Aura Minerals Announces Third Quarter 2010 Financial and Operating Results
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/09/10 -- Aura Minerals Inc. ('Aura Minerals' or the 'Company') (TSX: ORA) today announced financial and operating results for the third quarter 2010. All dollar amounts are expressed in US dollars unless otherwise specified.
Third Quarter 2010 Financial and Operating Highlights:
-- Gold production of 38,465 ounces for the quarter and 93,068 ounces for
the nine months ended September 30, 2010, with on-site average cash
costs(1) of gold produced of $1,121 per ounce and $889 per ounce,
respectively, comprised of the following:
For the three months For the nine months
ended ended
September 30, 2010 September 30, 2010
Ounces Cash Ounces Cash
Produced Costs(1) Produced Costs(1)
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San Andres 16,133 $ 709 51,171 $ 606
Sao Francisco (from May 1, 2010) 12,424 $ 1,682 23,355 1,421
Sao Vicente (from May 1, 2010) 9,908 $ 1,091 18,542 998
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Total / Average 38,465 $ 1,121 93,068 $ 889
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(1) See cautionary note regarding non-GAAP measures.
-- Gold sales of 39,087 ounces for the quarter and 89,145 ounces year-to-
date for net sales of $47.6 million and $105.9 million, respectively;
-- Realized average price of gold sold of $1,229 per ounce for the quarter,
which compares to a market average price of $1,227 per ounce (London PM
Fix), and realized average price of gold sold of $1,200 per ounce year-
to-date, which compares to a market average price year-to-date of $1,178
per ounce (London PM Fix);
-- Net loss for the quarter of $16.6 million or $0.08 per share and $31.2
million or $0.16 per share for the nine months ended September 30, 2010;
-- Adjusted net loss(1)for the quarter and nine months ended September 30,
2010, after adjusting for a write-down of inventory in the third
quarter, unrealized foreign exchange losses and other non- recurring
revenue and expense items, of $11.3 million or $0.05 per share and $14.9
million or $0.08 per share, respectively;
-- With the commissioning of the water treatment plant in August and
rainfall returning to normal levels in September, production and cash
costs at the San Andres Mine for September September were 7,532 ounces
and approximately $500 per ounce, respectively, which is a return to
those levels experienced prior to the heavier than normal rainfall from
June to August;
-- During and subsequent to the quarter, commissioning of the plant and
mine development advanced at the Aranzazu Project in line with the
planned ramp-up to full production of 2,600 tonnes per day ('tpd') in
the first quarter of 2011;
-- During and subsequent to the quarter, released results from ongoing
exploration and definition drilling programs at the Aranzazu Project,
including the second batch of drill holes from the deep drilling
program, with an emphasis on increasing the overall resource base along
strike and at depth; and
-- Ended the quarter with $57.8 million in cash and cash equivalents.
Dedicated Waste Stripping Program at the Sao Francisco Mine
Since its acquisition, mining of significantly lower than average head grades at the Sao Francisco Mine has been necessary due to the fact that the higher-grade material scheduled for mining in 2010 is waste-bound. The Company has put considerable effort into improving the mine plan for longer-term, sustainable operations. This has necessitated the mining of lower than average grade and rescheduling of waste movement. As a result, primarily due to the low head grades, waste dilution and corresponding low levels of production, cash costs(1) since May have been adversely affected and have increased to unsustainable levels.
To allow the mine operations to focus solely on waste stripping and provide adequate time to complete needed upgrades at the crushing and gravity circuits, the Company will be implementing a three to four month dedicated waste stripping program at the Sao Francisco Mine, effective at or around November month end. During this period, mining of ore will be deferred, but heap leaching of the ore on the leach pads will continue.
'Gold production in the third quarter of 38,465 ounces represents the first full quarter of production from all three of our operating gold mines. Although we continued to face challenges this quarter that adversely impacted cash costs at the operations, namely the low head grades at the Sao Francisco and Sao Vicente mines in Brazil and the heavy rainfall affecting the San Andres Mine, we are pleased with the progress we have seen in September and October,' commented Patrick Downey, President and Chief Executive Officer of Aura Minerals. 'At each of the San Andres and Sao Vicente mines, we have seen monthly production increase in September over previous months, and we continue to make progress in terms of lowering cash costs on a month-over-month basis. In fact, production at the Sao Vicente Mine during October has already reached 43% of the total third quarter production. We are also completing the final stages of the capital upgrades at the San Andres Mine. This will allow a sustainable increase in throughput, and an expected improvement of recoveries from the heap operations. Commissioning is also well advanced at the Aranzazu Project with commercial production expected to be declared later this quarter. Drilling continues to be very successful and we plan to commence engineering during the first quarter of 2011 on an immediate expansion at the Aranzazu Project. At the Sao Francisco Mine, we have reviewed all of our options with regards to achieving a sustainable mine plan and have determined that implementing a dedicated program to accelerate waste stripping and defer mining of ore for a few months will yield the highest net economic benefit. As we discussed in our second quarter results, since acquiring operational control of the Sao Francisco and Sao Vicente mines on April 30, 2010, the Company determined that a number of key additional initiatives would be required to deal with the lower than planned head grade, additional waste stripping and equipment repairs over the next few months. At the Sao Francisco Mine, the most effective way to deal with these issues is to allow the current mining fleet to focus solely on waste movement and to complete a new bench and haulage road system within the pit. Within four months, we expect to recommence mining of ore and operation of the crusher-gravity circuit at the Sao Francisco Mine on the basis of higher head grades, higher production, and significantly lower cash costs.'
Financial Review
The following financial information does not constitute management's discussion and analysis ('MD&A') as contemplated by relevant securities rules and should be read in conjunction with the Company's interim unaudited financial statements for the three and nine months ended September 30, 2010 and audited financial statements for the year ended December 31, 2009 and the MD&A's for the two periods, which are available on SEDAR at www.sedar.com under the Company's profile or on the Company's website.
The following table presents a summary of financial information for the three and nine months ended September 30, 2010 and 2009:
(Unaudited, in
thousands of Three months Three months Nine months Nine months
dollars, ended ended ended ended
except per September 30, September 30, September 30, September 30,
share amounts) 2010 2009 2010 2009
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Sales $ 47,550 $ 6,855 $ 105,917 $ 6,890
Mine operating
expenses,
depletion,
amortization
and accretion,
and net
smelter return
royalties 53,751 6,729 93,550 6,752
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Mine operating
profit (6,201) 126 12,367 138
Expenses
Stock-based
compensation 2,218 1,286 9,865 3,655
Cost of
operations in
care and
maintenance - 464 - 1,511
Exploration
expenses 6,655 2,735 18,346 6,837
General and
administrative
expenses 3,449 1,424 9,502 3,583
Amortization
and accretion 826 100 1,269 260
Transaction
costs (376) - 2,335 -
Interest
expense 517 90 1,265 90
Other income (2,070) (169) (2,347) (269)
Foreign
exchange and
derivatives
loss (gain) (2,202) 7,750 (2,323) 4,884
Impairment
charge - - - 8,167
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Loss before
income taxes 15,218 13,554 25,545 28,580
Income tax
expense
(recovery),
net 1,407 (381) 5,678 (3,155)
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Net loss for
the period $ 16,625 $ 13,173 $ 31,223 $ 25,425
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Adjustments:
Unrealized
foreign
exchange
(gains)
losses 310 - 916 -
Stock-based
compensation 2,218 1,286 9,865 3,655
Write-down of
inventory 3,188 - 3,188 -
Impairment
charge, net
of related
future income
tax recovery - - - 5,390
Non-recurring
transaction
costs (376) - 2,335 -
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Adjusted
loss(1) for the
period $ 11,285 $ 11,887 $ 14,919 $ 16,380
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Basic and
diluted loss
per share $ 0.08 0.09 0.16 0.20
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Adjusted
loss(1) per
share $ 0.05 $ 0.08 $ 0.08 $ 0.13
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(1) See cautionary note regarding non-GAAP measures.
Gold ounces sold for the respective periods, the average realized prices per ounce and gross and net sales are detailed in the following table. The average realized prices per ounce for the three and nine months ended September 30, 2010 compare to the average market prices (London PM Fix) of $1,227 and $1,178 per ounce, respectively.
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
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San Andes Mine,
Honduras (ounces) 13,963 7,175 50,471 7,175
Sao Francisco Mine,
Brazil, from May 1,
2010 (ounces) 14,129 - 21,057 -
Sao Vicente Mine,
Brazil, from May 1,
2010 (ounces) 10,995 - 17,617 -
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Total ounces sold
during period 39,087 7,175 89,145 7,175
Realized average
gold price per
ounce in period $ 1,229 $ 964 $ 1,200 $ 964
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Gross gold sales
revenues (in
thousands) $ 48,037 $ 6,914 $ 106,995 $ 6,914
Less local sales
taxes paid (in
thousands) (487) (59) (1,078) (59)
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Net gold sales
revenues (in
thousands) $ 47,550 $ 6,855 $ 105,917 $ 6,855
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For the quarter, cash costs of gold sold at the Company's three operating mines totalled $45.5 million (or $1,163 per ounce), which included an inventory write-down $3.2 million (or $82 per ounce) to bring production inventories to their net realizable value. Together with non-cash depletion, amortization and accretion charges of $8.3 million, cost of goods sold was $53.8 million or $1,375 per ounce for the three months ended September 30, 2010.
Mine operating loss was $6.2 million during the quarter, which compares to a mine operating profit of $9.8 million for the second quarter of 2010. The decrease in mine operating profit is a direct result of the higher cost of production at all three of the Company's gold mines, and the write-down to production inventories which resulted from the high costs at the Sao Francisco and Sao Vicente mines ('collectively, the Brazilian Mines'). Of the $3.2 million adjustment to product, leach pad and metal in circuit and gold in process inventories, $2.9 million relates to the Sao Francisco Mine and the balance relates to the Sao Vicente Mine.
Other expenses for the three months ended September 30, 2010 included exploration expenses of $6.7 million, stock-based compensation of $2.2 million, and general and administrative expenses of $3.4 million.
Interest expense for the quarter ended September 30, 2010 of $0.5 million relates to interest paid on the promissory notes payable in connection with the acquisitions of the San Andres Mine and the Brazilian Mines. For the three months ended September 30, 2010, the Company recorded a foreign exchange gain of $2.2 million reflecting the effects of the Company's assets and liabilities held in foreign currencies and the fluctuation of those currencies against the United States dollar during the period.
Other income for the three months ended September 30, 2010 of $2.1 million includes a gain on marketable securities, income generated on invested funds, and a gain of $1.0 million from marking the portion of the Company's forward currency contracts not designated as hedges to their market value.
For the third quarter, the Company recorded a current income tax expense of $1.3 million relating to income taxes payable on earnings at the San Andres Mine, as well as a future income tax expense of $0.1 million.
For the three months ended September 30, 2010, the Company recorded a net loss of $16.6 million or $0.08 per share. Adjusted net loss(1) for the third quarter, after adjusting for unrealized foreign exchange gains and losses, a write-down of inventory and other non-recurring revenue and expense items, was $11.3 million or $0.05 per share.
Liquidity and Capital Resources
Cash and cash equivalents used in operating activities during the third quarter of 2010 were $6.6 million. Cash and cash equivalents used in investing activities during the quarter were $21.8 million, and included additions of $23.2 million of property, plant and equipment acquired for cash. As at September 30, 2010, the Company had working capital of $81.9 million, including cash and cash equivalents of $57.8 million.
Operational and Project Review
San Andres Mine
Production at the San Andres Mine during the quarter was 16,133 ounces of gold, an increase of 2.5% over the second quarter of 2010, but a decrease of 12% from production in the third quarter of 2009 of 18,338 ounces, of which 6,925 ounces were attributable to the Company. Lower than expected gold production from June to August was a result of the early onset of the rainy season, combined with higher than normal rainfall, which impacted mining operations, the crusher and conveyor systems, and the grade of the heap leach solution. The Company undertook a number of measures to deal with the excessive rainfalls and the resulting operating issues. In addition, during the second quarter, standard testing of treated water prior to discharge revealed trace levels of cobalt. This prevented the Company from discharging excess water on a continuous basis. Pilot plant testing with a resin ion exchange filtration system was conducted on site in the second quarter with excellent results. A full-scale plant was constructed and commissioned during the third quarter. Until the commissioning and operation of this system, pregnant leach solution gold grades continued to be diluted due to high amounts of rainfall and the inability of the operation to discharge water on a continuous basis. During September, with the water treatment plant fully operational and the plant moving from batch to continuous discharge of water, gold production increased to 7,532 ounces for the month, or a targeted run rate of approximately 90,000 ounces per annum.
The table below sets out selected operating information for the San Andres Mine for the third quarters and year-to-date 2010 and 2009:
Operating
Information Q3 2010 Q3 2009(2) YTD 2010 YTD 2009(2)
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Ore mined (tonnes) 1,172,695 417,244 3,449,453 417,244
Waste mined (tonnes) 406,868 32,580 638,894 32,580
Total mined (tonnes) 1,579,563 449,824 4,088,347 449,824
Waste-to-ore ratio 0.35 0.08 0.19 0.08
Ore plant feed
(tonnes) 1,158,555 420,009 3,465,144 420,009
Grade (g/tonne) 0.67 0.71 0.72 0.71
Production (ounces) 16,133 6,925 51,171 6,925
Sales (ounces) 13,963 7,175 50,471 7,175
Average cash cost of
gold produced
($/ounce)(1) $ 709 $ 534 $ 606 $ 534
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(1) See cautionary note regarding non-GAAP measures.
(2) Following date of acquisition on August 25, 2009.
Cash operating costs(1) of $709 per ounce of gold produced in the third quarter of 2010 were approximately 11% higher than the $638 per ounce reported for the second quarter of 2010 and 33% higher than the $534 per ounce reported for the third quarter of 2009. Production and cash costs(1) during the second and third quarters of 2010 were adversely impacted by the early onset of the rainy season in June, which continued through August. Cash costs(1) during the quarter were also impacted by the increased waste movement during the quarter, up 100% from approximately 200,000 tonnes in the second quarter to approximately 407,000 tonnes in the third quarter of 2010. With the water treatment plant fully operational in early September and the heavy rains having eased, production for the month increased to over 7,500 ounces, which brought the month's cash costs(1) back down to approximately $500 per ounce.
Sao Francisco Mine
During the quarter, gold production was 12,424 ounces compared to 10,931 ounces for the two-month period ended June 30, 2010, which on an average monthly production basis was a decrease of 24%, a direct result of lower ore grades and the continuing need to focus on waste stripping at the operation. Accordingly, operating cash costs(1) of $1,682 per ounce of gold produced in the third quarter of 2010 were approximately 51% higher than the $1,125 per ounce reported for the second quarter of 2010. Cash costs(1) during the third quarter of 2010 were also adversely impacted by a 5% increase in the Brazilian reais as compared to the United States dollar, and increased maintenance to the crushing and gravity circuit and other plant areas.
The table below sets out selected operating information for the Sao Francisco Mine for the portion of the second quarter of 2010 for which the Company operated the mine and the third quarter, as well as from May 1 to September 30, 2010:
For the period For the period
from May 1 to from May 1 to
Operating Information June 30, 2010 Q3 2010 Sept. 30, 2010
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Ore mined (tonnes) 833,813 1,224,708 2,058,521
Waste mined (tonnes) 2,314,340 2,759,751 5,074,091
Deferred stripping (tonnes) - 790,515 790,515
Total mined (tonnes) 3,148,153 4,774,974 7,923,127
Waste-to-ore ratio(2) 2.78 2.90 2.85
Ore plant feed (tonnes) 781,977 1,233,212 2,015,189
Grade (g/tonne) 0.46 0.37 0.40
Production (ounces) 10,931 12,424 23,355
Sales (ounces) 6,928 14,129 21,057
Average cash cost of gold
produced ($/ounce)(1) $ 1,125 $ 1,682 $ 1,421
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(1) See cautionary note regarding non-GAAP measures.
(2) Includes deferred stripping waste.
The Company estimates that between four and five million tonnes of waste are required to be removed to achieve a sustainable mine plan. To accelerate the waste stripping and allow access to higher-grade material the Company will be implementing a dedicated stripping program at the Sao Francisco Mine effective at or around November month-end. The Company estimates that approximately three to four months will be necessary to complete the waste material movement and allow the mine to resume normal operations with a sustainable mine plan and pit configuration in place. The dedicated waste stripping program will allow a change in waste bench configuration from the current 15 metre wide benches to 30 metre benches, which will allow for more efficient blasting, material loading and transportation. The new configuration will help mitigate dilution. The estimated cost for the dedicated stripping program is $12 million. The deferral of the mining of ore during the dedicated stripping program will also allow the Company to implement certain operational initiatives that are expected to increase operational productivity, improve overall gold recovery and significantly lower cash operating costs. These initiatives include:
-- Using an owner-operated fleet to transport crushed ore from the
crushing/gravity plant to the leach pad, instead of the current contract
fleet. The estimated capital cost for this program is less than $1
million and the change from contract to owner-operated haulage of
crushed ore is expected to occur on recommencement of normal operations;
-- Changing waste bench widths to 30 metres from the current 15 metres
which will improve blasting and allow bigger catch bench widths, which
will greatly reduce ore dilution and improve overall equipment
productivity;
-- Installing of a 1,000 tpd agitated leach circuit to treat the gravity
circuit tailings and to increase overall gold recovery by approximately
10,000 ounces per annum, at an estimated capital cost of $12-16 million;
and
-- Overhauling the crushing/gravity circuit maintenance program and
completing certain flowsheet changes, including feed changes and water
management changes, to increase availability to 75% from the current 65%
availability, at an estimated capital cost of $2 million.
The changes described above, as well as cost savings that will be realized from new contracts for cyanide and fuel recently signed for the Sao Francisco Mine, are expected to result in annual operating cost savings of approximately $8-10 million. The Company expects to recommence normal operations at the Sao Francisco Mine by the end of the first quarter of 2011. During the first year of operations thereafter, the head grade is expected to be 0.8 g/t gold for the crusher-gravity ore, approximately twice the average head grade mined from May 1, 2010 to September 30, 2010. Achieving a sustainable mine plan through the dedicated waste stripping program, combined with the operational changes outlined above, is expected to allow production of approximately 100,000 ounces of gold at estimated cash costs(1) of between $700 and $800 per ounce in the first full year following the recommencement of normal operations. Thereafter, the grades are expected to continue to improve which should increase overall ounces produced per year.
Sao Vicente Mine
During the quarter, gold production was 9,908 ounces compared to 8,634 ounces for the two-month period ended June 30, 2010, which on a monthly average production basis was a decrease of 23%, a result of lower ore stacking levels in the prior quarter and changes to ore stockpile inventories. As a result, while overall monthly cash spending at the Sao Vicente Mine remained consistent throughout the five month period ended September 30, 2010, operating cash costs(1) of $1,091 per ounce of gold produced in the third quarter of 2010 were approximately 25% higher than the $893 per ounce reported for the second quarter of 2010. Cash costs(1)during the third quarter of 2010 were also impacted by a 5% increase in the Brazilian reais as compared to the United States dollar.
The table below sets out selected operating information for the Sao Vicente Mine for the portion of the second quarter of 2010 for which the Company operated the mine and the third quarter, as well as from May 1 to September 30, 2010:
For the period For the period
from May 1 to from May 1 to
Operating Information June 30, 2010 Q3 2010 Sept. 30, 2010
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Ore mined (tonnes) 562,899 1,015,253 1,578,152
Waste mined (tonnes) 1,070,009 1,121,601 2,191,610
Deferred stripping (tonnes) - 545,848 545,848
Total mined (tonnes) 1,632,908 2,682,702 4,315,610
Waste-to-ore ratio(2) 1.90 1.64 1.73
Ore plant feed (tonnes) 580,952 1,008,527 1,589,479
Grade (g/tonne) 0.49 0.47 0.47
Production (ounces) 8,634 9,908 18,542
Sales (ounces) 6,622 10,995 17,617
Average cash cost of gold
produced ($/ounce)(1) $ 893 $ 1,091 $ 998
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(1) See cautionary note regarding non-GAAP measures.
(2) Includes deferred stripping waste.
Like the Sao Francisco Mine, the Company's focus for the Sao Vicente Mine has been operational improvements to increase productivity, improve overall gold recovery and lower cash operating costs. Ongoing operational initiatives include:
-- Upgrading the crushing and process plant to increase equipment
availability and thereby improve plant throughput and reduce operating
costs;
-- Installing of a second train of carbon columns to improve gold
extraction from solution;
-- Constructing additional leach pad space, which began in the third
quarter of 2010; and
-- Conducting a definition and expansion drilling program to improve the
mine planning and grade control and to increase the resource base.
Due to the size of the operation, implementation of these initiatives at the Sao Vicente Mine has already begun to yield benefits, with gold production in September increasing 26% over the monthly average gold production in July and August and production in the month of October already having reached 43% of the third quarter's production.
Aranzazu Project
Commissioning of the recently-upgraded plant commenced at the Aranzazu Project during the third quarter of 2010. Commissioning of the crushing circuit has been completed. Commissioning of the mills is ongoing and the mine will be ramping up towards full production of 2,600 tpd during the first quarter of 2011. The regrind and cleaner circuits are scheduled for final commissioning during November. To date, copper recoveries during commissioning are averaging 90%, with a concentrate grade of approximately 23% copper. Once final commissioning of the cleaner circuit is completed, the concentrate grade is expected to increase to approximately 30%. The total capital expenditures associated with the restart of the Aranzazu Project, to the completion of commissioning, are estimated to be $30 million.
The Company is also continuing to drill the high-grade resources within the Calcocita, Arroyos Azules, Glory Hole and BW zones for conversion of resources into proven and probable reserves as part of the restart of operations. As part of this program, results from 161 holes were released in 2009, and from 91 new and six historic holes during the first nine months of 2010. An additional 58 in-fill and definition drill holes were released after the quarter-end which continue to confirm grades and widths of the deposit.
In the first quarter of 2010, a deep drilling program was initiated at the Aranzazu Project to test the depth potential of the mineralization. To date, the Company has released results from 10 deep drill holes located in the 'Glory Hole/Tiro Azules' zone. The results demonstrate the resource in this area is still open at depth with grades and widths consistent with the main resource. Ongoing deep drilling will test the other zones along strike. The Company will commence planning of a major expansion program for the mine during the first quarter of 2011.
The total expenditures associated with the exploration programs at the Aranzazu Project are estimated to be $24 million, of which $8.6 million has been incurred to September 30, 2010.
Arapiraca Project
The Arapiraca Project is a bulk-tonnage copper-gold-magnetite deposit located in the central-southern part of the State of Alagoas, Brazil. Based on the positive results of the Preliminary Economic Assessment Study released in 2009, the Company has continued with final variability testwork to finalize the process flowsheet. Grinding simulation testwork was completed subsequent to the quarter end. The Company intends to complete design criteria in November 2010 and award a feasibility contract before year-end. The feasibility study is expected to be completed in the third quarter of 2011. As part of the feasibility work, an additional drill program is planned to better define Measured and Indicated resource blocks at the margins of the deposit and define the life of mine waste-to-ore strip ratio based on the ongoing geological interpretation of the deposit. A new resource estimate will be completed on conclusion of the drill program.
Outlook
The third quarter continued to be a transitional one for the Company with the focus on productivity improvements and cost reduction programs. At the San Andres Mine, we completed the installation of the new primary crusher-conveyor system in the second quarter, followed by the completion of the leach pad expansion, the water treatment plant and new stacker system installation during the third quarter. While the higher than average rainfall in the second quarter and early third quarter of 2010, combined with our inability to discharge until mid-August, adversely affected production until late in the third quarter, the operation saw an immediate return to higher production and lower cost levels in September as the rainfalls eased and the new water treatment system was commissioned. The Company expects annualized production of between 85,000 and 90,000 ounces of gold in 2011 with cash costs(1) at or below $500 per ounce due to the higher throughput and increased recoveries resulting from the improvements completed in 2009 and 2010. The Company is lowering 2010 production guidance for the San Andres Mine to approximately 73,000-75,000 ounces of gold with per ounce cash costs(1) for the fourth quarter production in the $480-$520 range.
Since its acquisition, the mining of significantly lower than average head grades at the Sao Francisco Mine has been required as higher-grade material is still somewhat waste-bound. As a result of the lower head grades and dilution of ore with waste, the Sao Francisco Mine has experienced correspondingly lower production and higher cash costs(1). The Company has therefore determined that the dedicated waste stripping program will allow it to accelerate waste stripping and complete the necessary operational improvements so that higher plant availability and throughput can be achieved. The Company will also construct a tailings treatment plant, which will add an additional 9,000 to 11,000 ounces per annum at costs below $250 per ounce. The waste stripping is expected to be completed by the end of the first quarter of 2011 and normal operations at the Sao Francisco Mine will resume at a head grade for the crusher-gravity ore of approximately double the average head grade processed to date. The Company expects production of approximately 100,000 ounces of gold at estimated cash costs(1) of between $700 and $800 per ounce in the first full year following the resumption of normal operations. Thereafter, the grades are expected to continue to improve which should increase annual gold production.
Several operational initiatives have already begun to take effect at the Sao Vicente Mine and certain others will continue to be implemented. Beginning in September, the mine achieved 30% higher ore grades, which, combined with improved recoveries, resulted in September production increasing 26% over the monthly average gold production in the two prior months, and October's production being 43% of the total for the whole third quarter. The higher ore grades are expected to continue into the fourth quarter and into 2011 and beyond. The Company expects annualized production of approximately 50,000 ounces of gold at estimated cash costs(1) of between $800 and $900 per ounce in 2011, with further decreases in cash costs(1) when other operational improvements take effect.
Estimated 2010 gold production guidance per mine, based on eight months of production from the Brazilian Mines, and based on the dedicated waste stripping program at the Sao Francisco Mine, is summarized in the table below:
Gold Production Estimates
------------------------------------------------------------
San Andres Mine 73,000 - 75,000 oz
Sao Francisco Mine 32,000 - 34,000 oz
Sao Vicente Mine 25,000 - 30,000 oz
------------------------------------------------------------
Total 130,000 - 139,000 oz
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Plant commissioning at the Aranzazu Project is almost complete and this operation is expected to achieve commercial production in the fourth quarter of 2010, ramping up towards full production of 2,600 tpd during the first quarter of 2011. The Aranzazu Project is expected to produce approximately 20 million pounds of copper, 12,000 ounces of gold, and 140,000 ounces of silver on an annualized basis once targeted capacity is achieved.
The Company believes that the long term environment and prospects for its business remain favourable and it expects strong cash flows to be generated from the San Andres Mine, from the Sao Vicente Mine beginning in the fourth quarter of 2010, and from the Aranzazu Project, once it reaches full production in the first quarter 2011. Additionally, following the dedicated waste stripping program at the Sao Francisco Mine, the Company also expects strong operating cash flows to be generated from this operation. As a result, based on the Company's current expectations from its operating mines, combined with strong metal prices and currently available cash resources of approximately $50 million as of November 9, 2010, the Company believes it is fully financed to achieve its growth objectives.
Conference Call and Webcast Presentation on Sao Francisco Operations
Aura Minerals' management will host a conference call and webcast presentation for analysts and investors on Wednesday, November 10, 2010, at 9 a.m. (eastern time) to review the third quarter 2010 results and provide additional detail pertaining to the implementation of a dedicated waste stripping program at the Sao Francisco Mine. Participants may access the call by dialing 416-340-8530 or toll-free access at 1-877-240-9772. Participants are encouraged to call in 10 minutes prior to the scheduled start time to avoid delays.
The call and presentation are being webcast and can be accessed at Aura Minerals' website at www.auraminerals.com. Those who wish to listen to a recording of the conference call at a later time may do so by dialing 416-695-5800 or 1-800-408-3053 (Passcode 1112100#). The conference call replay will be available from 2 p.m. eastern time on November 10, 2010, until 11:59 p.m. eastern time on November 25, 2010.
Non-GAAP Measures
This news release includes certain non-GAAP performance measures, in particular, the total cash costs of gold per ounce, and adjusted earnings or loss and adjusted earnings or loss per share. These non-GAAP measures do not have any standardized meaning within Canadian GAAP and therefore may not be comparable to similar measures presented by other companies. The Company believes that this information is useful to management and certain investors in evaluating the Company's performance. The data presented 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 Canadian GAAP. Cash costs are presented as they represent an industry standard method of comparing certain costs on a per unit basis. Total cash costs include on-site mining, processing and, administration costs, off-site refining and royalty charges, reduced by by-product credits, but exclude amortization, reclamation, and exploration costs, as well as capital expenditures. Total cash costs are divided by ounces to arrive at per ounce cash costs. Adjusted earnings or loss and adjusted earnings or loss per share are calculated by taking the Company's net earnings or loss, excluding (a) non-recurring revenue and expense items; (b) stock-based compensation; (c) unrealized foreign exchange gains and losses; (d) unrealized gains and losses on derivative financial instruments; and (e) impairment losses.
About Aura Minerals Inc.
Aura Minerals is a Canadian mid-tier gold production company focused on the acquisition, exploration, development and operation of gold and base metal projects in the Americas. The Company's producing assets includes the San Andres gold mine in Honduras, and the Sao Francisco and Sao Vicente gold mines in Brazil. The Company is also developing the copper-gold-silver Aranzazu Project in Zacatecas state in Mexico, which will commence commercial production in the fourth quarter of 2010. Other significant assets include the feasibility-stage Serrote Deposit at the copper-gold-iron ore Arapiraca Project in Brazil.
(1) Refer to cautionary note regarding non-GAAP measures in this news release.
For further information, please visit Aura Minerals' web site at www.auraminerals.com.
Cautionary Note Regarding Forward-Looking Statement:
This news release contains 'forward-looking statements' within the meaning of the applicable Canadian securities legislation. Except for statements of historical fact relating to the Company, information contained herein constitutes forward-looking statements, including any information as to the Company's strategy, plans or future financial or operating performance. Forward-looking statements are characterized by words such as 'plan,' 'expect', 'budget', 'target', 'project', 'intend', 'believe', 'anticipate', 'estimate' and other similar words, or statements that certain events or conditions 'may' or 'will' occur. Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include, but are not limited to, the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating metal prices (such as gold, copper, silver, nickel and iron ore), currency exchange rates (such as the Canadian dollar, Brazilian Real, Mexican Peso and the Honduran Lempira versus the United States dollar), possible variations in ore grade or recovery rates, changes in accounting policies, changes in the Company's corporate resources, changes in project parameters as plans continue to be refined, changes in project development and production time frames, the possibility of project cost overruns or unanticipated costs and expenses, higher prices for fuel, steel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, final pricing for concentrate sales, unanticipated results of future studies, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, successful completion of proposed acquisitions, permitting time lines, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, limitations on insurance coverage and timing and possible outcome of pending litigation and labour disputes, as well as those risk factors discussed or referred to in the Company's AIF under the heading 'Item 4.2 - Risk Factors'.
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. 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. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates, assumptions or opinions should change, except as required by applicable law. The reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is presented for the purpose of assisting investors in understanding the Company's expected financial and operational performance and results as at and for the periods ended on the dates presented in the Company's plans and objectives and may not be appropriate for other purposes.
Contacts:
Aura Minerals Inc.
Patrick Downey
President & Chief Executive Officer
(604) 669-4777
(604) 696-0212 (FAX)
info@auraminerals.com
www.auraminerals.com