Jaguar Mining Reports Third Quarter 2011 Financial Results
JAG - TSX/NYSE
Third Quarter 2011 Highlights
-- Record total of 41,390 ounces of gold sold
-- Record total revenue of $70.0 million
-- Total gold production of 40,661 ounces
-- Record cash operating margin of $806 per ounce
-- Operating profit of $6.7 million
-- Cash provided by operating activities totaled $30.0 million or
$0.36 per fully diluted share, an increase of 164% from Q3 2010
and 38% from Q2 2011
CONCORD, NH, Nov. 9, 2011 /CNW/ - Jaguar Mining Inc. ('Jaguar' or the 'Company')
today reported adjusted net income of $7.4 million or $0.09 per fully diluted share for the quarter ended September 30, 2011. The adjusted result excludes non-operating expenses including $27.3 million from an unrealized loss on the conversion option embedded in convertible debt (see note 1), an $18.6 million loss resulting from a significant decline in the value of the Brazilian real vs. the U.S. dollar during the period (see note 2), a $1.2 million loss on foreign exchange derivatives (see note 3), $5.6 million of deferred income taxes, $3.3 million non-cash interest expense and $2.8 stock based compensation. Including these items, Jaguar's third quarter result was a net loss of $51.3 million or $0.61 per fully diluted share.Commenting on the quarter's results and operations, Daniel R. Titcomb, Jaguar's President and CEO stated, 'We had a number of notable accomplishments in the quarter. We set a new quarterly record of 41,390 ounces of gold sold. Combined with strong gold prices, averaging $1,692 per ounce, we also achieved a record $70.0 million in total revenue. Our combined mine output for the third quarter 2011 totaled approximately 463,000 tonnes, yielding 40,661 recovered gold ounces. Our average cash operating margin per ounce increased by more than 77 percent compared to the third quarter of last year, setting a new quarterly record. This produced record quarterly cash flow of $30 million or $0.36 per share. These positives should not be overshadowed by the non-cash, non-operating expenses which negatively impacted net income in the quarter.'
Cash operating costs were $886 per ounce of gold in the third quarter 2011 compared to $799 per ounce in the second quarter 2011. The vast majority of the cash cost increase is attributable to higher labor expense. Approximately half of the increase in labor expense for the quarter was the result of one-time payments for incentive/retention bonuses and unique, salary premiums as agreed in the June labor negotiations. Lower feed grades at the Paciência mining complex were also a factor in the higher average cash operating costs. The average cash operating margin for the third quarter 2011 was $806 per gold ounce sold compared to $708 per gold ounce sold in the second quarter of 2011.
Cash provided by operating activities during the quarter totaled $30.0 million or $0.36 per basic and diluted share.
At September 30, 2011, Jaguar had cash and cash equivalents totaling $101.7 million. This compares to $39.2 million at December 31, 2010 and $125.4 million at June 30, 2011. The decline from the end of the second quarter is largely attributable to $33.9 million capital investment in mining equipment and exploration, $14.8 million effect of foreign exchange on non-US dollar denominated cash and cash equivalents, offset by $30.0 million cash provided by operations.
For the first nine months of 2011, Jaguar sold 121,368 ounces of gold and reported total revenue of $185.7 million and a net loss of $32.0 million or $0.38 per fully diluted share. Excluding the non-operating expenses related to derivatives, the conversion option embedded in the Company's convertible debt, gains or losses from changes in foreign exchange rates, stock based compensation, interest expense and deferred taxes adjusted net income was $16.0 million or $0.19 per fully diluted share for the first nine months of 2011. Cash provided by operating activities in the first nine months of the year totaled $71.0 million, or $0.84 per share. The results compare to 106,395 ounces of gold sold, total revenue of $126.2 million, net income of $31.8 million, adjusted net loss of $8.1 million and cash provided by operating activities of $24.7 million in the first nine months of 2010. The increases in ounces of gold sold and total revenue in the first nine months of 2011are largely attributable to the addition of the Caeté operation which was commissioned in the third quarter of 2010. Total revenue was also driven higher by increased average price realization per ounce.
The following is a summary of key operating results and measures for the three month and nine month periods ended September 30, 2011 and comparable measures for the relevant prior year periods.
Summary of Key Operating Measures
Quarter Ended Nine Months Ended
September 30 September 30
2011 2010 2011 2010
(unaudited)
($ in 000s, except
per share amounts)
Gold sales $ 70,041 $ 48,712 $ 185,739 $ 126,234
Ounces sold 41,390 38,861 121,368 106,395
Average sales
price ($ per 1,692 1,254 1,530 1,186
ounce)
Gross profit 17,716 256 41,536 9,792
Net income (loss) (51,272) 19,230 (31,962) 31,810
Basic income (0.61) 0.23 (0.38) 0.38
(loss) per share
Diluted income (0.61) 0.23 (0.38) 0.37
(loss) per share
Weighted avg. # of
shares outstanding 84,388,909 84,224,952 84,378,791 84,117,099
- basic
Weighted avg. # of
shares outstanding 84,388,909 84,652,178 84,378,791 85,307,435
- diluted
South Operations Development and Exploration
During the third quarter, Jaguar's operations completed the development of more than 6.5 kilometers, added 17 new working faces, and completed over 23.3 kilometers of drilling in their existing mines. This development and drilling will provide opportunities to increase total production as well as improve operational flexibility, resulting in the ability to more effectively manage the consistency of feed grades at processing plants in future periods.
In addition, Jaguar is continuing brownfield exploration efforts at and around existing mining complexes. Subsequent to the end of the third quarter, the Company completed and filed a NI 43-101 compliant statement of resource technical report for its Faina and Pontal targets. Faina and Pontal are refractory ore deposits located near the Turmalina Mine. This technical report added 276,850 ounces of measured and indicated mineral resources and 127,820 ounces of inferred mineral resources to Jaguar's total mineral resources.
Conference Call Details
Members of the Jaguar senior management team will hold a conference call to discuss the third quarter results and operations on Thursday, November 10, 2011 at 10:00 a.m. ET. The call can be accessed via telephone or webcast.
Conference Call
Details:
From North 888-702-7351
America:
International: 213-416-2192
Replay:
From North 800-675-9924
America:
International: 213-416-2185
Replay ID: 111011
Webcast: www.jaguarmining.com
A slide presentation to accompany the conference call discussion will be available prior to the call on the Company's homepage at www.jaguarmining.com.
About Jaguar
Jaguar is a gold producer in Brazil with operations in a prolific greenstone belt in the state of Minas Gerais. Jaguar is also engaged in developing the Gurupi Project in the state of Maranhão. Based on its development plans, Jaguar is one of the fastest growing gold producers in Brazil. The Company is actively exploring and developing additional mineral resources at its approximate 256,300-hectare land base in Brazil. Additional information is available on the Company's website at www.jaguarmining.com.
Forward Looking Statements
This press release contains forward-looking statements, within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, concerning the Company. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements.
These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating gold prices and monetary exchange rates, the possibility of project cost delays and overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, uncertainties related to production rates, timing of production and the cash and total costs of production, changes in applicable laws including laws related to mining development, environmental protection, and the protection of the health and safety of mine workers, the availability of labor and equipment, the possibility of labor strikes and work stoppages and changes in general economic conditions. 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 information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.
The forward-looking statements represent our view as of the date of discussion. The Company anticipates that subsequent events and developments may cause the Company's views to change. The Company does not undertake to update any forward-looking statements, either written or oral, that may be made from time to time by or on behalf of the Company subsequent to the date of this discussion except as required by law. For a discussion of important factors affecting the Company, including fluctuations in the price of gold and exchange rates, uncertainty in the calculation of mineral resources, competition, uncertainty concerning geological conditions and governmental regulations and assumptions underlying the Company's forward-looking statements, see the 'CAUTIONARY NOTE' regarding forward-looking statements and 'RISK FACTORS' in the Company's Annual Information Form for the year ended December 31, 2010 filed on System for Electronic Document Analysis and Retrieval and available at http://www.sedar.com and the Company's Annual Report on Form 40-F for the year ended December 31, 2010 filed with the United States Securities and Exchange Commission and available at www.sec.gov.
Note: As required by applicable Canadian rules, effective Q1 2011, Jaguar has prepared its financial statements in accordance with International Financial Reporting Standards ('IFRS'), including the restatement of the comparative period previously reported under Generally Accepted Accounting Principles ('GAAP') in Canada.
Additional details are available in the Company's filings on SEDAR and EDGAR, including Management's Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements for the quarter ended September 30, 2011.
The following tables are included in Jaguar's financial statements as filed on SEDAR and EDGAR. Readers should refer to those filings for the associated footnotes which are an integral part of the tables.
JAGUAR MINING INC.
Condensed Interim Consolidated Balance
Sheets
(Expressed in thousands of U.S. dollars)
(Unaudited)
September 30, December 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 101,725 $ 39,223
Inventory 31,945 31,495
Prepaid expenses and sundry assets 27,426 24,523
Derivatives - 168
161,096 95,409
Prepaid expenses and sundry assets 45,545 48,582
Net smelter royalty - 1,006
Restricted cash 909 908
Property, plant and equipment 384,401 348,815
Mineral exploration projects 83,259 74,658
$ 675,210 $ 569,378
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 36,335 $ 27,853
Notes payable 20,536 26,130
Income taxes payable 19,077 16,677
Reclamation provisions 2,463 2,167
Deferred compensation liabilities 2,974 2,436
Derivative liabilities 893 -
Other liabilities 1,086 704
83,364 75,967
Notes payable 226,866 140,664
Option component of convertible notes 67,101 28,776
Deferred income taxes 7,019 215
Reclamation provisions 17,216 17,960
Deferred compensation liabilities 1,780 4,829
Other liabilities 393 497
Total liabilities 403,739 268,908
Shareholders' equity
Share capital 370,043 369,747
Stock options 14,252 13,054
Contributed surplus 3,370 1,901
Deficit (116,194) (84,232)
Total equity attributable to equity 271,471 300,470
shareholders of the Company
Commitments
$ 675,210 $ 569,378
JAGUAR MINING
INC.
Condensed Interim Consolidated Statements of Operations
and Comprehensive Income (Loss)
(Expressed in thousands of U.S. dollars, except per share
amounts)
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2011 2010 2011 2010
Gold sales $ 70,041 $ 48,712 $ 185,739 $ 126,234
Production costs (40,602) (37,193) (110,494) (88,016)
Stock-based (189) - (212) (381)
compensation
Depletion and (11,534) (11,263) (33,497) (28,045)
amortization
Gross profit 17,716 256 41,536 9,792
Operating
expenses:
Exploration 230 1,012 1,281 3,291
Stock-based 3,818 (3,639) 734 (2,464)
compensation
Administration 6,044 5,133 16,718 14,249
Management 165 333 690 970
fees
Amortization 316 133 986 383
Other 438 1,190 1,509 2,208
Total
operating 11,011 4,162 21,918 18,637
expenses
Income (loss)
before the 6,705 (3,906) 19,618 (8,845)
following
Loss on 1,219 127 805 319
derivatives
Loss (gain) on
conversion
option embedded 27,260 (21,978) 19,420 (46,827)
in convertible
debt
Foreign exchange 18,559 (2,299) 8,944 (725)
loss (gain)
Accretion 648 433 1,842 999
expense
Interest 7,203 4,157 19,960 12,501
expense
Interest income (2,854) (645) (7,186) (3,155)
Gain on
disposition of (595) (673) (1,593) (6,125)
property
Other
non-operating (30) - (349) -
expense
recoveries
Total other
expenses 51,410 (20,878) 41,843 (43,013)
(income)
Income (loss)
before income (44,705) 16,972 (22,225) 34,168
taxes
Income taxes
Current income
taxes 979 (1,273) 2,911 1,250
(recoveries)
Deferred
income taxes 5,588 (985) 6,826 1,108
(recoveries)
Total income 6,567 (2,258) 9,737 2,358
taxes
Net income
(loss) and
comprehensive
income (loss)
for the period $ (51,272) $ 19,230 $ (31,962) $ 31,810
Basic earnings
(loss) per $ (0.61) $ 0.23 $ (0.38) $ 0.38
share
Diluted earnings $ (0.61) $ 0.23 $ (0.38) $ 0.37
(loss) per share
Weighted average
number of common
shares
outstanding -
basic 84,388,909 84,224,952 84,378,791 84,117,099
Weighted average
common shares
outstanding -
diluted 84,388,909 84,652,178 84,378,791 85,307,435
JAGUARMINING INC.
Condensed Interim
Consolidated
Statements of Cash
Flows
(Expressed in
thousands of U.S.
dollars)
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2011 2010 2011 2010
Cash provided by
(used in):
Operating
activities:
Net income
(loss) and
comprehensive $ (51,272) $ 19,230 $ (31,962) $ 31,810
income (loss)
for the period
Adjustments to
reconcile net
earnings to net
cash provided
from
(used in)
operating
activities:
Unrealized
foreign 23,151 (2,324) 16,402 381
exchange loss
(gain)
Stock-based
compensation 4,007 (3,639) 946 (2,083)
expense
(recovered)
Interest 7,203 4,157 19,960 12,501
expense
Accretion of
interest - (94) (188) (94)
income
Accretion 648 433 1,842 999
expense
Income taxes (36) - (140) -
(recovered)
Deferred 5,588 (985) 6,826 1,108
income taxes
Depletion and 11,850 11,396 34,483 28,428
amortization
Unrealized
loss on 1,090 932 1,061 2,104
derivatives
Unrealized
loss (gain)
on option 27,260 (21,978) 19,420 (46,827)
component of
convertible
note
Gain on
disposition - - - (4,625)
of property
Reclamation
expenditure (73) (539) (99) (1,613)
(recovery)
29,416 6,589 68,551 22,089
Change in
non-cash
operating working
capital:
Inventory 388 5,190 1,321 4,056
Prepaid
expenses and (82) (2,906) (7,559) (8,389)
sundry assets
Accounts
payable and 1,297 2,959 6,678 6,423
accrued
liabilities
Income taxes (785) (397) 2,540 606
payable
Deferred
compensation (255) (42) (501) (42)
liability
29,979 11,393 71,030 24,743
Financing
activities:
Issuance of 164 127 164 2,078
common shares
Increase in - (1,500) - (2,301)
restricted cash
Repayment of (7,115) (121) (15,049) (3,655)
debt
Increase in 6,000 9,036 105,313 20,152
debt
Interest paid (4,387) (48) (9,002) (5,137)
Other 333 (210) 278 16
liabilities
(5,005) 7,284 81,704 11,153
Investing
activities:
Short-term - 5,862 - -
investments
Mineral
exploration (5,062) (14,155) (9,674) (20,274)
projects
Purchase of
property, plant (28,820) (21,193) (70,420) (88,461)
and equipment
Proceeds from
disposition of - 1,250 - 1,250
property
(33,882) (28,236) (80,094) (107,485)
Effect of foreign
exchange on
non-U.S. dollar
denominated
cash and cash (14,767) 112 (10,138) (490)
equivalents
Increase (decrease)
in cash and cash (23,675) (9,447) 62,502 (72,079)
equivalents
Cash and cash
equivalents, 125,400 58,624 39,223 121,256
beginning of period
Cash and cash
equivalents, end of $ 101,725 $ 49,177 $ 101,725 $ 49,177
period
Non-IFRS Performance Measures
The Company has included the non-IFRS performance measures discussed below in this press release. These non-IFRS performance measures do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS measures provide investors with additional information that will better enable them to evaluate the Company's performance. Accordingly, these Non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with IFRS.
The Company has included cash operating cost per ounce produced and cash operating margin per ounce because it believes these figures are a useful indicator of an operation's performance as they provide: (i) a measure of the mine's cash margin per ounce, by comparison of the cash operating costs per ounce to the price of gold; (ii) the trend in costs as the mine matures; and (iii) an internal benchmark of performance to allow for comparison against other gold mining operations. Additionally, the Company has provided adjusted net income, which reflects the elimination of special non-operating and certain non-recurring charges that do not reflect on-going costs in Jaguar's operations or administrative costs; and cash flow from operations, which does not reflect the change in non-cash operating working capital. The definitions for these performance measures and reconciliation of the non-IFRS measures to reported IFRS measures are set out in the following tables:
Adjusted Net
Income (Loss)
($000s)
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
September 30 September 30 September 30 September 30
2011 2010 2011 2010
Net income
(loss) as $ (51,272) $ 19,230 $ (31,962) $ 31,810
reported
Adjustments:
Loss (gain)
on conversion
option 27,260 (21,978) 19,420 (46,827)
embedded in
convertible
debt
Foreign
exchange loss 18,559 (2,299) 8,944 (725)
(gain)
Deferred
income tax 5,588 (985) 6,826 1,108
(recoveries)
Non-cash
interest 3,250 2,091 9,153 6,169
expense
Stock-based
compensation 2,798 - 2,798 -
stock options
granted
Loss on 1,219 127 805 319
derivatives
Adjusted net 7,402 (3,814) 15,984 (8,146)
income (loss)
Adjusted
basic and
diluted net $ 0.09 $ (0.05) $ 0.19 $ (0.10)
loss per
share
Cash Provided
by Operating
Activities
($000s)
Quarter
Ended Nine Months Nine Months
September QuarterEnded Ended Ended
30 September 30 September 30 September 30
2011 2010 2011 2010
Cash provided
by operating
activities as
reported
Net income $ (51,272) $ 19,230 $ (31,962) $ 31,810
(loss)
Adjustments to
reconcile net
earnings to
net cash
provided from
(used in)
operating
activities:
Unrealized
foreign 23,151 (2,324) 16,402 381
exchange
(gain) loss
Stock-based
compensation 4,007 (3,639) 946 (2,083)
(recovered)
Interest 7,203 4,157 19,960 12,501
expense
Accretion of
interest - (94) (188) (94)
income
Accretion 648 433 1,842 999
expense
Income taxes (36) - (140) -
(recovered)
Deferred
income 5,588 (985) 6,826 1,108
taxes
Depletion
and 11,850 11,396 34,483 28,428
amortization
Unrealized
loss on 1,090 932 1,061 2,104
derivatives
Unrealized
(gain) loss
on option 27,260 (21,978) 19,420 (46,827)
component of
convertible
note
Gain on
disposition - - - (4,625)
of property
Reclamation
expenditure (73) (539) (99) (1,613)
(recovery)
$ 29,416 $ 6,589 $ 68,551 $ 22,089
Change in non
cash operating 563 $ 4,804 2,479 $ 2,654
working
capital
Cash provided
by operating $ 29,979 $ 11,393 $ 71,030 $ 24,743
activities
Cash provided
by operating $ 0.36 $ 0.14 $ 0.84 $ 0.29
activities per
share
Cash Operating Margin per
Ounce of Gold Quarter Ended Nine Months Ended
September 30 September 30
2011 2010 2011 2010
Average sales price per ounce $ 1,692 $ 1,254 $ 1,530 $ 1,186
gold
less
Cash operating cost per 886 798 804 722
oounce gold produced
equals
Cash operating margin per $ 806 $ 456 $ 726 $ 464
oounce gold
Note 1 - Fair Valuation of Derivative Financial Instruments - Option Component of Convertible Notes
IFRS requires that derivative financial instruments be valued on a periodic basis. The option components of the Company's convertible notes are considered derivative financial instruments and are fair valued using the Crank - Nicolson valuation model using inputs, such as volatility and credit spread.
The carrying amount of the option components of the convertible notes was $67.1 million at September 30, 2011 (June 30, 2011 - $39.8 million; December 31, 2010 - $28.8 million). The change in fair value of $27.3 million for the three months ended September 30, 2011 is shown as a loss on conversion option embedded in convertible debt in the Statements of Operations and Comprehensive Income (Loss) (three months ended September 30, 2010 - $22.0 million gain.) The change in fair value of $19.4 million for the nine months ended September 30, 2011 is shown as a loss on conversion option embedded in convertible debt in the Statements of Operations and Comprehensive Income (Loss) (nine months ended September 30, 2010 - $46.8 million gain.)
Note 2 - Gains or Losses from Changes in Foreign Exchange Rates
The Company maintains a cash balance for general operating and investment purposes. Because the Company's operations and investments are located mostly in Brazil, much of the Company's cash and cash equivalents are held in Brazil and are denominated in Brazilian currency (Brazilian real). Because the Company's financial reporting is in U.S. dollars, changes in the exchange rate of the Brazilian real vs. the U.S. dollar result in unrealized gains or losses driven by the U.S. dollar valuation of the real denominated assets.
The exchange rate at September 30, 2011 was 1.85 Brazilian real per 1.0 U.S. dollar.
The exchange rate at June 30, 2011 was 1.56 Brazilian real per 1.0 U.S. dollar.
The exchange rate at December 31, 2010 was 1.67 Brazilian real per 1.0 U.S. dollar.
These changes in currency exchange rates resulted in losses of $18.6 million during the third quarter of 2011 and 8.9 million for the first nine months of 2011.
Note 3 - Forward foreign exchange contracts
As at September 30, 2011, the Company has forward foreign exchange contracts to purchase Brazilian real as follows:
Settlement Date Amount in Settlement amount in
thousands ofUS$ thousands ofR$
28-Oct-11 $ 1,000 R$ 1,652
31-Oct-11 1,000 1,835
30-Nov-11 1,000 1,663
30-Nov-11 1,000 1,846
23-Dec-11 1,000 1,623
23-Dec-11 1,000 1,638
23-Dec-11 1,000 1,644
23-Dec-11 1,000 1,672
$ 8,000.00 R$ 13,573
As at September 30, 2011, derivative liabilities include $893,000 of unrealized foreign exchange losses relating to the forward foreign exchange contracts (June 30, 2011 - gains of $197,000; December 31, 2010 - gains of $168,000). Included in the Statements of Operations and Comprehensive Income (Loss) are the following amounts of unrealized and realized gains or losses on foreign exchange derivatives:
Three Months Ended NineMonths Ended
September 30 September 30
2011 2010 2011 2010
Unrealized (gain) loss $ 1,090 $ (570) $ 1,061 $ 602
Realized (gain) loss 129 (805) (450) (1,785)
$ 1,219 $(1,375) $ 612 $(1,183)
Jaguar Mining Inc.
CONTACT: Company Contacts
Investors and Analysts may contact:
Roger Hendriksen
Vice President, Investor Relations
603-224-4800
rhendriksen@jaguarmining.com
Members of the media may contact:
Valéria Rezende DioDato
Director of Communication
603-224-4800
valeria@jaguarmining.com