Klondex Mines Ltd.

Operational and financial results for the third quarter of 2016

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Vancouver, BC - November 3, 2016 - Klondex Mines Ltd. (TSX: KDX; NYSE MKT: KLDX) ("Klondex", the "Company", "we", "our", or "us" - http://www.commodity-tv.net/c/mid,2697,Company_Presentation/?v=296881) is pleased to announce its operational and financial results for the third quarter of 2016 as well as recent developments. This press release should be read in conjunction with our third quarter 2016 interim financial statements and related management's discussion & analysis ("MD&A"), which are available on our website (www.klondexmines.com), on SEDAR (www.sedar.com), and on EDGAR (www.sec.gov). All dollar amounts included in this press release are expressed in thousands of United States dollars, unless otherwise noted, and are based on our financial statements and MD&A, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. References to "Notes" refers to the notes contained in the third quarter 2016 interim financial statements. "Nevada Operations" collectively refers to our Fire Creek and Midas mines.

Third Quarter 2016 Highlights

  1. Health, Safety, and Environmental - No lost-time injuries or environmental citations at Fire Creek, Midas or True North.
  2. True North - Positive production decision and first gold sold, now have three producing mines.
  3. Cash Flows and Liquidity - Strengthened financial position and liquidity. Following a CDN$129.5 million equity offering, cash balance of $131.1 million, working capital of $119.9 million (ratio of 4.1:1), and total liquidity of $144.9 million when including the Revolver availability. On October 3, 2016, remitted $80.0 million payment to complete Hollister Acquisition.
  4. Ounces Sold and Financial Results - Sold 41,553 gold equivalent ounces ("GEOs"), consisting of 36,648 gold ounces and 362,500 silver ounces. Revenue of $53.0 million from average selling prices per gold and silver ounce of $1,276 and $17.26, respectively. Net income of $7.2 million (or $0.05 per share - basic).
  5. Nevada Operations and Performance Measures - Produced 35,324 GEOs and continued trend of increasing GEO grades milled at Nevada Operations. Nevada Operations operating metrics were: 761 ore tons milled per day at an average GEO mill head grade of 0.55 oz/ton. Cost metrics are as follows:

 

 

Production cash costs per gold equivalent ounce sold

 

All-in sustaining costs per gold ounce sold

 

All-in costs per gold ounce sold (excluding True North)

Non-IFRS Measure - Nevada Operations(1)

 

$

671

 

 

$

1,155

 

 

$

1,206

 

(1) See Non-IFRS Performance Measures in this Press Release.

  1. Mineral Reserves and Resources - Updated Mineral Reserve and Mineral Resource estimates for Fire Creek, Midas, and True North.
  2. Capital Expenditures - Spent $8.9 million at Fire Creek, $8.0 million at Midas, $3.8 million at True North, and $0.1 million at corporate for total capital spending of $20.8 million.

Recent Developments

  1. Hollister Acquisition and Private Placement - On October 3, 2016, completed the acquisition of the Hollister and Aurora projects, located in Nevada, USA. Synergies with our Nevada Operations and significant future operational and exploration potential.
  2. True North Technical Report - On October 27, 2016, we filed a Technical Report for True North and reported a Mineral Reserve in the tailings of ~32,400 Au oz consisting of 1,170k tons at an average grade of 0.028 Au opt. This is in addition to the Mineral Reserve and Mineral Resource of the True North gold mine announced on September 12, 2016.
  3. Secured Revolving Facility - On October 27, 2016, we amended our Revolver to increase its capacity by $10.0 million to $35.0 million, further strengthening our financial position and liquidity.

Mr. Paul Huet, President and CEO commented, "We continue to deliver on our commitments as our third quarter operating and financial results were in line with our plans.  Due to the planned development activities conducted throughout the year, we are well positioned to achieve our full year production and cost guidance.” Mr. Huet continued, “We also achieved a milestone in the third quarter by placing our third mine into production.  True North has become an important asset in our portfolio and we are excited about its future contributions to our profitability."

2016 Full Year Outlook
Nevada Operations
We maintain our targeted total annual production costs and GEO production guidance, which is expected to be weighted approximately 45%-50% in the first-half of 2016 and 50%-55% in the second-half of 2016. While we maintain our annual total Nevada Operations guidance, our production cash cost per GEO range was decreased by $50 at Fire Creek and was increased by $50 at Midas. Our 2016 GEO production and grades are expected to progressively increase from the first half of the year to the second half of the year following the completion of planned first-half development and silling activities. GEO grades milled at our Nevada Operations were 0.44 oz/ton, 0.52 oz/ton, and 0.55 oz/ton during the first, second, and third quarters of 2016, respectively.
The following table outlines our annual guidance compared to actual results and presents all-in costs per gold ounce sold exclusive of True North, which was acquired during the first quarter of 2016 (after the release of our full-year guidance):

 

 

Fire Creek

 

Midas

 

Total

 

Actual

2016 Guidance (Nevada Operations)

 

Low

 

High

 

Low

 

High

 

Low

 

High

 

Nine months ended September 30, 2016

Gold equivalent ounces produced(1)

 

97,000

 

 

100,000

 

 

48,000

 

 

50,000

 

 

145,000

 

 

150,000

 

 

106,901

 

Production cash costs per GEO sold(1)(2)

 

$

400

 

 

$

450

 

 

$

900

 

 

$

950

 

 

$

600

 

 

$

650

 

 

$

649

 

All-in sustaining costs per gold ounce sold(2)

 

 

 

 

 

 

 

 

 

$

850

 

 

$

900

 

 

$

1,067

 

All-in costs per gold ounce sold, excluding True North(2)

 

 

 

 

 

 

 

 

 

$

1,025

 

 

$

1,075

 

 

$

1,163

 

Capital expenditures on mineral properties, plant and equipment, excluding True North

 

$

34,700

 

 

$

36,700

 

 

$

20,300

 

 

$

23,300

 

 

$

55,000

 

 

$

60,000

 

 

$

45,514

 

(1) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the projected average realized gold price per ounce by the projected average realized silver price per ounce expected to be received by us in 2016.

(2) See Non-IFRS Performance Measures section in this Press Release.

True North
We expect to produce gold ounces during the second half of 2016 from a combination of processing gold in tailings and mining. The following table outlines our annual guidance and is compared to actual results:

 

 

Total

 

Actual

2016 Guidance (True North)

 

Low

 

High

 

Nine months ended September 30, 2016

Gold ounces produced

 

8,000

 

 

12,000

 

 

1,752

 

Capital expenditures on mineral properties, plant and equipment

 

$

14,000

 

 

$

16,000

 

 

$

11,708

 

Hollister Project
The following table outlines our fourth quarter projections for Hollister capital spending:

 

 

Total

 

Actual

2016 Guidance (Hollister Project)

 

Low

 

High

 

Nine months ended September 30, 2016

Capital expenditures on mineral properties, plant and equipment

 

$

7,500

 

 

$

9,500

 

 

$

 

Consolidated Financial Results of Operations

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2016

 

2015

 

2016

 

2015

Revenues

 

$

53,005

 

 

$

38,436

 

 

$

136,484

 

 

$

118,002

 

Cost of sales

 

 

 

 

 

 

 

 

Production costs

 

27,828

 

 

21,029

 

 

71,750

 

 

63,366

 

Depreciation and depletion

 

7,127

 

 

7,628

 

 

19,885

 

 

22,442

 

Gross profit

 

18,050

 

 

9,779

 

 

44,849

 

 

32,194

 

General and administrative expenses

 

4,840

 

 

3,454

 

 

11,429

 

 

9,252

 

Loss on equipment disposal

 

109

 

 

 

 

109

 

 

351

 

Income from operations

 

13,101

 

 

6,325

 

 

33,311

 

 

22,591

 

(Loss) gain on gold supply agreement derivative, net

 

(113

)

 

(66

)

 

(1,948

)

 

229

 

Finance charges, net

 

(1,305

)

 

(2,120

)

 

(3,886

)

 

(6,405

)

Foreign currency gain (loss), net

 

370

 

 

5,945

 

 

(1,837

)

 

12,207

 

Business acquisition costs

 

(819

)

 

 

 

(1,846

)

 

 

Provision for legal settlement

 

 

 

 

 

(2,250

)

 

 

Other, net

 

(813

)

 

 

 

(694

)

 

 

Income before tax

 

10,421

 

 

7,952

 

 

20,850

 

 

26,490

 

Income tax expense

 

3,207

 

 

3,836

 

 

7,594

 

 

10,347

 

Net income

 

$

7,214

 

 

$

4,116

 

 

$

13,256

 

 

$

16,143

 

 

 

 

 

 

 

 

 

 

Net income per share

 

$

0.05

 

 

$

0.03

 

 

$

0.09

 

 

$

0.12

 

When compared to the prior year quarter, third quarter 2016 Revenues were higher from selling an additional 8,714 gold ounces at a $140 higher average realized price, partially offset by a decrease in silver sales due to low silver grades. Production costs and Depreciation and depletion increased from the prior period due primarily to an increase in ounces sold. General and administrative expenses increased in 2016 due to increased staff levels at the corporate office, severance payments, and costs associated with our deferred share unit plan. Finance charges were primarily related to the gold purchase agreement, finance leases, and the promissory note pursuant to the True North acquisition. Business acquisition costs related to the True North and Hollister/Aurora acquisitions.
Liquidity and Capital Resources

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2016

 

2015

 

Change

 

2016

 

2015

 

Change

Net cash provided by operating activities

 

$

16,576

 

 

$

13,399

 

 

$

3,177

 

 

$

44,539

 

 

$

36,662

 

 

$

7,877

 

Net cash used in investing activities

 

(20,760

)

 

(9,728

)

 

(11,032

)

 

(75,056

)

 

(23,809

)

 

(51,247

)

Net cash provided by financing activities

 

98,410

 

 

2,665

 

 

95,745

 

 

101,719

 

 

3,298

 

 

98,421

 

Effect of foreign exchange on cash balances

 

38

 

 

(543

)

 

581

 

 

842

 

 

(1,348

)

 

2,190

 

Net increase in cash

 

94,264

 

 

5,793

 

 

88,471

 

 

72,044

 

 

14,803

 

 

57,241

 

Cash, beginning of period

 

36,877

 

 

54,498

 

 

 

 

59,097

 

 

45,488

 

 

 

Cash, end of period

 

$

131,141

 

 

$

60,291

 

 

 

 

$

131,141

 

 

$

60,291

 

 

 

We generated $16.6 million of net operating cash flows and were provided $98.4 million from financing cash flows due to the CDN$129.5 million equity offering and the exercise of share options and warrants; cash used in investing activities totaled $20.8 million. We maintained our strong financial position and as of September 30, 2016, had total liquidity of $144.9 million, consisting of $119.9 million in working capital and $25.0 million of borrowing availability under our Revolver. On October 3, 2016, we remitted $80.0 million cash to complete the Hollister Acquisition and on October 27, 2016, we increased our Revolver borrowing capacity by $10.0 million to $35.0 million.

Third Quarter and Year To Date 2016 Summary Operational Results

 

 

Three months ended September 30,

 

 

 

 

2016

 

2015

 

 

Mine operations

 

Fire Creek

 

Midas

 

Nevada Total

 

True North

 

Total

 

Nevada Total(1)

 

Change

Ore tons milled

 

26,122

 

 

43,934

 

 

70,056

 

 

31,748

 

 

101,804

 

 

70,997

 

 

30,807

 

Average gold equivalent mill head grade (oz/ton)(2)

 

0.98

 

 

0.28

 

 

0.55

 

 

0.06

 

 

 

 

0.48

 

 

 

Average gold mill head grade (oz/ton)

 

0.97

 

 

0.18

 

 

0.48

 

 

0.06

 

 

 

 

0.39

 

 

 

Average silver mill head grade (oz/ton)

 

0.66

 

 

7.59

 

 

5.00

 

 

 

 

 

 

6.65

 

 

 

Average gold recovery rate (%)

 

93.4

%

 

93.4

%

 

93.3

%

 

88.7

%

 

 

 

94.1

%

 

 

Average silver recovery rate (%)

 

87.2

%

 

87.2

%

 

87.3

%

 

%

 

 

 

94.0

%

 

 

Gold equivalent produced (oz)(2)

 

23,858

 

 

11,445

 

 

35,324

 

 

1,752

 

 

37,070

 

 

32,076

 

 

4,994

 

Gold produced (oz)

 

23,654

 

 

7,523

 

 

31,177

 

 

1,752

 

 

32,929

 

 

26,300

 

 

6,629

 

Silver produced (oz)

 

15,023

 

 

291,031

 

 

306,054

 

 

 

 

306,054

 

 

443,576

 

 

(137,522

)

Gold equivalent sold (oz)(2)(3)(4)

 

27,500

 

 

13,036

 

 

40,560

 

 

1,000

 

 

41,553

 

 

33,853

 

 

7,700

 

Gold sold (oz)(3)

 

27,254

 

 

8,394

 

 

35,648

 

 

1,000

 

 

36,648

 

 

27,934

 

 

8,714

 

Silver sold (oz)

 

18,100

 

 

344,400

 

 

362,500

 

 

 

 

362,500

 

 

454,611

 

 

(92,111

)

Revenues and realized prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold revenue (000s)

 

$

34,653

 

 

$

10,750

 

 

$

45,403

 

 

$

1,344

 

 

$

46,747

 

 

$

31,715

 

 

$

15,032

 

Silver revenue (000s)

 

312

 

 

5,946

 

 

6,258

 

 

 

 

6,258

 

 

6,721

 

 

$

(463

)

Total revenues (000s)

 

$

34,965

 

 

$

16,696

 

 

$

51,661

 

 

1,344

 

 

53,005

 

 

$

38,436

 

 

$

14,569

 

Average realized gold price ($/oz)

 

$

1,271

 

 

$

1,281

 

 

$

1,274

 

 

$

1,344

 

 

$

1,276

 

 

$

1,135

 

 

$

141

 

Average realized silver price ($/oz)

 

$

17.24

 

 

$

17.26

 

 

$

17.26

 

 

$

 

 

$

17.26

 

 

$

14.78

 

 

$

2.48

 

Non-IFRS Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production cash costs per GEO sold(4)

 

$

499

 

 

$

1,035

 

 

$

671

 

 

$

615

 

 

$

670

 

 

$

621

 

 

$

49

 

All-in sustaining costs per gold ounce sold(4)

 

 

 

 

 

$

1,155

 

 

n/a

 

$

1,140

 

 

$

858

 

 

$

282

 

All-in costs per gold ounce sold (Nevada Total)(4)

 

 

 

 

 

 

 

 

 

$

1,206

 

 

$

1,096

 

 

$

110

 

All-in costs per gold ounce sold (including True North)(4)

 

 

 

 

 

 

 

 

 

$

1,275

 

 

n/a

 

n/a

(1) During the 2015, production was only from Nevada Operations.

(2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.

(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.

(4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.

 

 

Nine months ended September 30,

 

 

 

 

2016

 

2015

 

 

Mine operations

 

Fire Creek

 

Midas

 

Nevada Total

 

True North

 

Total

 

Nevada Total(1)

 

Change

Ore tons milled

 

92,832

 

 

137,173

 

 

230,005

 

 

31,748

 

 

261,753

 

 

191,721

 

 

70,032

 

Average gold equivalent mill head grade (oz/ton)(2)

 

0.86

 

 

0.26

 

 

0.50

 

 

0.06

 

 

 

 

0.54

 

 

 

Average gold mill head grade (oz/ton)

 

0.85

 

 

0.15

 

 

0.43

 

 

0.06

 

 

 

 

0.44

 

 

 

Average silver mill head grade (oz/ton)

 

0.76

 

 

8.24

 

 

5.22

 

 

 

 

 

 

7.13

 

 

 

Average gold recovery rate (%)

 

93.6

%

 

94.1

%

 

93.7

%

 

88.7

%

 

 

 

94.2

%

 

 

Average silver recovery rate (%)

 

87.4

%

 

87.7

%

 

87.7

%

 

%

 

 

 

92.9

%

 

 

Gold equivalent produced (oz)(2)

 

74,480

 

 

32,357

 

 

106,901

 

 

1,752

 

 

108,634

 

 

97,269

 

 

11,365

 

Gold produced (oz)

 

73,673

 

 

19,287

 

 

92,960

 

 

1,752

 

 

94,712

 

 

80,077

 

 

14,635

 

Silver produced (oz)

 

61,864

 

 

990,672

 

 

1,052,536

 

 

 

 

1,052,536

 

 

1,270,504

 

 

(217,968

)

Gold equivalent sold (oz)(2)(3)(4)

 

72,644

 

 

36,916

 

 

109,629

 

 

1,000

 

 

110,610

 

 

99,461

 

 

11,149

 

Gold sold (oz)(3)

 

71,688

 

 

23,423

 

 

95,111

 

 

1,000

 

 

96,111

 

 

81,837

 

 

14,274

 

Silver sold (oz)

 

73,351

 

 

1,022,739

 

 

1,096,090

 

 

 

 

1,096,090

 

 

1,302,419

 

 

(206,329

)

Revenues and realized prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold revenue (000s)

 

$

88,235

 

 

$

29,008

 

 

$

117,243

 

 

$

1,344

 

 

$

118,587

 

 

$

97,098

 

 

$

21,489

 

Silver revenue (000s)

 

1,177

 

 

16,720

 

 

17,897

 

 

 

 

17,897

 

 

20,904

 

 

$

(3,007

)

Total revenues (000s)

 

$

89,412

 

 

$

45,728

 

 

$

135,140

 

 

1,344

 

 

136,484

 

 

$

118,002

 

 

$

18,482

 

Average realized gold price ($/oz)

 

$

1,231

 

 

$

1,238

 

 

$

1,233

 

 

$

1,344

 

 

$

1,234

 

 

$

1,186

 

 

$

48

 

Average realized silver price ($/oz)

 

$

16.05

 

 

$

16.35

 

 

$

16.33

 

 

$

 

 

$

16.33

 

 

$

16.05

 

 

$

0.28

 

Non-IFRS Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production cash costs per GEO sold(4)

 

$

458

 

 

$

1,025

 

 

$

649

 

 

$

615

 

 

$

649

 

 

$

637

 

 

$

12

 

All-in sustaining costs per gold ounce sold(4)

 

 

 

 

 

$

1,067

 

 

n/a

 

$

1,062

 

 

$

750

 

 

$

312

 

All-in costs per gold ounce sold (Nevada Total)(4)

 

 

 

 

 

 

 

 

 

$

1,163

 

 

$

1,046

 

 

$

117

 

All-in costs per gold ounce sold (including True North)(4)

 

 

 

 

 

 

 

 

 

$

1,272

 

 

n/a

 

n/a

(1) During the 2015, production was only from Nevada Operations.

(2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.

(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.

(4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.

Our 2016 annual operating plan for our Nevada Operations encompasses higher GEO grades and production during the second half of the year. During the third quarter of 2016, our Nevada mines produced 35,324 GEOs, bringing our year to date consolidated GEO production to 106,901 GEOs, which is approximately 73% of our annual guidance's midpoint range. At our Nevada Operations, the 70,056 ore tons milled (average of 761 tons per day) represented a decrease of 186 tons per day from the prior quarter as we focused mining efforts on ore development to access additional faces in the fourth quarter. Our fourth quarter plan entails increasing both the GEO grades by mining in higher grade areas and the average daily milling rate at the Midas mill. At True North, we reported our first gold sales from the re-processing of existing tailings and during the fourth quarter will begin running ore through the mill.
Fire Creek and Midas's third quarter 2016 ounces sold were in-line with management expectations and included the sale of 40,560 GEOs, consisting of 35,648 gold ounces and 362,500 silver ounces. Due to the sale of an additional 7,714 gold ounces at a $139 higher average realized price, gold revenue at our Nevada Operations increased $13.7 million during the third quarter of 2016 compared to the same period of 2015, while silver revenue decreased due to lower grades which were offset by higher realized prices. True North recorded its first revenue from the sale of 1,000 gold ounces at $1,344 per ounce, bringing consolidated sales to 41,553 GEOs totaling $53.0 million in revenue.
We continued to generate significant cash margins on a consolidated basis as our third quarter production cash costs per GEO sold of $670 remained well below current gold price levels.

Webcast and Conference Call
Klondex will report its third quarter 2016 financial results after market close on Thursday, November 3, 2016. A conference call and webcast will be held the following morning on Friday, November 4, 2016 at 10:30 am ET/7:30 am PT. The conference call telephone numbers are listed below:
Canada & USA Toll Free Dial In: 1-800-319-4610
Toronto: +1 1-416-915-3239
International: +1-604-638-5340
Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the Klondex call. The webcast will be available on the Company's website or by clicking: services.choruscall.ca/links/klondex20161104.html.

About Klondex Mines Ltd. (www.klondexmines.com)
Klondex is a well-capitalized, junior-tier gold and silver mining company focused on exploration, development, and production in a safe, environmentally responsible, and cost-effective manner. The Company has 100% interests in three producing mineral properties: the Fire Creek Mine and the Midas Mine and ore milling facility, both of which are located in the state of Nevada, USA, and the True North Gold Mine (formerly the Rice Lake Mine) and mill in Manitoba, Canada. The Company also has 100% interests in two recently acquired projects, the Hollister mine and the Aurora mine and ore milling facility (formerly known as Esmeralda), also located in Nevada, USA.

For More Information Contact:
John Seaberg
Senior Vice President, Investor Relations and Corporate Development
O: 775-284-5757
M: 303-668-7991
jseaberg@klondexmines.com
In Europe:
Swiss Resource Capital AG
Jochen Staiger
info@resource-capital.ch
www.resource-capital.ch

Cautionary Note Regarding Technical Information and Forward-looking Information

This news release contains certain information that may constitute forward-looking information or forward-looking statements under applicable Canadian and U.S. securities legislation (collectively, "forward looking information"), including but not limited to information about current expectations on the timing and success of exploration and development activities, the timing and success of mining operations, the Company's ability to produce and sell gold and silver, the Company’s achievement of the full-year projections for ounce production, metal grades and production costs, the Company's ability to meet annual operations estimates, the ability to maintain average daily milling rates, the Company's capital addition expenditures, the Company's intention and ability to monetize mineralized material, the results of economic studies regarding the Company's mineral projects, the Company's financial conditions, the successful execution and project development at all of the Company's mines and projects, and related permitting the completion of the Hollister acquisition, and the completion of the equity private placement. This forward-looking information entails various risks and uncertainties that are based on current expectations, and actual results may differ materially from those contained in such information. These uncertainties and risks include, but are not limited to, the strength of the global economy; the price of gold and silver; operational, funding and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations; and the ability of Klondex to fund its substantial capital requirements and operations. Risks and uncertainties about the Company's business are more fully discussed in the Company's disclosure materials filed with the securities regulatory authorities in Canada and United States available at www.sedar.com and www.sec.gov, respectively. Readers are urged to read these materials. Klondex assumes no obligation to update any forward-looking information or to update the reasons why actual results could differ from such information unless required by law.

Technical Information
Scientific and technical information in this press release has been reviewed and approved by Brian Morris, a "qualified person" within the meaning of NI 43-101.

Non-IFRS Performance Measures
We have included the non-IFRS measures "Production cash costs per gold equivalent ounce sold", “All‐in sustaining costs per gold ounce sold”, and "All-in costs per gold ounce sold" in this press release (collectively, the "Non-IFRS Measures"). These Non-IFRS Measures are used internally to assess our operating and economic performance and to provide key performance information to management. We believe that these Non-IFRS Measures, in addition to conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate our performance and ability to generate cash flows required to fund our business. 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 in accordance with IFRS. These Non-IFRS Measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to or consistent with measures used by other issuers or with amounts presented in our financial statements.
Our primary business is gold production and our future development and current operations primarily focus on maximizing returns from such gold production. As a result, our Non-IFRS Measures are calculated and disclosed on a per gold ounce basis.

Production Cash Costs per Gold Equivalent Ounce Sold
Production cash costs per gold equivalent ounce sold presents our cash costs associated with the production of gold equivalent ounces and, as such, non-cash depreciation and depletion charges are excluded. Production cash costs per gold equivalent ounce sold is calculated on a per gold equivalent ounce sold basis, and includes all direct and indirect operating costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, and royalties (State of Nevada net proceeds and other such taxes are excluded). Gold equivalent ounces are computed as the number of silver ounces required to generate the revenue derived from the sale of one gold ounce, using average realized selling prices (table in thousands, except ounces sold and per ounce amounts):

 

 

Three months ended September 30, 2016

 

Three months ended September 30, 2015

 

 

Fire Creek

 

Midas

 

Nevada Total

 

True North

 

Total

 

Fire Creek

 

Midas

 

Nevada Total(1)

Average realized price per gold ounce sold

 

$

1,271

 

 

$

1,281

 

 

$

1,274

 

 

$

1,344

 

 

$

1,276

 

 

$

1,130

 

 

$

1,158

 

 

$

1,135

 

Average realized price per silver ounce sold

 

$

17.24

 

 

$

17.26

 

 

$

17.26

 

 

$

 

 

$

17.26

 

 

$

15.17

 

 

$

14.77

 

 

$

14.78

 

Silver ounces equivalent to revenue from one gold ounce

 

73.8

 

74.2

 

73.8

 

 

 

73.9

 

74.5

 

78.4

 

76.8

Silver ounces sold

 

18,100

 

 

344,400

 

 

362,500

 

 

 

 

362,500

 

 

13,248

 

 

441,363

 

 

454,611

 

GEOs from silver ounces sold

 

246

 

 

4,642

 

 

4,912

 

 

 

 

4,905

 

 

178

 

 

5,630

 

 

5,919

 

Gold ounces sold(2)

 

27,254

 

 

8,394

 

 

35,648

 

 

1,000

 

 

36,648

 

 

22,203

 

 

5,731

 

 

27,934

 

Gold equivalent ounces

 

27,500

 

 

13,036

 

 

40,560

 

 

1,000

 

 

41,553

 

 

22,381

 

 

11,361

 

 

33,853

 

Production costs

 

$

13,716

 

 

$

13,497

 

 

$

27,213

 

 

$

615

 

 

$

27,828

 

 

$

10,124

 

 

$

10,905

 

 

$

21,029

 

Production cash costs per GEO sold

 

$

499

 

 

$

1,035

 

 

$

671

 

 

$

615

 

 

$

670

 

 

$

452

 

 

$

960

 

 

$

621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2016

 

Nine months ended September 30, 2015

 

 

Fire Creek

 

Midas

 

Nevada Total

 

True North

 

Total

 

Fire Creek

 

Midas

 

Nevada Total(1)

Average realized price per gold ounce sold

 

$

1,231

 

 

$

1,238

 

 

$

1,233

 

 

$

1,344

 

 

$

1,234

 

 

$

1,178

 

 

$

1,208

 

 

$

1,186

 

Average realized price per silver ounce sold

 

$

16.05

 

 

$

16.35

 

 

$

16.33

 

 

$

 

 

$

16.33

 

 

$

16.52

 

 

$

16.03

 

 

$

16.05

 

Silver ounces equivalent to revenue from one gold ounce

 

76.7

 

75.8

 

75.5

 

 

 

75.6

 

71.3

 

75.4

 

73.9

Silver ounces sold

 

73,351

 

 

1,022,739

 

 

1,096,090

 

 

 

 

1,096,090

 

 

58,218

 

 

1,244,201

 

 

1,302,419

 

GEO from silver ounces sold

 

956

 

 

13,493

 

 

14,518

 

 

 

 

14,499

 

 

817

 

 

16,501

 

 

17,624

 

Gold ounces sold(2)

 

71,688

 

 

23,423

 

 

95,111

 

 

1,000

 

 

96,111

 

 

58,743

 

 

23,094

 

 

81,837

 

Gold equivalent ounces

 

72,644

 

 

36,916

 

 

109,629

 

 

1,000

 

 

110,610

 

 

59,560

 

 

39,595

 

 

99,461

 

Production costs

 

$

33,285

 

 

$

37,850

 

 

$

71,135

 

 

$

615

 

 

$

71,750

 

 

$

28,316

 

 

$

35,050

 

 

$

63,366

 

Production cash costs per GEO sold

 

$

458

 

 

$

1,025

 

 

$

649

 

 

$

615

 

 

$

649

 

 

$

475

 

 

$

885

 

 

$

637

 

(1) During the 2015, production was only from Nevada Operations.

(2) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.

All-in Sustaining Costs per Gold Ounce Sold
All-in sustaining costs per gold ounce sold presents the full cost of gold production from our current operations; therefore, capital amounts related to expansion and growth projects are excluded. Certain other cash expenditures, including State of Nevada net proceeds and other related taxes, federal tax payments, and financing costs are also excluded. Our calculation of all-in sustaining costs per gold ounce sold is consistent with the June 2013 guidance released by the World Gold Council, a non-regulatory, non-profit market development organization for the gold industry.
We calculate our all-in sustaining costs per gold ounce sold on a Nevada basis, as ore from both Fire Creek and Midas is processed at Midas, for True North, and for a consolidated total. All-in sustaining costs per gold ounce sold includes all: (1) 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, and royalties, (2) general and administrative expenses, (3) decommissioning provision accretion, and (4) sustaining capital expenditures, the total of which is reduced for revenues earned from silver sales (table in thousands, except ounces sold and per ounce amounts):

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2016

 

2015

 

2016

 

2015

 

 

Nevada Total(1)

 

True North

 

Total

 

Nevada Total(2)

 

Nevada Total(1)

 

True North

 

Total

 

Nevada Total(2)

Production costs

 

$

27,213

 

 

$

615

 

 

$

27,828

 

 

$

21,029

 

 

$

71,135

 

 

$

615

 

 

$

71,750

 

 

$

63,366

 

General and administrative expenses

 

4,840

 

 

 

 

4,840

 

 

3,454

 

 

11,429

 

 

 

 

11,429

 

 

9,252

 

Decommissioning provision accretion

 

137

 

 

 

 

137

 

 

107

 

 

412

 

 

 

 

412

 

 

299

 

Sustaining capital expenditures

 

15,230

 

 

 

 

15,230

 

 

6,112

 

 

36,390

 

 

 

 

36,390

 

 

9,396

 

Less: Silver revenue

 

(6,258

)

 

 

 

(6,258

)

 

(6,721

)

 

(17,897

)

 

 

 

(17,897

)

 

(20,904

)

All-in sustaining costs

 

41,162

 

 

615

 

 

41,777

 

 

23,981

 

 

101,469

 

 

615

 

 

102,084

 

 

61,409

 

Gold ounces sold(2)

 

35,648

 

 

1,000

 

 

36,648

 

 

27,934

 

 

95,111

 

 

1,000

 

 

96,111

 

 

81,837

 

All-in sustaining costs per gold ounce sold

 

$

1,155

 

 

$

615

 

 

$

1,140

 

 

$

858

 

 

$

1,067

 

 

$

615

 

 

$

1,062

 

 

$

750

 

(1) Nevada Total includes Corporate sustaining capital expenditures and all general and administrative costs.

(2) During the 2015, production was only from Nevada Operations.

(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.

We define sustaining capital expenditures as those costs which are required to sustain current gold ounce production levels. As such, non-sustaining (growth) capital expenditures include amounts for exploration, development, and permitting activities related to long-term growth and expansion efforts outside of the existing mineral resource boundary. For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.
All-in Costs per Gold Ounce Sold
All-in costs per gold ounce sold includes additional costs which reflect the varying costs of producing gold over the life-cycle of a mine or project. We calculate our all-in costs per gold ounce sold by beginning with all-in sustaining costs and adding non-sustaining (growth) capital expenditures and other costs not related to current operations (table in thousands, except ounces sold and per ounce amounts):

 

 

Three months ended September 30,

 

Nine months ended September 30,

Nevada Total

 

2016

 

2015

 

2016

 

2015

All-in sustaining costs

 

$

41,162

 

 

$

23,981

 

 

$

101,469

 

 

$

61,409

 

Non-sustaining capital expenditures

 

1,828

 

 

6,631

 

 

9,124

 

 

24,233

 

All-in costs

 

42,990

 

 

30,612

 

 

110,593

 

 

85,642

 

Gold ounces sold (Nevada)(1)

 

35,648

 

 

27,934

 

 

95,111

 

 

81,837

 

All-in costs per gold ounce sold (Nevada)

 

$

1,206

 

 

$

1,096

 

 

1,163

 

 

1,046

 

 

 

 

 

 

 

 

 

 

Total (with True North)

 

 

 

 

 

 

 

 

All-in costs (Nevada total)

 

42,990

 

 

30,612

 

 

110,593

 

 

85,642

 

Non-sustaining capital expenditures (True North)

 

3,754

 

 

 

 

11,708

 

 

 

All-in costs

 

46,744

 

 

30,612

 

 

122,301

 

 

85,642

 

Gold ounces sold(1)

 

36,648

 

 

27,934

 

 

96,111

 

 

81,837

 

All-in costs per gold ounce sold

 

$

1,275

 

 

$

1,096

 

 

$

1,272

 

 

$

1,046

 

(1) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.

For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.

 

 



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