Allied Nevada Achieves Net Income of $12.1 Million or $0.13 Per Share in Q1 2012
Solid Operating Performance in Q1 2012; Production and Adjusted Cash Costs In Line with ExpectationsRENO, NEVADA -- (Marketwire) -- 05/07/12 -- Allied Nevada Gold Corp. ("Allied Nevada" or the "Company") (TSX: ANV)(NYSE Amex: ANV) is pleased to provide financial and operating results for the quarter ended March 31, 2012. The results presented in this press release should be read in conjunction with the Company's Quarterly Report Form 10-Q for the quarter ended March 31, 2012 filed on SEDAR and EDGAR and posted on Allied Nevada's website at www.alliednevada.com. The financial results are based on United States GAAP (with the exception of the non-GAAP measure - adjusted cash costs) and are expressed in U.S. dollars.
Q1 2012 Highlights:
-- Hycroft continues its outstanding health, safety and environmental
record with no lost time accidents or significant environmental
incidents in the first quarter. The mine has now surpassed two years and
more than one million hours worked without a lost time accident.
-- Production from the Hycroft mine in the first quarter of 2012 met
expectations with 32,473 ounces of gold and 166,156 ounces of silver
produced. Production is expected to ramp up through the remainder of
2012, and is on track to meet previously stated guidance of between
180,000 and 200,000 ounces of gold.
-- Revenue from sales of 20,347 gold ounces and 128,306 silver ounces in
the first quarter of 2012 was $39.2 million, an increase of $7.3 million
compared with 21,341 ounces of gold and 59,566 ounces of silver sold for
revenue of $31.9 million in the first quarter of 2011. Revenue increased
primarily due to a higher average realized gold price of $1,715 per
ounce in the first quarter of 2012 compared with $1,401 per ounce in the
same period in 2011. As previously announced, the Company received
notification in the fourth quarter of 2011 that the company that
processes the gold and silver laden carbon would no longer accept
additional shipments for processing. Allied Nevada is in discussions
with an off-site processor of carbon while concurrently permitting for
an on-site carbon stripping plant, which is expected to be at a minimal
capital cost.
-- Allied Nevada achieved net income of $12.1 million or $0.13 per share in
the first quarter of 2012, compared with net income of $0.2 million or
$0.00 per share in the first quarter of 2011. In 2012, the Company
recorded an income tax expense of $4.0 million compared with $0.1
million in the same period in 2011. Net income in the first quarter of
2012 as compared to the same period in 2011 benefited from $8.1 million
lower exploration, development and land holding costs and $2.6 million
lower corporate general and administrative costs, partially offset by a
$3.9 million higher income tax expense.
-- Adjusted cash costs(1) of $531 per ounce in the first quarter of 2012
were as expected. Hycroft is completing a larger than average stripping
campaign for which costs are expensed and expects adjusted cash cost(1)
per ounce to be higher in the second quarter and then to decline in the
second half of the year. It is anticipated that the adjusted cash
cost(1) for 2012 will be within previously stated guidance range of
$475-$495 per ounce.
-- Cash provided by operating activities was $2.4 million in the first
quarter of 2012, compared with $0.4 million in the first quarter of
2011.
-- Cash used in investing activities was $34.6 million in the first quarter
of 2012 compared with $16.6 million in the same period in 2011. Included
in investing activities in the first quarter of 2012 were down payments
for mobile mining equipment of $14.3 million and capital expenditures of
$17.2 million, primarily for expansion equipment, infrastructure
upgrades and leach pad expansions. Mine development costs were $8.9
million primarily for permitting activities and drilling associated with
expansion engineering, condemnation drilling and reserve verification.
-- Cash used in financing activities was $2.7 million in the first quarter
of 2012 compared with $0.6 million for the same period in 2011. Cash
used in financing activities in the first quarter of 2011 was for
repayments of principal on capital lease obligations of $2.8 million,
partially offset by proceeds from the issuance of common stock on
exercise of options of $0.1 million.
-- Cash and cash equivalents at March 31, 2012, were $240.1 million.
-- Early receipt of the construction permit for the crushing plant at
Hycroft allowed for earthwork and ground preparation to begin ahead of
schedule.
-- The Company provided an updated mineral resource estimate for the
Hycroft mine in the first quarter of 2012. Proven and probable mineral
reserves increased to 12.7 million ounces of gold and 481.9 million
ounces of silver (1.1 billion tons grading 0.011 ounces per ton (opt)
gold and 0.42 opt silver)(2).
-- The Company provided an updated Hycroft Mill Feasibility Study with
improved economics. The revised study indicates a 19-year mine life
with the initial ten-year (2015-2024) average annual production of
582,260 ounces of gold and 29.1 million ounces of silver at an average
annual adjusted cash cost of $166 per ounce. There has been no change to
the initial capital cost estimate of $1.2 billion. The updated study
estimates a net present value of $1.6 billion (6% discount) and an
internal rate of return of 37% at conservative metals prices ($1,000 per
ounce gold price and $18 per ounce silver price(1).
Hycroft Operations Update
Hycroft mined 11.5 million tons of material including 4.0 million tons of ore grading 0.016 opt gold and 0.524 opt silver. Gold and silver grades exceeded expectation for the quarter by 11% and 74%, respectively. Better than planned grades offset lower than expected tons placed on the leach pad, resulting in production of 32,473 ounces of gold and 166,156 ounces of silver. This production was consistent with expectations for the first quarter of 2012. The variance of gold and silver produced compared with sales is due to the timing difference in ounces in process, on carbon and in solution, and sales of that inventory.
As previously announced, the Company received notification in the fourth quarter of 2011 that the company that processes the gold and silver laden carbon would no longer accept additional shipments for processing. Allied Nevada is working to develop a strategy to process the gold in carbon in order to improve the timing of sales for those ounces in carbon including entering into an agreement with off-site processing facilities to process the carbon and permitting an on-site carbon stripping plant. If an agreement cannot be reached with an off-site processing facility, it is expected to take 12 months before an on-site plant can be complete, due to the timing of the necessary permits. The gold on carbon is currently 13,000 ounces and is expected to grow at a rate of 2,000 ounces per month until processing recommences.
Key operating statistics for the three months ended March 31, 2012, compared with the same period in 2011, are as follows:
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Quarters ended March 31,
----------------------------
2012 2011
----------------------------
Total tons of material mined (000s) 11,458 7,780
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Ore grade - gold (oz/ton) 0.016 0.014
Ore grade - silver (oz/ton) 0.524 0.197
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Ounces produced - gold 32,473 20,718
Ounces produced - silver 166,156 61,751
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Ounces sold - gold 20,347 21,341
Ounces sold - silver 128,306 59,566
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Average realized price - gold ($/oz) $ 1,715 $ 1,401
Average realized price - silver ($/oz) $ 34 $ 34
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Average spot price - gold ($/oz) $ 1,691 $ 1,386
Average spot price - silver ($/oz) $ 33 $ 32
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Total adjusted cash costs(1) (thousands) $ 10,805 $ 11,118
Total adjusted cash costs(1) per ounce $ 531 $ 521
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The majority of construction and development efforts in the first quarter were directed towards completion of the 3.0 million square foot Lewis leach pad expansion. Ore is currently being stacked on the new areas of the leach pad. The Company received the permits to begin construction of the crushing plant ahead of schedule. A contract miner is being utilized to complete excavation and ground work preparation for the crushing plant.
Two of the nine Komatsu 930E haul trucks slated for delivery throughout 2012 arrived on site slightly ahead of schedule.
Exploration
Drilling activities at Hycroft in the first quarter of 2012 totaled 39,628 feet in 46 holes and were for engineering in support of the expansion projects at Hycroft. The drill fleet has been reduced to one core rig and one rotary rig in the second quarter, and drilling activities will be primarily directed towards facility and infrastructure condemnation work and in-pit inferred resource conversion drilling.
2012 Outlook
Hycroft Operations
Production is expected to ramp up through the remainder of 2012, and is on track to meet current guidance of between 180,000 and 200,000 ounces of gold. The success of Hycroft in achieving production and cost guidance for 2012 is highly sensitive to a number of events taking place as scheduled, including delivery of major mining equipment. The Hitachi EX5500 shovel, which was expected to depart Japan in late March, shipped about a month late due to logistical issues at the port stemming from damage created by the March 2011 tsunami. The 2012 mine plan assumed the shovel would be in operation in the beginning of June, 2012. The Company will make every effort to construct and place the shovel into operation upon its arrival at site, but expects that it will be at least a month behind schedule.
Adjusted cash costs(1) of $531 per ounce in the first quarter of 2012 were as expected. Hycroft is completing a larger than average stripping campaign for which costs are expensed and expects adjusted cash costs per ounce to be higher in the second quarter and to decline in the second half of the year. For the year the Company continues to believe that the adjusted cash cost per ounce will be within the previously stated guidance of $475-$495.
The assumptions used in determining the 2012 production and cost guidance: gold price of $1,400 per ounce, silver price of $25 per ounce, and costs associated with $100 per barrel fuel.
Major Capital Programs
Capital expenditures in 2012 are expected to total approximately $225 million. Significant capital projects include the following: ongoing condemnation and engineering drilling, permitting, progress payments for long-lead fixed and mobile equipment, engineering for the mill and gyratory crushing projects and infrastructure improvements.
The Company is currently expanding Hycroft operations to include increasing the mining rate, improving the metal recovery with crushing and ultimately milling processes and adding the potential to process sulfide material. The expansion project is the combination of three previously related projects announced:
-- The Company began implementing an accelerated heap leach mine plan in
mid-2010 with a goal of increasing the mining rate utilizing a larger
capacity mining fleet and upgrading existing processing facilities.
-- In 2011, the decision was made to accelerate construction of the large
gyratory crushing unit to be utilized in the heap leach operation.
-- In 2011, the Company completed a positive feasibility study on the
Hycroft mill expansion option. Under this project, a milling process
will supplement the heap leach operations. The mill will process the
higher grade fractions of the oxide mineralization and all of the
transitional and sulfide mineralization. The Board has approved the
capital expenditures to complete detailed engineering to construct the
mill and the ordering of long-lead time items critical to the proposed
construction timelines.
The current expansion project from this point forward is best described in
four related activities:
1. Mine Expansion. The current expansion project requires the Company to
increase its mining rate from the 34 million tons of material mined in
2011 to 80 million tons of material by the end of 2014. This stage
involves implementing larger capacity haul trucks, shovels and
production drills along with ancillary mining equipment. By the end of
2011, a significant portion of the larger mobile mining fleet was in
operation including two smaller and two larger capacity hydraulic
shovels, seven 320-ton haul trucks and additional support equipment.
2. Leach Pad Expansion. Until a mill is constructed, the increased oxide
mineralization mined will be processed on leach pads. To accommodate the
oxide ore, the existing leach pad system needs to be expanded. The
addition of the gyratory crusher will benefit the ultimate recovery of
gold from the leach pads. In 2011, the Merrill Crowe plant was expanded
to increase the solution processing capacity from 3,500 gallons per
minute to 5,000 gallons per minute. The Brimstone leach pad expansion
was completed increasing the pad size to 9.1 million square feet. In
addition, preparation of the Lewis leach pad, located directly adjacent
to the Brimstone pad, began and is expected to add 3.0 million square
feet of leach pad space in the second quarter of 2012. To date, the
primary, secondary and tertiary units have been ordered including a
gyratory crusher, cone crushers and screens. It is anticipated that the
gyratory crushing plant will become operational mid-2013. The effect of
this phase of implementation is to increase annual gold production to
approximately 300,000 ounces by the end of 2013.
3. Mill Construction. Based on the completed feasibility study, the
economics of the project could be increased by constructing a mill to
process the higher grade oxide mineralization along with the
transitional and sulfide mineralization. The Company is currently
completing the detailed engineering and has begun ordering long-lead
time items critical to the construction schedule.
4. Infrastructure. The future expansion plans require the company to
upgrade the infrastructure at the Hycroft Mine. Major infrastructure
items include the upgrade of the power transmission and distribution
system to handle the milling demands and the construction of a rail
siding.
The initial capital cost estimate for the expansion project is expected to be $1.2 billion. As of March 31, 2012, Allied Nevada had spent or committed $398.8 million, which is in line with the feasibility estimate for this equipment and represents approximately 32% of the total capital estimate. All equipment pricing is firm and includes freight and taxes. In the case of the mining equipment, the pricing also includes on-site assembly and commissioning. The Company anticipates that additional financing, in addition to future operating cash flows, existing cash and cash equivalents and capital lease commitments, will be required to meet the capital needs of the ongoing Hycroft expansion project.
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Conference Call Information
Allied Nevada will host a conference call to discuss these results on
Monday, May 7, 2012, at 8:00 am PT (11:00 am ET), which will be followed by
a question and answer session.
To access the call, please dial:
Canada & US toll-free - 1-800-814-4860
Outside of Canada & US - 1-416-644-3414
Replay (available until May 21, 2012):
Access code: 4535931#
Canada & US toll-free - 1-877-289-8525
Outside of Canada & US - 1-416-640-1917
An audio recording of the call will be archived on our website at
www.alliednevada.com.
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Cautionary Statement Regarding Forward Looking Information
This press release contains forward-looking statements within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934 (and the equivalent under Canadian securities laws) and the Private Securities Litigation Reform Act, that are intended to be covered by the safe harbor created by such sections. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "will," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. Such forward-looking statements include, without limitation, statements regarding the results and indications of exploration drilling currently underway at Hycroft; the potential for confirming, upgrading and expanding gold and silver mineralized material at Hycroft; resource estimates and the timing of the release of updated estimates; estimates of gold and silver grades; anticipated costs, project economics, the realization of expansion and construction activities and the timing thereof and other statements that are not historical facts. Forward-looking statements address activities, events or developments that Allied Nevada expects or anticipates will or may occur in the future, and are based on current expectations and assumptions.
Although Allied Nevada management believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among others, risks that Allied Nevada's exploration and property advancement efforts will not be successful; risks relating to fluctuations in the price of gold and silver; the inherently hazardous nature of mining-related activities; uncertainties concerning reserve and resource estimates; uncertainties relating to obtaining approvals and permits from governmental regulatory authorities; and availability and timing of capital for financing the Company's exploration and development activities, including the uncertainty of being able to raise capital on favorable terms or at all; as well as those factors discussed in Allied Nevada's filings with the U.S. Securities and Exchange Commission (the "SEC") including Allied Nevada's latest Annual Report on Form 10-K and its other SEC filings (and Canadian filings) including, without limitation, its latest Quarterly Report on Form 10-Q (which may be secured from us, either directly or from our website at www.alliednevada.com or at the SEC website www.sec.gov). The Company does not intend to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.
The technical contents of this news release have been prepared under the supervision of David C. Flint, a Certified Professional Geologist with American Institute of Professional Geologists (A.I.P.G.), #10360, who is Vice President, Exploration for Allied Nevada Gold Corp. and is a Qualified Person as defined by National Instrument 43-101. For further information regarding technical information in relation to the Hycroft property, please see the Technical Report titled "Technical Report, Allied Nevada Gold Corp. Hycroft Mine, Winnemucca, Nevada, USA" dated April 9, 2012, available on www.sedar.com or on the Company's website.
Non-GAAP Measures
Adjusted cash costs is a non-GAAP measure, calculated on a per ounce of gold sold basis, and includes all direct and indirect operating cash costs related to the physical activities of producing gold, including mining, processing, third party refining expenses, on-site administrative and support costs, royalties, and mining production taxes, net of by-product revenue earned from silver sales. Adjusted cash costs provides management and investors with a further measure, in addition to conventional measures prepared in accordance with GAAP, to assess the Company's performance of the mining operations and ability to generate cash flows over multiple periods. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other companies. Accordingly, the above measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
The table below presents a reconciliation between non-GAAP adjusted cash costs to cost of sales (GAAP) for the three months ended March 31, 2012 and 2011 (in thousands, except ounces sold):
Three months ended
March 31,
-----------------------------------------------
2012 2011
---------------------- ----------------------
Total cost of sales (000s) $ 17,139 $ 14,695
Less:
Depreciation and amortization
(000s) (2,000) (1,558)
Silver revenues (000s) (4,334) (2,019)
---------------------- ----------------------
Total adjusted cash costs
(000s) $ 10,805 $ 11,118
Gold ounces sold 20,347 21,341
Adjusted cash cost per ounce $ 531 $ 521
ALLIED NEVADA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
(US dollars in thousands, except shares)
(Unaudited)
March 31, December 31,
2012 2011
---------------- ---------------
Assets:
Cash and cash equivalents $ 240,123 $ 275,002
Inventories 42,047 28,305
Ore on leach pads, current 72,976 64,230
Prepaids and other 4,432 6,687
Deferred tax asset, current 1,511 1,795
---------------- ---------------
Current assets 361,089 376,019
Restricted cash 21,896 18,798
Ore on leach pads, non-current 12,878 11,320
Plant and equipment, net 139,392 135,244
Mine development 62,709 55,450
Other assets, non-current 17,128 2,196
Mineral properties 44,614 44,706
Deferred tax asset, non-current 11,343 13,473
---------------- --------------
Total assets $ 671,049 $ 657,206
---------------- ---------------
---------------- ---------------
Liabilities:
Accounts payable $ 18,134 $ 26,283
Amounts due to related parties 23 31
Other liabilities, current 3,236 3,166
Capital lease obligations, current 12,274 10,306
Asset retirement obligation, current 339 339
---------------- ---------------
Current liabilities 34,006 40,125
Capital lease obligations, non-current 39,535 34,245
Asset retirement obligation, non-
current 8,387 8,387
Other liabilities, non-current 10,212 9,327
---------------- ---------------
Total liabilities 92,140 92,084
---------------- ---------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.001 par value
200,000,000 shares authorized, shares
issued and outstanding: 89,399,055 at
March 31, 2012 and 89,646,988 at
December 31, 2011 89 90
Additional paid-in-capital 590,732 589,012
Accumulated deficit (11,912) (23,980)
---------------- ---------------
Total shareholders' equity 578,909 565,122
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Total liabilities and shareholders'
equity $ 671,049 $ 657,206
---------------- ---------------
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ALLIED NEVADA GOLD CORP.
CONSOLIDATED STATEMENTS OF INCOME
(US dollars in thousands, except per share amounts)
Three months ended
March 31,
-----------------------------------
2012 2011
----------------- -----------------
Revenue $ 39,225 $ 31,926
Operating expenses:
Production costs 15,139 13,137
Depreciation and amortization 2,000 1,558
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Total cost of sales 17,139 14,695
Exploration, development, and land
holding costs 1,018 9,164
Accretion 144 112
Corporate general and administrative 5,017 7,597
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Income from operations 15,907 358
----------------- -----------------
Interest income 126 15
Interest expense (605) (156)
Other income 663 40
----------------- -----------------
Income before income taxes 16,091 257
Income tax expense (4,023) (76)
----------------- -----------------
Net income $ 12,068 $ 181
----------------- -----------------
----------------- -----------------
Earnings per share:
Basic $ 0.13 $ -
Diluted $ 0.13 $ -
ALLIED NEVADA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US dollars in thousands)
Three months ended
March 31,
--------------------------------
2012 2011
--------------- ----------------
Cash flows from operating activities:
Net income $ 12,068 $ 181
Adjustments to reconcile net income for the
period to net cash provided by operating
activities:
Depreciation and amortization 2,000 1,558
Accretion 144 112
Stock-based compensation 2,472 4,084
Deferred taxes 2,414 46
Other non-cash items (655) (6)
Change in operating assets and liabilities:
Inventories (12,083) (849)
Ore on leach pads (8,060) (4,739)
Prepaids and other 2,255 (759)
Accounts payable 1,898 194
Asset retirement obligation (144) (160)
Other liabilities 60 784
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Net cash provided by operating activities 2,369 446
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Cash flows from investing activities:
Additions to plant and equipment (8,346) (5,487)
Additions to mine development (8,865) (7,196)
Deposits for plant and mobile equipment (14,317) ---
Increase in restricted cash (3,098) (3,914)
Proceeds from other investing activities 38 40
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Net cash used in investing activities (34,588) (16,557)
--------------- ----------------
Cash flows from financing activities:
Proceeds on issuance of common stock 129 272
Repayments of principal on capital lease
agreements (2,789) (910)
--------------- ----------------
Net cash used in financing activities (2,660) (638)
--------------- ----------------
Net decrease in cash and cash equivalents (34,879) (16,749)
Cash and cash equivalents, beginning of
period 275,002 337,829
--------------- ----------------
Cash and cash equivalents, end of period $ 240,123 $ 321,080
--------------- ----------------
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Supplemental cash flow disclosures:
Cash paid for interest $ 777 $ 244
Cash paid for taxes 800 ---
Non-cash financing and investing activities:
Mining equipment acquired by capital lease --- 11,267
Accounts payable reduction through capital
lease $ 10,047 $ ---
(1) Allied Nevada uses the non-GAAP financial measures "adjusted cash cost" in this document. Please see the section at the end of this press release and in the 2012 first quarter Form 10-Q titled "Non-GAAP Measures" for further information regarding these measures.
(2) For further information with respect to the Hycroft mineral reserve and resource estimates and the feasibility study, including all assumptions, parameters and risks related thereto, please see the Technical Report entitled "Technical Report, Allied Nevada Gold Corp, Hycroft Mine, Winnemucca, Nevada, USA" effective April 9, 2012, available on www.sedar.com and on the Company's website.
Contacts:
Allied Nevada Gold Corp.
Scott Caldwell
President & CEO
(775) 358-4455
Allied Nevada Gold Corp.
Tracey Thom
Vice President, Investor Relations
(775) 789-0119
www.alliednevada.com