A Letter from Brigus Gold′s President and Chief Executive Officer
(NYSE Amex: BRD; TSX: BRD)
Dear Fellow Shareholders,
I write today to provide you with an overview of Brigus′ accomplishments
and challenges during 2011 and our expectations for 2012. Throughout
2011, we continued the process of building the company that was formed
when Linear Gold and Apollo Gold merged in June 2010 to create Brigus
Gold.
At the time of the merger, we recognized significant value and future
potential in the assets at the Black Fox Mine. We estimated it would
take approximately 12 to 15 months to make necessary changes, implement
a turnaround, build the underground portion of the mine and begin
unlocking the considerable value of the assets. Although this process
has taken longer than first estimated, our confidence in the Black Fox
Mine, the quality of the ore body and the exploration potential has
never been higher. Today, the turnaround is well underway, we are
beginning to see results, and we expect this positive trend to continue
throughout the year.
Significant accomplishments over the past year have made the company
fundamentally stronger and provide Brigus with a solid foundation to
support future growth. However, the accomplishments and positive
developments during 2011 were overshadowed by gold production levels
below our targets and market expectations. During the third and fourth
quarters shortfalls in gold production resulted from a slower ramp up of
the underground portion of the mine and poor ore dilution practices.
I confirm that we have taken corrective action and we are seeing
results. We identified the underlying reasons for the shortfalls, found
appropriate solutions and implemented a series of improvements and
management changes at the Black Fox Mine. These actions have resulted in
measurable and material improvements in performance during the first
quarter of 2012, and we are confident problems experienced in the second
half of 2011 are now behind us.
We reported strong Q1-2012 gold production from the Black Fox Mine
hitting the top end of our guidance. The new operating team has done an
excellent job reducing ore dilution and ramping up gold production from
the underground. Current production levels put us on track to meet our
guidance for the second quarter and we are confident the mine will
continue to meet targets and reach a steady state production level of
approximately 25,000 ounces per quarter by year-end.
2011 Accomplishments:
All surface and infrastructure facilities at the Black Fox Mine were
upgraded. Production commenced in Phase Two of the open pit in April.
The underground achieved commercial production in October.
Brigus issued $50.0 million of unsecured convertible debentures in
March 2011 to strengthen its balance sheet, and completed an $8.2
million private placement financing of flow-through shares to fund
exploration programs in 2012.
Brigus′ exploration team made a new, significant gold discovery on the
southern portion of the Black Fox Complex. An independent 43-101
report, released in December, increased gold resources on the property
by more than 50 percent. The new discovery remains open for further
expansion and drilling continues.
A mill enhancement began in the third quarter and is expected to
increase ore processing capacity by 5-10% to up to 2,200 tonnes per
day.
The Black Fox Mine was recognized with the Angus D. Campbell award for
safety two years in a row, recently reaching a milestone of operating
for over 22 months and 1,200,000 person-hours without a lost time
injury.
An independent 43-101 report on the Goldfields development project,
located in northern Saskatchewan, was completed and published.
Non-core assets in Mexico and the Dominican Republic were divested.
These were important milestones along the path to reach our goal of
becoming a leading Canadian gold producer.
Black Fox Mine, Ontario
Operations at the Black Fox Mine continue to ramp up and will deliver
increased gold production quarter over quarter in 2012, reaching our
steady state level of approximately 25,000 ounces per quarter by the end
of the year.
The open pit at Black Fox, which commenced production in May 2009,
performed well during 2011 and is meeting our expectations.
The underground portion of the mine continues to improve with average
grades of approximately 6 grams per tonne ('gpt?) of gold during
Q1-2012, consistent with the mine reserves, up from less than 3 gpt
during the previous quarter. Daily tonnage from the underground
continues to increase and is expected to reach 800 tonnes per day
('tpd?) by the end of the third quarter and 800 to 1,000 tpd by
year-end. There are currently 21 underground stopes open and we expect
approximately 30 stopes will be open by Q3-2012. The team at Black Fox
continues to focus on optimizing underground grades while effectively
managing dilution and throughput on an on-going basis.
The Black Fox underground ore body is open for expansion with grades
that trend higher at depth. We are confident the mine will prove to be a
long-life mining asset for Brigus.
Production Growth - 2012
During the first quarter of 2012 we produced 16,922 ounces of gold, and
we expect quarter over quarter production growth through the year. We
are forecasting annual production of 77,000 to 85,000 ounces of gold in
2012 and expect to reach a steady state annual production rate of
approximately 100,000 ounces at year-end.
Increasing Canadian Gold Reserves and Resources
A key priority for Brigus is to increase our inventory of gold reserves
and resources through targeted, systematic exploration. At present we
have 1.86 million ounces of gold reserves; 840,000 ounces at the Black
Fox Mine in Timmins, Ontario and 1,020,000 ounces at Goldfields in
Uranium City, Saskatchewan. Both the Black Fox and Goldfields deposits
remain open for expansion with considerable potential for new reserve
additions.
At Black Fox we recently began driving an exploration drift from the
deepest portion of our east ramp. Exploration drilling from underground
drill stations will commence in June with an objective of increasing
reserve ounces and extending the mine life. We are excited about the
potential and are confident the program will positively impact and
expand gold reserves at Black Fox.
Elsewhere on the Black Fox property, Brigus′ ongoing drill program was
successful with the discovery of the 147 Zone along with a significant
extension of the Contact Zone. Both zones are in close proximity to the
Black Fox Mine and remain open for further expansion. In December, we
released an initial National Instrument 43-101 resource estimate on
these zones resulting in more than a 50 percent increase of gold
resources on the Black Fox Complex. An in-fill drilling program is in
progress to convert inferred ounces to indicated ounces while continuing
to expand the resource with deeper drilling. We look forward to
releasing an updated resource statement later in the year.
Simultaneously, we recently commenced a preliminary economic assessment
(PEA) on the 147 and Contact zones and expect to release results during
the third quarter. We believe these zones have the potential for robust
economics. A project manager has been hired to oversee this work and
begin the permitting and planning process for a new mine, to be named
Grey Fox.
Numerous high priority drill targets remain to be tested and 75 percent
of the property remains unexplored.
GoldFields Project, Saskatchewan
The Goldfields Project, located in northern Saskatchewan, is host to
1,020,000 ounces of reserves. Brigus released an updated independent
43-101 report for Goldfields in the fall of 2011, which calls for a
13-year mine life and 100,000 ounces of production for each of the first
six years. This mine is permitted and will require a two-year
construction period once a production decision is made. The
pre-feasibility study indicated a net present value of approximately
$144 million at a 5 percent discount rate with an internal rate of
return of 19.6 percent, assuming a gold price of $1,250 per ounce. At
gold prices of $1,600 per ounce, Goldfields returns a net present value
of over $300 million. We will not make a production decision on this
mine until Black Fox is operating at its steady state production rate of
25,000 ounces a quarter, and we will fund this project in an optimal
manner.
Maintaining a Strong Balance Sheet and Increasing Cash Flow
Since the beginning of 2011, we have strengthened our balance sheet and
overall financial position. The Company issued US$50.0 million of
unsecured convertible debentures in March 2011, a $8.2 million flow
through financing to fund 2012 exploration in December 2011, and a
bought deal financing for $15 million in February 2012.
With $34 million on hand today, Brigus is well positioned to capitalize
on the growth opportunities before us. Mining operations will be
profitable this year with cash flows building as gold production
increases quarter over quarter.
Looking Forward
We believe in the future of gold bullion and are undeterred by the
recent weakness in gold equities across the marketplace. Brigus is well
positioned to benefit from strong gold prices, now and in the future.
Increasing production at Black Fox, promising exploration drill results,
new gold discoveries and growing cash flows signal Brigus′ evolution to
become a mid-tier gold producer.
I want to thank our dedicated team of employees who continue to work
tirelessly to build value for Brigus Gold. Their skill and expertise are
essential to our success, and I am very proud of their excellent mining
safety record. The health and safety of Brigus employees is our top
priority.
I would like to thank you for your continued support and look forward to
a successful year ahead.
Sincerely,
Wade K. Dawe
President and Chief Executive Officer
About Brigus Gold
Brigus is a growing gold producer committed to maximizing shareholder
value through a strategy of efficient production, targeted exploration
and select acquisitions. The Company operates the wholly owned Black Fox
Mine and Mill in the Timmins Gold District of Ontario, Canada. The Black
Fox Complex encompasses the Black Fox Mine and adjoining properties in
the Township of Black River-Matheson, Ontario, Canada. Brigus is also
advancing the Goldfields Project located near Uranium City,
Saskatchewan, Canada, which hosts the Box and Athona gold deposits. In
Mexico, Brigus has granted Cangold Limited the option to acquire a 75%
interest in the Company′s Ixhuatan Project located in the state of
Chiapas. In the Dominican Republic, Brigus has signed an agreement to
sell its remaining interests in three mineral exploration projects.
Cautionary and Forward-Looking Statements
Statements contained in this news release, which are not historical
facts, are forward-looking statements that involve risk, uncertainties
and other factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements. All
statements regarding the ability of the Company to achieve its
production, total cash costs, steady state annual production and mining
rate estimates; estimated average gold grades for the open pit and
underground operations; increase in gold production; increase in
profitability; exploration drill results and resource additions, are
forward-looking statements and estimates that involve various risks and
uncertainties. This forward-looking statements include, or may be based
upon, estimates, forecasts, and statements as to management's
expectations with respect to, among other things, the outcome of legal
proceedings, the issue of permits, the size and quality of the Company's
mineral resources, progress in development of mineral properties, future
production and sales volumes, capital and mine production costs, demand
and market outlook for metals, future metal prices and treatment and
refining charges, and the financial results of the Company.
Important factors that could cause actual results to differ materially
from these forward-looking statements include environmental risks and
other factors disclosed under the heading 'Risk Factors? in Brigus′ most
recent Annual Information Form and Management Discussion and Analysis
filed under the Company′s name at www.sedar.com
and annual report on Form 40-F filed with the United States Securities
and Exchange Commission at www.sec.gov
as well as elsewhere in Brigus′ documents filed from time to time with
the Toronto Stock Exchange, the NYSE Amex Equities, the United States
Securities and Exchange Commission and other regulatory authorities. All
forward-looking statements included in this news release are based on
information available to the Company on the date hereof. The Company
assumes no obligation to update any forward-looking statements, except
as required by applicable securities laws.
Brigus Gold
Jennifer Nicholson, CA, 902-442-7186
Executive
Vice President
jnicholson@brigusgold.com
or
Katherine
Burgess, 902-442-7184
Manager, Stakeholder Relations
kburgess@brigusgold.com