Crocodile Gold Reports Net Earnings of $2.4 Million and Positive Operating Cash Flow for the Third Quarter of 2010
TORONTO, ONTARIO -- (Marketwire) -- 11/08/10 -- Crocodile Gold Corp. (TSX: CRK)(OTCQX: CROCF)(FRANKFURT: XGC) ('Crocodile Gold' or the 'Company') today announces its financial and operating results for the third quarter ended September 30, 2010. All figures are in U.S. dollars, unless otherwise stated.
Highlights include:
-- Net earnings of $2.4 million, or $0.01 per share, and cash flow from
operations, before working capital adjustments, of $7.9 million in the
Company's first full quarter since the declaration of commercial
production.
-- Revenue of $30.6 million and an average realized gold price of $1,223
per ounce sold.
-- During the quarter, processed 557,189 tonnes of ore at an average head
grade of 1.58 grams per tonne ('g/t') and at a recovery rate of 92.4% to
produce 26,138 ounces of gold with mill availability during the quarter
of 95% at the Union Reefs mill.
-- During the four months of production since commercial production was
declared on June 1, 2010, processed 731,524 tonnes of ore at an average
head grade of 1.58 g/t and at a recovery rate of 91.9% to produce 34,060
ounce of gold.
-- During the nine months ended September 30, 2010, processed 1,337,705
tonnes of ore at an average head grade of 1.58 g/t and at a recovery
rate of 87.5% to produce 59,443 ounces of gold.
-- Began excavation at the new Cosmo underground mine with the first blast
on the portal occurring on May 30, 2010. Underground development through
September 30, 2010 was 372 metres from the portal. Commercial levels of
production from Cosmo are expected to begin late in the second quarter
of 2011.
-- Cash cost of $942 per ounce on 25,002 ounce of gold sold (See Non-GAAP
Measures below).
-- Completed 32,409 metres of exploration and definition drilling at Brocks
Creek, Howley, Cosmo and Princess Louise during the quarter.
-- In September, Crocodile Gold was added to the S&P/TSX SmallCap Index.
In releasing this information, Mike Hoffman, President and Chief Executive Officer of Crocodile Gold commented, 'Our third quarter results continue to show the steady progress we are making at our operation since we began commercial production on June 1st of this year. Our team is focused on optimizing all operational areas including tonnage mined and milled, grade and dilution control, and metallurgical recovery and costs. We expect these improvements to be realized in the coming quarters through an increase in production in 2011 and lower cash costs. Our priority remains focused on bringing the Cosmo underground mine to production by mid-2011.'
Operations Discussion
Crocodile Gold remains on track to produce 85,000 ounces of gold in 2010. Production will come from the Howley, North Point and Princess Louise open pit mines and the Brocks Creek underground mine for the remainder of the year.
During the third quarter of 2010, the Company milled 557,189 tonnes of ore at a head grade of 1.58 g/t and a recovery rate of 92.4% to produce 26,138 ounces of gold at the Union Reefs mill. Since the declaration of commercial production on June 1, 2010, the Company milled 731,524 tonnes of ore at a head grade of 1.58 g/t and a recovery rate of 91.9% to produce 34,060 ounces of gold. During the nine month period ended September 30, 2010, Crocodile Gold milled 1,337,705 tonnes of ore at an average head grade of 1.58 g/t and a recovery rate of 87.5% to produce 59,443 ounces of gold.
Mill availability and throughput have increased steadily year-to-date. Mill availability during the quarter and in the four month period since the declaration of commercial production was 95% which is at the target level. During the quarter, the Union Reefs mill processed an average of 186,000 tonnes of ore per month up from an average of 108,000 tonnes per month during the first quarter and 152,000 tonnes per month during the second quarter of 2010.
During the quarter, 609,000 tonnes of ore was mined at the Howley, North Point and Princess Louise open pit mines at an average grade of 1.25 g/t, containing an estimated 24,462 contained ounces of gold. During the same period, 25,000 tonnes of ore was mined at the Brocks Creek underground mine at an average grade of 7.06 g/t, containing an estimated 5,685 ounces of contained gold. During the quarter, the Company's mining activities included a focus on continuing to develop and improve grade control and mine planning processes. The tonnes ore mined during the quarter exceeded the tonnes milled as the Company is building an ore stockpile in advance of the wet season which begins in November/December and lasts through April. At September 30, 2010, the Company had 162,000 tonnes of ore stockpiles at an average grade of 1.02 g/t for approximately 5,300 contained ounces of gold. Production from both Princess Louise and North Point in 2010 is expected to cease sometime between late November and early December as the seasonal rains will make the public unsealed dirt roads to those open pits inaccessible.
The focus at the Union Reefs mill during the quarter was on increasing recovery rates and throughput and achieving cost reductions. The recovery rate during the third quarter of 92.4% was up from 85.1% during the second quarter and up from 82.3% during the first quarter. The targeted recovery rate is 90% on mixed oxide and fresh ore and 86% on 100% fresh ore. Steps taken to improve recovery rates included allowing for increased residence time, improvements to the gravity circuit process and a focus on ore blending to achieve desired grind size. A number of recovery initiatives are underway to increase the recovery on 100% fresh ore. During the quarter milling costs were approximately A$17 per tonne, continuing to trend lower, compared with approximately A$23 per tonne during the second quarter.
The cash cost for the third quarter of 2010 was $942 per ounce on 25,002 ounces of gold sold. The cash cost for the four month period following the declaration of commercial production on June 1, 2010 was $971 per ounce on 33,904 ounces of gold sold (See Non-GAAP Measures below). The cash costs were higher than expected due to the processing of the higher cost pre-commercial production ounces in opening inventory at the commencement of commercial production and lower head grade. In addition, the Australian dollar has strengthened since the beginning of 2010 and since the date commercial production was declared, June 1, 2010. The cash costs are also high due to the lack of capitalized waste stripping and waste development in the short life mines at North Point, Princess Louise, Brocks Creek and, to a lesser extent, at Howley. Crocodile Gold expects the cash costs per ounce to gradually decrease moving forward with a larger decrease in overall cash costs as mining begins in the Pine Creek/Union Reefs area and as Cosmo reaches commercial production levels in 2011.
During the third quarter of 2010, Crocodile Gold spent approximately $2.5 million on exploration expenditures, completing 7,190 metres of drilling, including 2,472 metres of diamond drilling. In addition, the Company completed 25,219 metres of definition drilling in the third quarter of 2010 at the mining operations. Crocodile Gold's exploration team continues to evaluate and analyze drill results and are also focusing on the very large historical geological database to not only guide current exploration activities but to also identify and rank new exploration targets.
Financial Discussion
During the third quarter of 2010, Crocodile Gold's first full quarter of commercial production, net earnings of $2.4 million were recorded. For the nine months ended September 30, 2010, the Company recorded a loss of $5.1 million, or $0.03 per share.
Crocodile Gold's operations have been in commercial production since June 1, 2010. Prior to June 1, 2010, all operational activity and related revenue and costs were treated as capitalized development. During the three months ended September 30, 2010, the Company's first full quarter of commercial production, gold sale revenues of $30.6 million was recorded on the sale of 25,002 ounces of gold, for an average realized gold price of $1,223 per ounce. During the four month period since the declaration of commercial production, the Company recorded gold sale revenue of $41.6 million on the sale of 33,904 ounces of gold, for an average realized gold price of $1,224 per ounce.
Operating expenses during the quarter were $23.7 million. Depreciation, depletion and amortization expense of $3.9 million, or $154 per ounce of gold sold, was recorded during the quarter. During the quarter, the Company generated an operating profit of $2.8 million (profit after operating and royalty expenses, depreciation, depletion and amortization, and reclamation accretion expense).
With the strengthening of the Australian dollar vis-a-vis the U.S. dollar, the Company recorded gains of $1.8 million on the currency forward contracts it had in place to buy the Australian dollars and sell the U.S. dollar during the quarter.
Cash Flow
During the third quarter of 2010, cash flow from operating activities, before changes in non-cash working capital, provided $7.9 million (See Non-GAAP Measures below). For the nine months ended September 30, 2010, cash flow from operating activities, before changes in non-cash working capital, provided $5.6 million.
Investing activities during the three and nine months ended September 30, 2010, used $17.1 million and $76.1 million, respectively. Investing activities during these periods consisted of capitalized exploration costs, development on the Cosmo underground mine, and development costs at Brocks Creek, Howley, Tom's Gully and at the Union Reefs mill. Investing activities during the nine month period also included the capitalization of pre-commercial production activities.
Financial Position
As at September 30, 2010, the Company had net working capital of $10.8 million, which included cash and cash equivalents of $9.5 million, amounts receivable of $2.7 million, prepaid expenses of $1.1 million and inventories of $11.6 million, partially offset by current liabilities of $14.1 million.
On November 2, 2010, the Company announced that it had entered into an agreement with a syndicate of underwriters to issue, on a bought deal basis, 20,000,000 common shares at a price of C$1.40 per share for aggregate gross proceeds of C$28,000,000. The Company has agreed to grant the underwriters an over-allotment option to purchase up to an additional 3,000,000 common shares at C$1.40 per share, exercisable in whole or in part, at any time on or prior to the date that is 30 days following the closing of the offering. If this option is exercised in full, an additional C$4,200,000 will be raised bringing the aggregate gross proceeds to C$32,200,000. The proceeds of the financing will be used for the development of the Cosmo underground mine and working capital and general corporate purposes.
Projects Discussion
Crocodile Gold plans to advance development of the Cosmo underground mine in the fourth quarter of 2010 with commercial production from Cosmo remaining on track for mid-2011. Ramp development will continue along with dewatering of the existing Cosmo open pit to be completed by the end of the wet season.
In addition, Crocodile Gold is accelerating permitting and development activities on certain deposits within the Union Reefs and Pine Creek area as previously disclosed (refer to Crocodile Gold press releases dated September 8, 2010 and October 14, 2010) with production expected in the first quarter of 2011. The close proximity of the deposits to the Company's Union Reefs mill relative to the Burnside deposits (Howley, North Point, Princess Louise and Brocks Creek) where the Company's current production is being sourced has the benefit of lower haulage costs.
Further details are available on the Company's website at www.crocgold.com and also www.sedar.com where the Crocodile Gold financial statements and management's discussion and analysis (MD&A) are posted.
Non-GAAP Measures
Crocodile Gold believes that investors use certain indicators to assess gold mining companies. The indicators are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with Canadian Generally Accepted Accounting Principles ('GAAP'). 'Cash flow from operating activities before changes in non-cash working capital' is a non-GAAP performance measure which could provide an indication of the Company's ability to generate cash flows from operations, and is calculated by adding back the change in non-cash working capital to 'Cash provided by (used for) operating activities as presented on the Company's consolidated statements of cash flows. 'Cash cost per ounce' is a non-GAAP performance measure which could provide an indication of the mining and processing efficiency and effectiveness at the operations. It is determined by dividing the operating expenses excluding stock-based compensation allocated to operating expense and net of silver revenue. There are variations in the method of computation of 'cash cost per ounce' as determined by the Company compared with other mining companies. The following is a reconciliation of the cash cost per ounce of gold sold to the reported operating expenses for the periods following the Company's declaration of commercial production on June 1, 2010:
Three months Nine months
ended ended
Sept. 30, 2010 Sept. 30, 2010
--------------- ---------------
Operating expenses per consolidated
statement of income (loss) and
comprehensive income $ 23,736,800 $ 33,152,972
By-product silver sales credit (74,345) (98,632)
Non-cash stock option expense charged to
operating expenses (113,589) (146,435)
--------------- ---------------
Operating cash costs 23,548,866 32,907,905
Divided by ounces of gold sold 25,002 33,904
--------------- ---------------
Cash cost per ounce $ 942 $ 971
--------------- ---------------
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About Crocodile Gold
Crocodile Gold is a Canadian company with operating gold mines in the Northern Territory of Australia and a land package of over 2,500 km2. Crocodile Gold is currently mining from the Howley, North Point and Princess Louise open pit mines and the Brocks Creek underground mine. Crocodile Gold commenced mining in November 2009 and announced its first gold pour in December 2009 at its Union Reefs Mill. The Company is currently developing the Cosmo underground mine. Ore is currently processed at the 2.4 million tonne per year Union Reefs Mill. Crocodile Gold has 3.3 million ounces of NI 43-101 compliant measured and indicated resources (47 million tonnes at an average grade of 2.2 g/t gold) and 1.9 million ounces of inferred resources (25 million tonnes at an average grade of 2.3 g/t gold) (see the Amended Annual Information Form dated November 5, 2010 and Crocodile Gold press releases dated September 8, 2009, January 25, 2010 and October 14, 2010). The Company has an exploration program in place with a main focus on the Cosmo/Howley corridor which covers a five kilometre strike length of a 25 kilometre trend.
Qualified Person
David Keough M.AusIMM of Crocodile Gold is a 'qualified person' as such term is defined in National Instrument 43-101 and has reviewed and confirmed the technical information and data included in this press release.
Cautionary Note
Certain information set forth in this press release contains 'forward-looking statements', and 'forward-looking information under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management's assessment of Crocodile Gold's targeted production, future plans, operations and mineral resource estimates and are based on Crocodile Gold's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as 'expects' 'anticipates', 'believes', 'projects', 'plans', and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Crocodile Gold's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: liabilities inherent in mine development and production; geological, mining and processing technical problems; Crocodile Gold's inability to obtain required mine licenses, mine permits and regulatory approvals required in connection with mining and mineral processing operations; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in commodity prices and exchange rates; currency and interest rate fluctuations; various events which could disrupt operations and/or the transportation of mineral products, including labour stoppages and severe weather conditions; the demand for and availability of rail, port and other transportation services; the ability to secure adequate financing and management's ability to anticipate and manage the foregoing factors and risks. 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. Crocodile Gold undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.
To view Figure 1: Crocodile Gold Northern Territory Location Map, please visit the following link: http://media3.marketwire.com/docs/crkmap.pdf.
Contacts:
Crocodile Gold Corp.
Michael Hoffman
President and CEO
416-861-2964
Crocodile Gold Corp.
Ashleigh Clelland
Manager, Investor Relations
416-861-5899
info@crocgold.com
www.crocgold.com