CASH COSTS REDUCED BY 8%; PRODUCTION INCREASED BY 16%
SMALL MINE PLAN IMPLEMENTED TO FURTHER REDUCE COSTS
TORONTO,
July 16, 2013 /PRNewswire/ - U.S.
Silver & Gold Inc. (TSX: USA,
OTCQX: USGIF) ("U.S. Silver & Gold" or the "Company") today
announced production figures for its 100% owned and operating
high-grade silver Galena Mine Complex in Idaho and its 100% owned high-grade gold and
silver Drumlummon Mine in Montana.
Highlights
- Strong second quarter consolidated silver production totalling
651,125 ounces with gold production of 1,795 ounces (reflects only
April and May as Drumlummon mine operations were suspended on
May 31, 2013). This represents
an increase in silver production of 23% compared with Q2, 2012, and
a 9% increase over the previous quarter. Consolidated year-to-date
production of 1.25 million silver ounces and 3,956 ounces of
gold.
- Galena Mine Complex production of 629,227 silver ounces (a 19%
increase over Q2, 2012). Cash cost of $16.41 per ounce silver, which represents an 8%
reduction over Q2, 2012 and a 20% reduction over the previous
quarter.
- As previously announced, production at the Drumlummon Mine was
discontinued at the end of May 2013.
The mine has been put on care and maintenance pending an
improvement in gold and silver prices.
- Given the continued decline in the price of silver, Management
will implement a Small Mine Plan ("SMP") during the third quarter
to further protect the balance sheet. The SMP will increase the
silver equivalent cut-off grade mined by 50% and lower cash and
overall costs, which will decrease production and result in
additional staff reductions.
- As a result of the SMP, silver guidance for 2013 has been
reduced to 2.1 - 2.2 million ounces and production at the Galena
Complex during the second half of the year is expected to be
850,000 - 950,000 ounces at a cash cost of $15.50 - $17.50 per ounce.
- Hale Capital Partners has agreed to extend the term of the
Company's $7.9 million debt for two
years at an interest rate of 12%. The cash balance as of
July 2, 2013 was approximately
$7.4 million.
The Company expects to release its second
quarter financial results on Tuesday August
13, 2013.
"In just under a year we have implemented a
number of initiatives to increase productivity and reduce costs,"
stated Darren Blasutti, President
and CEO of U.S. Silver and Gold. "While we have seen positive
results including increases in tonnage, production and average
grade, as well as a decrease in cash costs, the ongoing decline in
the price of silver required us to look for further cost savings in
order to be profitable and protect our balance sheet going
forward. We have therefore taken the difficult step of
identifying additional strategic measures that will allow us to cut
costs over the immediate and longer term while maintaining the
potential of the high-grade, lower cost Caladay Zone. I deeply
regret the impact this will have on our employees, who have worked
hard to help us achieve the progress we have made."
Galena Complex Second Quarter Production Details
The Galena Complex produced 629,227 ounces of silver during the
second quarter of 2013 at a grade of 11.14 ounces per ton and a
silver cash cost of $16.41 per
ounce. When compared with the second quarter of 2012, overall
tonnage for the quarter rose 10%, production increased 19%, grade
was up 8% and cash costs declined by 8%.
Table 1
Galena Production Highlights |
|
Q2 2013 |
Q2 2012 |
Change |
Processed Ore (tons milled) |
58,585 |
53,438 |
+10% |
Production (ounces) |
629,227 |
527,899 |
+19% |
Grade (ounces per ton) |
11.14 |
10.27 |
+8% |
Cash Costs |
$ 16.41 |
$ 17.81 |
-8% |
Lead (pounds) |
2,636,089 |
846,950 |
+211% |
Copper (pounds) |
268,392 |
237,827 |
+13% |
Small Mine
Plan
The Small Mine Plan focuses on increasing the grade mined to be
profitable at current silver prices. Increasing grade will reduce
the Company's operations. The SMP will be implemented immediately,
target both fixed and variable costs and entail the following
actions:
- The number of operating stopes will be reduced from current
levels to approximately fifteen;
- Staff at the Galena Mine Complex will be reduced from 351 to
225;
- The Coeur Shaft and Coeur Mill will be put on care and
maintenance;
- Further capital development and exploration reductions will be
made;
- Levels 2800, 3000, 3200, 4300 and 5500 will be put on care and
maintenance;
- Milling of both silver/copper and silver/lead ore will be
campaigned through the Galena Mill.
Although the SMP will result in reduced tonnage,
the decrease in revenue will be partially offset by an increase in
grade.
Other Cost Reductions
In April 2013, as a result of the
Company's cost control focus and portfolio review, $12-14 million in exploration, capital projects
and capital development costs were cut from the 2013 Galena Complex
budget. In addition, corporate general and administrative
costs were reduced by $1 million.
Effective August 1, 2013, the CEO and
Board of Directors will take a voluntary 20% reduction in cash
remuneration and all members of the executive management team have
agreed to a 10% reduction.
Caladay Zone Update
Galena Complex personnel are actively working toward development of
the silver/copper Silver Halo area, which has the highest grade
potential and is close to existing infrastructure. Drilling
continues to confirm and expand new resources, and development
toward ore is occurring on the 4900 level. First production from
the Silver Halo is anticipated by August 31,
2013 and management continues to target production of 100
tons/day. Once initial production has been established, focus
will shift to the closest, high-grade silver/lead blocks in the
49-390 resource area of the Caladay Zone.
Underground drilling to further expand the resources on the 4900
Level in the Silver Halo and the Caladay Zone continued during the
second quarter of 2013. Both areas returned impressive widths
of potentially ore-grade mineralization (see Tables 2 and 3
below). All reported drill holes were completed from one of
two drill stations on the 4900 Level and were drilled to the north
of and below the 4900 Level drift. Some of the intersections for
the Silver Halo begin within 2 to 5 feet of the drill station which
makes this mineralization readily accessible from the existing
infrastructure. Publication of the Caladay Zone Preliminary
Economic Assessment has been deferred due to recent volatility in
the price of silver.
Table 2
Recent Silver Halo (Silver-Copper Mineralization) |
Hole No. |
From
(ft) |
To
(ft) |
Width
(ft) |
Ag
(oz/ton) |
Cu
(%) |
Ag
Equivalent
(oz/ton) |
Ag
Equivalent
(g/t) |
49-284 |
182.2 |
194.6 |
12.4 |
12.14 |
0.15 |
12.60 |
432 |
49-286 |
5.0 |
12.8 |
7.8 |
18.30 |
0.30 |
19.19 |
658 |
49-287 |
2.0 |
56.5 |
54.5 |
13.19 |
0.22 |
13.84 |
474 |
49-300 |
146.5 |
170.7 |
24.2 |
26.40 |
0.41 |
27.62 |
947 |
49-304 |
239.0 |
275.0 |
36.0 |
9.53 |
0.13 |
9.92 |
340 |
49-305 |
61.0 |
62.9 |
1.9 |
65.93 |
2.49 |
73.41 |
2,517 |
49-305 |
168.5 |
173.0 |
4.5 |
43.00 |
0.52 |
44.55 |
1,528 |
Table 3
Recent Caladay Zone (Silver-Lead Mineralization) |
Hole No. |
From
(ft) |
To
(ft) |
Width
(ft) |
Ag
(oz/ton) |
Pb
(%) |
Ag
Equivalent
(oz/ton) |
Ag
Equivalent
(g/t) |
49-286 |
315.0 |
335.0 |
20.0 |
6.96 |
9.08 |
12.41 |
425 |
49-302 |
396.3 |
493.0 |
96.7 |
5.78 |
8.67 |
10.49 |
360 |
including |
415.4 |
423.7 |
8.3 |
10.9 |
17.80 |
21.58 |
740 |
including |
431.8 |
459.2 |
27.4 |
9.0 |
15.47 |
18.28 |
627 |
Note: Silver Equivalent calculated using
$25.00/oz. Ag, $3.10/lb. Cu and $0.90/lb. Pb.
Since these drill holes were completed from
different drill stations and intersect the veins at various angles
the recovered intersections may not reflect true widths. Please
refer to www.us-silver.com for all drilling results.
Debt Re-financing and Liquidity Update
The Company has agreed on terms to extend its current debt of
$7.9 million under its senior secured
line of credit facility agreement (the "Credit Facility") with Hale
Capital Partners ("Hale") for an additional 24 months. The
parties are working on definitive documentation and the extension
is subject to customary conditions. An additional
$2.1 million will be made available
under the Credit Facility on the satisfaction of conditions that
the Company expects to be attainable (including the delivery of the
final SMP). In consideration of the extension and other amounts
advanced or forgone (including an additional $1.0 million in cash, the additional $2.1 million under the credit facility and a
waiver of all fees except professional fees associated with the
extension), the Company has agreed to grant Hale a 1.5% net smelter
return ("NSR") royalty on its Galena properties.
Payment under the NSR would not commence while the Company remains
in good standing under the Credit Facility and half of the NSR may
be bought down within 18 months of the closing for $5.2 million.
Outstanding amounts under the Credit Facility
will accrue interest at a fixed rate of 12% per annum with interest
payable monthly in arrears and may be prepaid in whole or in part
without premium or penalty at any time. The Credit Facility
will be secured by a first charge against all the properties and
assets of the Company and its subsidiaries.
Amounts owing under the Credit Facility cannot
be converted into equity or voting shares of the Company or its
subsidiaries. No common shares, options or warrants of the Company
were issued to Hale or any other person and no broker or placement
fees were paid in connection with this transaction. Other
than professional expenses there are no fees contemplated to be
paid.
Quality Assurance / Quality Control
("QA/QC")
U.S. Silver & Gold maintains a QA/QC Program for all assays,
whether completed at the Drumlummon laboratory or at a contract
laboratory including the use of standards, blanks and duplicates.
All QA/QC results are evaluated using a program of QA/QC
monitoring. Both the contract laboratory and the Drumlummon
laboratory maintain programs of QA/QC as well. Assays for the
Caladay Zone were prepared by a commercial laboratory located in
Osburn, Idaho.
About U.S. Silver & Gold Inc.
U.S. Silver & Gold Inc. is a newly formed silver and gold
mining company focused on growth from its existing asset base and
the execution of targeted accretive acquisitions. U.S. Silver &
Gold owns and operates the Galena Mine Complex in the heart of the
Silver Valley/Coeur d'Alene Mining
District, Shoshone County, Idaho
and the Drumlummon Mine in Lewis and
Clark County, Montana. The Galena Mine produces high-grade
silver and is the second most prolific silver mine in U.S. history
delivering over 200 million ounces to date, and the Caladay Zone is
being evaluated for bulk mining development.
Mr. Jim Atkinson,
Vice President, Exploration and a Qualified Person under Canadian
Securities Administrators guidelines, has approved the contents of
this news release.
For further information please see SEDAR or
www.us-silver.com for the NI 43-101 compliant Technical Report on
the Galena Project dated March 22,
2013.
Cautionary Statement Regarding Forward
Looking Information:
This news release contains "forward‐looking information" within the
meaning of applicable securities laws. Forward‐looking information
includes, but is not limited to, the Company's expectations
intentions, plans, and beliefs with respect to, among other things,
the Galena Complex and the Drumlummon Mine. Often, but not always,
forward‐looking information can be identified by forward‐looking
words such as "anticipate", "believe", "expect", "goal", "plan",
"intend", "estimate", "may", and "will" or similar words suggesting
future outcomes, or other expectations, beliefs, plans, objectives,
assumptions, intentions, or statements about future events or
performance. Forward‐looking information is based on the opinions
and estimates of the Company as of the date such information is
provided and is subject to known and unknown risks, uncertainties,
and other factors that may cause the actual results, level of
activity, performance, or achievements of the Company to be
materially different from those expressed or implied by such
forward looking information. This includes the ability to develop
and operate the Galena and Drumlummon properties, risks associated
with the mining industry such as economic factors (including future
commodity prices, currency fluctuations and energy prices), failure
of plant, equipment, processes and transportation services to
operate as anticipated, environmental risks, government regulation,
actual results of current exploration activities, possible
variations in ore grade or recovery rates, permitting timelines,
capital expenditures, reclamation activities, social and political
developments and other risks of the mining industry. Although U.S.
Silver and Gold has attempted to identify important factors that
could cause actual results to differ materially from those
contained in forward‐looking information, there may be other
factors that cause results not to be as anticipated, estimated, or
intended. Readers are cautioned not to place undue reliance on such
information. By its nature, forward‐looking information involves
numerous assumptions, inherent risks and uncertainties, both
general and specific those contribute to the possibility that the
predictions, forecasts, and projections of various future events
will not occur. The Company undertakes no obligation to update
publicly or otherwise revise any forward‐looking information
whether as a result of new information, future events or other such
factors which affect this information, except as required by
law.
SOURCE U.S. Silver & Gold Inc.