B2Gold Corp. press release
Uruguay Mineral Exploration Inc Announces Results for the Quarter and Full Year Ended May 31, 2007
TSX - Toronto Stock Exchange · Gold · Canada
LONDON, August 15 /CNW/ - Uruguay Mineral Exploration Inc. (TSX VENTURE:UME) (LSE:UGY):
Summary of Results
-- Gold production was 29,265 ounces for the fourth quarter, bringing year to date production to 96,420 ounces.
-- Cash costs were $US 273 per ounce for the quarter and $US 294 for the full year, compared with $US 243 and $US 210 for the comparable periods last year. Cash costs increased due to a higher strip ratio, general industry cost increases, a more abrasive work index for ore mined and processed and marginally lower production compared with the previous year.
-- Net profit after tax for the fourth quarter was $US 6.4 million or $US 0.13 basic earnings per share, with net profit for the full year of $US 14.5 million, up 37% year-on-year, or $US 0.30 basic earnings per share.
-- Cash flow from operations before non-cash working capital movements was $US 11,356 million for the fourth quarter and $US 24,177 million for the year to date, up 18% year-on-year.
-- The higher average realized gold price for the fourth quarter of $US 658 per ounce resulted in increased sales of $US 21.8 million for the quarter, resulting in sales for the full year of $US 63.1 million, up 23% year-on-year, with an average price of $US 610 per ounce for the full year.
-- A final dividend of C$ 3.5 cents per share proposed to be paid on 26 October, 2007 to all shareholders on the register as at 12 October, 2007.
3 Months to Full Year to May May May May 2007 2006 2007 2006 Operating Review Gold produced Ounces 29,265 25,350 96,420 101,287 Average cash cost US$/oz 273 243 294 210 Average price received US$/oz 658 543 610 482
Financial Review Revenue US$ '000s 21,840 15,992 63,056 51,206 Net income for the period US$ '000s 6,337 4,077 14,554 10,583 Cash flow from operations(x) US$ '000s 11,356 7,445 24,177 20,515 Basic earnings per share US$ 0.13 0.090 0.30 0.23 Cash at the end of the period US$ '000s 13,978 8,931 13,978 8,931 Total debt at the end of period US$ '000s 3,385 4,225 3,385 4,225
(x) before non-cash working capital movements
Tony Shearer, Chairman commented: "The past year has been a very active and successful one for the Group, under the leadership of David Fowler and his mostly new management team. Production is going very well at the rate of about 96,000 ounces a year, though the cash costs per ounce for 2006/7 were higher than we had expected. Gold exploration has already delivered significant results in replacing and increasing reserves and resources, with very promising opportunities to expand them in the year ahead. Exploration at Lascano is going very well and the long odds of this being a commercially successful project are reducing. The first steps have been taken to plan for the expansion of the plant at San Gregorio, when exploration results justify the cost and tell us where to expand the production. In summary, the Group has progressed from being a small exploration company into an entity of substance with competent employees and a very strong management team. I believe that the Group is now exceptionally well placed to develop on these strong foundations."
CHIEF EXECUTIVE OFFICER'S REPORT
Financial Performance
UME reported a net profit after tax for the year ended 31st May 2007 of $US 14.5 million or $US 0.30 basic earnings per share. The increase in earnings for the current year is attributed to the higher realized sales price for gold sold. As shown in the chart below operating costs increased due to a higher strip ratio, general industry cost increases, more abrasive work index for ore mined and processed and marginally lower production this financial year than last. Despite this increase in cash costs UME remained, at $ 294 per ounce, below the average cash costs for the gold mining industry.
Expenses include a non-cash charge of $2.1 million in respect of the write off of exploration costs incurred in previous years on projects that we are no longer actively progressing.
Description $US per Ounce Cash cost 2005/06 financial year $210 Change in strip ratio 20 Other cost increases 50 Impact of lower production 14 Cash cost 2006/7 $294
Operational cash flows of $ 25.4 million generated during 2007 allowed us to pay $ 2.3 million back to shareholders as dividends, re-invest $ 19.4 million in plant, equipment and exploration and increase our cash position by $ 5.0 million to $ 14.0 million. UME had no hedging and $ 3.5 million debt at 31 May 2007.
Operations
I am pleased to report that we have achieved our production goals while improving our safety performance with important reductions in the lost time injury frequency and accident severity rates. During the year we had a number of independent environmental audits. While there is always room for improvement these audits confirmed that our environmental performance continued to be of a high standard.
The final production figure for the financial year was a creditable 96,420 ounces of gold. A pit wall slip at Arenal early in 2006 deferred access to higher grade ore in the first half of the 2006/07 year, and resulted in production of only 39,234 ounces for the half. While anticipated, the recovery of production to 57,186 ounces in the second half of the year resulted from a concerted effort to develop new ore sources in addition to the recovery in Arenal grade as we mined areas of the pit that had not been accessible earlier in the year due to the pit wall slip. Of the second half production 19,353 ounces came from Veta A and Veta Sur, neither of which was included in reserves at the half year.
The San Gregorio operations team was restructured in the second half of the year with Terry Butler promoted to Operations Manager, Simon Hillyard appointed as Mining Manager and Ernesto Lamilla appointed as Technical Services Manager. These changes are giving additional focus to improving productivity and now provide us with the appropriate level of technical skills to improve planning and convert resources into reserves. Additionally they give John Sadek as Vice President Operations more time for the strategic development of the business.
An important milestone was achieved in the first quarter of the 2007/08 financial year with the diversion of the Arroyo Corrales. This was a major civil engineering feat to plan, permit and execute in its own right, requiring a considerable degree of skill and expertise. It is a tribute to our staff and management that this $4 million project was completed largely as planned. Accordingly, from the end of July 2007, we have been extracting ore from the expanded Arenal pit, and expect to produce approximately 95, 000 ounces of gold from all sources in the financial year ended 31st May 2008 at a cost of approximately $ 345 per ounce.
Reserves and Resources
As confidence in our reserves and resources position is fundamental to UME's future success we took three important decisions at the beginning of the year. They were to:
-- use external, independent consultants to evaluate all published resources.
-- convert inferred resources into the higher confidence categories of measured and indicated to allow economic assessments to be made on the resources.
-- form a Resources and Reserves Board Committee to oversee the process of evaluating reserves and resources.
Our resource drilling in 2007 was therefore initially focused on upgrading resources and the independent review of those resources. Updated reserves and resources were published as at November 2006 and a further update has again been published effective 1 June 2007. In the November 2006 statement an initial resource of 95,000 and 28,700 ounces was added for Argentinita and the Vetas respectively while resources for Sobresaliente and Zapucay were downgraded.
A summary of the movements in Reserves and Resources from 1st November 2006 to 1 June 2007 is summarised below:
Proven Measured and and Probable Indicated Inferred Contained ounces Reserves Resources Resources June 1, 2007 353,000 885,900 133,640 November 1, 2006 322,000 659,300 250,700 Increase/(decrease) 31,000 226,600 (117,060)
While the grade of reserves reduced an overall increase of 31,000 ounces was achieved while producing 63,945 ounces in the same period. Measured and indicated resources increased by 226,600 ounces. Part of this increase reflects an upgrade of inferred resources with increases for San Gregorio and Vetas A and Sur. The San Gregorio resource increase reflects additional drilling and an updated geological interpretation that joins the areas of San Gregorio, Rieles and the East Extension.
Most of our resource drilling over the past year has been focused on near mine projects to consolidate our medium term mine life. While this will continue we will increasingly focus on new targets that have the potential to build more significant resources. The strengthening of the exploration management team over the last 6 months gives me the confidence to believe that this can be achieved.
Exploration
There has been a significant change over the last year in the level of intensity and quality of our exploration effort. An increase in the number of geologists from 18 at May 2006 to 30 at May 31 2007 has been accompanied by clear leadership from George Schroer and two, newly appointed, experienced Regional Exploration Managers in Alex Raab and Devin Den Boer. The eight teams that have been formed have been given specific objectives for each project and a timeframe in which these objectives are to be achieved. As our internal teams have been built we have also brought in outside experts on structure, geophysics, petrology, geochemistry and quality control to challenge our ideas and accelerate our progress.
One of UME's most significant assets is the database of geological information for Uruguay. While we have a significant amount of data, it was not in a consistent format and lacked quality control. Over the past year we have audited the majority of the Company's data, upgraded from spreadsheets to a database and as a result new targets are now being identified.
Our understanding of the San Gregorio mine system and the western half of the Isla Cristalina belt has increased significantly as a result of bring in an experienced consultant in structural geology and organizing the data so it can be used interactively. The first target that we developed as a result of this work was the Vetas A and Sur (veins in Spanish). Originally gold mineralisation in these deposits was thought to be confined to the veins. As drilling progressed during the second half of the year it became clear that mineralisation was contained, along with the veins, in north east trending shear structures that intersect the main mineralised trend at San Gregorio. During the year we mined 20,738 contained ounces from these deposits and have defined a further 68,600 contained ounces in indicated and inferred resources. The shears hosting these deposits although restricted by infrastructure in some areas remain largely unexplored to the south.
In the Zapucay district at Argentinita we defined an initial indicated and inferred resource of 2.2 million tonnes at 1.41 g/t for 100,000 ounces before we stopped drilling to work up additional targets within the district to build further resources. Drilling will continue in this district during 2008 to build additional resources and scoping studies have commenced on how these resources will be developed.
Our greenfields programme in the eastern end of the belt is also starting to define specific targets that we expect to progress to drilling in 2008. Our goal is to build resources in the Isla Cristalina belt to 1,500,000 ounces over the next 2 years and convert 750,000 of these ounces to reserves.
We now have 11 geologists working in the Don Feliciano and Florida Belts. The first step has been to review historical work and produce good geological maps for each project. This work and follow-up sampling has now been done on the initial projects such as Crucera/Casupa, Presidente Terra and Nueva Helvecia with new drill targets being defined. We have started drilling at Crucera/Casupa and will continue to dedicate one to two rigs to projects in these Belts over the next year. Our goal is to define sufficient resources over the next two years on at least one project in the Don Feliciano and Florida belts to justify a new operation.
Last year we successfully completed an airborne geophysical survey at Lascano that resolved the initial 30 kilometer by 70 kilometer gravity anomaly into three separate circular gravity and magnetic anomalies, each approximately 20 kilometers in diameter. This year we drilled 4 holes that averaged over 800 meters in depth in and around the central circular feature. These holes were designed to improve our understanding of the rock units causing the anomaly and establish whether these rocks were altered or mineralised.
While all of the 4 holes drilled to date have contributed to our understanding of the geology the second hole we drilled was the most important. This hole showed hydrothermal alteration, characterized by potasic and iron oxide metasomatism that included weak copper mineralisation over a zone of 125 meters thick. This alteration and mineralisation is believed to be consistent with that found in a porphyry copper or IOCG systems. Similar but weaker alteration was also evident in both of the two holes that were drilled on the rim of the circular feature. These results mean that the significant geophysical anomaly at Lascano is now associated with a potentially large hydrothermal system with copper mineralisation. We are very encouraged by results to date and believe that they have significantly enhanced the potential of the project to produce a discovery. We expect to finishing analysing the results from the current programme, including a fifth drill hole, in September and intend to drill a further 7,000 to 10,000 meters commencing in October 2007 using contract drillers. This drilling will initially be focused on steps outs from hole 2 looking for stronger alteration and mineralization and will then also test other targets.
Our diamond exploration programme this year was focused on developing the project to a point where it could be divested. This programme was successful in identifying kimberlite pipe targets from aeromagnetic, airborne gravity and structural datasets. These anomalies are associated locally with positive indicator minerals including a micro-diamond, G9 and G10 garnets and chrome spinels in the area. Our objective is to divest the diamond project during 2008.
We have spoken to a number of parties about our base metal projects, but to date have not reached agreement for a farm-in on acceptable terms. Generally the projects have been regarded as green field projects with good potential but insufficiently advanced. We have brought in an experienced nickel consultant to evaluate the projects and recommend, if justified, a focused exploration programme to progress the best projects to a more advanced stage.
Our exploration drilling capacity increased during the year with the addition of the UDR 200 diamond rig and the second DM45 reverse circulation rig. We have also moved most of the rigs to two shifts. This rapid growth has however reduced productivity as inexperienced crews are added and has impacted our capacity to maintain the equipment. Our focus for 2008 will therefore be on improving productivity on our own rigs and supplementing our own capacity with contractor rigs.
With a strengthened exploration team supported by key external advisors and better management of geological information we are generating the targets needed to add resources. Our challenge is to now explore these targets in a disciplined manner and convert the best of them into resources and reserves as quickly as we can.
Future Development
During the year UME commenced a number of conceptual studies that will assist us in the future development of our business in Uruguay. The purpose of these studies is to allow rapid development of our business as resources and reserves are built. These studies have examined the capital and operating costs of expanding the throughput of our existing plant, building a new processing plant or heap leach operation and the development of underground resources. These initial scoping studies indicate that we could;
-- expand production by 50 per cent at San Gregorio to 1.9 million tonnes per annum at a capital cost in the region of $ 20 million with a milling unit cost reduction of approximately 10%.
-- build a second plant with a similar production facility with annual capacity of 1,250,000 tonnes per annum at a capital cost in the order of $ 50 million.
-- build a heap leach operation with the capacity to process 750,000 tonnes of ore a year at a capital cost in the order of $ 25 million.
-- establish an underground mining operation at a depth of between 200 and 400 meters at a capital cost of the order of $15 million and an operating cost of the order of $ 25 a tonne. A grade of 2.3g/t would allow production at a cash cost of $ 400 per ounce.
These options are not mutually exclusive, and which of them we follow will depend on the results that the exploration team produces, the optimisation of operating plans and the conclusion of more definitive studies. Metallurgical test work will be performed in the first half of 2007/08 to complete the scoping studies. Drilling to test the down dip extensions of San Gregorio and Arenal will commence in the first quarter of 2008.
As part of our objective of increasing our production profile we have started to evaluate the acquisition of gold development projects in other South American countries. Our focus will be on acquiring projects with measured and indicated resources that have the potential to be put into production within three years.
Uruguay Business Environment
With effect from 1st July 2007 a major tax reform was passed into law in Uruguay. We believe that these changes will, on the whole, have a neutral effect on the Group.
We have regular contact with the Uruguay Government and community leaders at many levels. We are grateful for their openness in dealing with us, the access and support they provide, and their constructive interest in our activities. Whilst inevitably there are areas of disagreement and frustration, on the whole we believe that our relationship is constructive and supportive.
Conclusion
I would like to thank all of those who have committed to the success of UME. Our employees and consultants, shareholders, the local communities in which we operate and the Uruguayan Government have all supported the Company over the last year and we look forward to building on this in the coming year.
David Fowler, Chief Executive Officer
STATEMENT ON RESERVES AND RESOURCES
As at June 1, 2007 the Company had Measured and Indicated Resources of 20,921,000 tonnes at 1.32 g/t, containing 885,900 ounces of gold in the Isla Cristalina Belt. This compares to the previous disclosure as at November 1, 2006 of 13,590,000 tonnes at 1.51 g/t, containing 659,000 ounces of gold. Primarily as a result of conversion to higher resource categories, Inferred Resources have decreased from 5,619,000 tonnes at 1.4 g/t, containing 250,700 ounces at November 1, 2006 to 3,736,000 tonnes at 1.1 g/t containing 133,640 ounces of gold.
Proven and Probable Reserves as at June 1, 2007, and wholly within the stated Resources, were 6,933,000 tonnes at 1.58 g/t, containing 353,000 ounces of gold. This compares to the previous disclosure of 5,671,000 tonnes at 1.77 g/t, containing 322,000 ounces of gold. Therefore, the comparative increase of contained gold has been 31,000 ounces of reserve, whilst producing 63,945 ounces during the intervening period.
The significant changes in the current Resource and Reserve position compared to the previous disclosure are summarised in the table below:
Deposit Change Arenal -- Resource updated for excavated topography -- Reserve has been updated for excavated topography -- The completed diversion of the Corrales Stream has now enabled access to the reserve of 2.6 Mt at 1.9g/t Au previously qualified San Gregorio -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to measured and indicated category. -- Updated geological interpretation that joins the areas of San Gregorio, Rieles and the East Extension -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 550/oz Argentinita -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to the indicated category. -- Updated geological interpretation -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 500 oz. Vetas A & Sur -- Inclusion of data from the latest drilling campaign -- Updated geological interpretation -- Updated independent resource estimation -- Updated excavated topography -- Pit optimisation and design based upon gold price of US$ 600/oz