TORONTO,
Aug. 13, 2013 /PRNewswire/ - U.S.
Silver & Gold Inc. (TSX: USA,
OTCQX: USGIF) ("U.S. Silver & Gold" or the "Company") today
reported financial and operational results for the second quarter
ending June 30, 2013.
This earnings release should be read in
conjunction with the Company's MD&A, Financial Statements and
Notes to Financial Statements for the corresponding period, which
have been posted on SEDAR at www.sedar.com and are also
available on the Company's website at
www.us-silver.com.
All figures are in U.S. dollars unless
otherwise noted.
Highlights
- Implemented previously announced Small Mine Plan ("SMP") in
July to lower cash and overall costs at the Galena Complex and
increase the grade mined in order to be profitable at current
silver prices.
- Replaced extension on existing $7.9
million debt with new, three-year CDN $8.5 million facility provided at a comparable
rate with Royal Capital Management as security agent, and without
the requirement to pay net smelter return royalty.
- Strong consolidated silver production of 651,125 ounces for the
quarter (a 23% increase over Q2, 2012) at a cash cost of
$16.67 per ounce (a 6% decrease over
Q2, 2012). Gold production of 1,795 ounces (reflects only
April and May as Drumlummon mine operations were suspended on
May 31, 2013). Consolidated
year-to-date production of 1.25 million silver ounces (a 16%
increase over 2012) and 3,956 ounces of gold.
- Galena Mine Complex production of 629,227 silver ounces (a 19%
increase over Q2, 2012) at a cash cost of $16.41 per ounce, which represents a 20%
reduction over the previous quarter and an 8% reduction over Q2,
2012.
- Underground drilling in the silver/copper areas adjacent to the
Caladay Zone has the potential to expand resources on the 4900
Level where exploration drifting on the 348 Vein returned a strike
length over 102 feet at average widths of 11 feet and average
grading of 19.3 ounces per ton silver equivalent (662 grams per
tonne).
- Consolidated revenues of $16.9
million and net loss of ($8.3)
million or ($0.14) per share
for the quarter, and revenues of $39.8
million and net loss of ($11.7)
million or ($0.20) per share
year-to-date. The net loss is primarily attributable to lower
realized metal prices, negative provisional pricing adjustments,
and cost and impairments associated with the shutdown at the
Drumlummon Mine.
- Galena Complex revenues of $13.5
million and net loss of ($2.3)
million for the quarter, and revenues of $31.1 million and net loss of ($0.2) million year-to-date.
- As of July 2, 2013, the Company's
cash and cash equivalents totaled $7.4
million.
"We set out to deliver strong production,
increased grade and reduced costs during the second quarter of
2013," said Darren Blasutti,
President and CEO of U.S. Silver and Gold. "While we were
successful on all fronts, the current silver price environment also
required us to keep a close eye on our balance sheet and be ready
to take quick and decisive action should the price of silver
continue to decline. As a result we were prepared and able to
rapidly introduce a Small Mine Plan when market conditions
worsened. The plan will allow us to mine profitably at current
silver prices, and positions the Galena Complex well for an
increase in the price of silver."
Consolidated Production and Operating Costs
As reported on July 16,
2013, the Company delivered second quarter consolidated
silver production totalling 651,125 ounces (a 9% increase over the
previous quarter and a 23% increase over Q2, 2012), along with gold
production of 1,795 ounces. Consolidated silver cash costs
decreased to $16.67 per ounce from
$22.20 during Q1, 2013 primarily due
to increases in tonnage, production and average grade at the Galena
Complex. Realized silver prices have declined 23% to $23.26 per ounce since Q2, 2012.
A net loss of ($8.3)
million was recorded for the quarter, compared with a net
loss of ($2.3) million in the second
quarter of 2012. The increased loss was primarily due to
lower realized metal prices and higher cost of sales (due to
underperformance at the Drumlummon Mine and negative provisional
pricing adjustments), higher depreciation, depletion, amortization
and finance costs in addition to care and maintenance costs and
impairment charges incurred at the Drumlummon Mine. These increases
were partially offset by higher year-over-year production and lower
general and administration expenses, exploration costs and income
tax expense.
Galena Complex
The Galena Mine Complex produced 629,227 ounces
of silver during the second quarter and 1.2 million ounces
year-to-date, representing year-over-year increases of 19% and 12%
respectively. Overall tonnage was up 10% for the quarter and
6% year-to-date, while average grade rose 8% to 11.14 ounces per
ton silver for the quarter and 5% to 10.32 ounces per ton
year-to-date.
Quarter over quarter, cash costs decreased 20%,
to $16.41 due to increases in
tonnage, production and average grade. In April 2013, as a result of the Company's cost
control focus and portfolio review, $12-14
million in exploration, capital projects and capital
development costs were cut from the 2013 Galena Complex budget.
Please see Table 1 below for Galena Complex production and cost
details.
Table 1
Galena Complex Production and Cost Details |
|
Q2
2013 |
Q2 2012 |
YTD
2013 |
YTD
2012 |
Total Ore Processed (tons
milled) |
58,585 |
53,438 |
121,411 |
114,511 |
Silver -
Copper |
43,375 |
37,659 |
88,262 |
80,005 |
Silver - Lead |
15,210 |
15,779 |
33,149 |
34,506 |
Silver produced (ounces) |
629,227 |
527,899 |
1,206,322 |
1,079,127 |
Lead produced (pounds) |
2,636,089 |
846,950 |
4,408,345 |
2,431,093 |
Copper produced (pounds) |
268,392 |
237,827 |
530,010 |
470,305 |
Silver recoveries (percent) |
96.4 |
96.2 |
96.3 |
96.1 |
Lead recoveries (percent) |
94.4 |
89.2 |
93.7 |
91.0 |
Copper recoveries (percent) |
96.3 |
96.3 |
96.1 |
96.2 |
Silver head grade (ounces per
ton) |
11.14 |
10.27 |
10.32 |
9.80 |
Silver -
Copper |
11.83 |
12.10 |
11.32 |
11.65 |
Silver -
Lead |
9.20 |
5.89 |
7.65 |
5.52 |
Lead head grade (percent) |
9.19 |
3.00 |
7.10 |
3.87 |
Copper head grade (percent) |
0.32 |
0.33 |
0.31 |
0.31 |
Silver sold (ounces) |
661,056 |
527,899 |
1,206,322 |
1,079,127 |
Lead sold (pounds) |
2,636,089 |
846,950 |
4,408,345 |
2,431,093 |
Copper sold (pounds) |
268,392 |
237,827 |
530,010 |
470,305 |
Realized silver price ($ per
ounce) |
$23.26 |
$28.05 |
$26.56 |
$30.73 |
Realized lead price ($ per
pound) |
$0.94 |
$0.88 |
$0.98 |
$0.92 |
Realized copper price ($ per
pound) |
$3.27 |
$3.57 |
$3.46 |
$3.84 |
Silver cash costs ($ per
ounce)1 |
$16.41 |
$17.81 |
$18.36 |
$18.61 |
1The Company reports the cash cost
per ounce of silver produced, a non-IFRS measure, in accordance
with measures widely reported in the silver mining industry as a
benchmark for performance measurement. Management uses these
measures internally to better assess performance trends and
understands that a number of investors, and others who follow the
Company's performance, also assess performance in this manner.
These measures should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures do not have any
standardized meaning and may differ from methods used by other
companies with similar descriptions. The method does not include
depletion, depreciation, exploration or corporate administrative
costs and is therefore not directly reconcilable to costs as
reported under International Financial Reporting Standards.
Small Mine Plan Update
In December 2012,
the Board approved an operating budget for the Galena Complex based
on a silver price of $30 per ounce.
In the months that followed the price of silver fell to a low of
$18.61 before recovering to current
levels. Early in the year management began work on a downside
pricing case—a Small Mine Plan ("SMP") based on a silver price of
$20 per ounce, which the Company was
able to quickly implement in response to the continued decrease in
the price of silver.
The plan focuses on increasing grade while
reducing fixed and variable costs. Implemented in July, it
triggered the following actions: 1) the number of operating stopes
was cut to approximately 15; 2) staffing at the Galena Mine will be
reduced from 351 to 225 after a two month notice period per the
Worker Adjustment and Retraining Notification "WARN" Act; and 3)
the Coeur Shaft and Coeur Mill will be put on care and maintenance
along with Levels 2800, 3000, 3200, 4300 and 5500. Further
capital development and exploration reductions are also being made.
In addition, 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.
The SMP will allow the Galena Complex to operate
profitably in the current silver price environment and position it
to benefit from an increase in the price of silver. July
silver production exceeded our SMP estimates and cash costs were
lower than expected due to the increased production. The
August monthly budget is currently on track.
Drumlummon Mine
The Drumlummon Mine produced 1,795 ounces of
gold and 21,898 ounces of silver during the second quarter of the
year at a by-product cash cost of $1,660.80 per ounce gold.
As previously announced, given current gold
prices and recent mine performance, the mine was put on care and
maintenance effective May 31,
2013. All ongoing costs until the end of the year are
expected to be less than $500,000. The Company recorded a further
impairment charge of $1.4 million
during the period ended June 30, 2013
as a result of declining comparable market valuation.
Exploration Update
Underground drilling at the Galena Complex
continued during the second quarter, and has the potential to
further expand the resources on the 4900 Level and defining areas
in known and new veins. Exploration drifting on the 348
silver/copper vein returned a strike length of 102 feet at average
widths of 11 feet and average grading of 19.3 ounces per ton (662
grams per tonne) silver equivalent including 0.38% copper. The
potential of adding this high grade area to the SMP is being
evaluated. As well, hole 49-332 intersected 20.9 feet of 14.7
ounces per ton (503 grams per tonne) silver equivalent.
Please refer to www.us-silver.com for all drilling results.
While drilling in the silver/copper areas
adjacent to the Caladay Zone, including the Silver Halo will
continue, going forward the Company will focus on implementing the
SMP and increasing the grade mined to be profitable at current
silver prices. The resulting decrease in personnel has
created a backlog of core from the Caladay Zone which current mine
staff are working to record. They have also begun incorporating
information from the drilling program completed since December 2012 into a new resource calculation for
release at year-end.
Financial Position
U.S. Silver & Gold's cash and cash
equivalents at June 30, 2013 totaled
$3.6 million compared to $18.9 million at December
31, 2012, while net working capital totaled $1.9 million and $16.0
million for the same dates, respectively. Net working
capital at June 30, 2013 included the
Hale Capital Partners ("HCP") debt as a short term liability.
The debt was re-classified to long-term debt on August 8, 2013. As of July 2, 2013, the Company's cash and cash
equivalents totaled $7.4
million. The difference was due to a wire transfer
error from one of the Company's smelter contracts totaling
$3.8 million which was not received
prior to the end of the second quarter. The decrease in net
working capital primarily reflects net cash inflows from operations
less drilling, underground development, and exploration costs,
purchase of property, plant and equipment, rehabilitation and
access development activity, and other changes in non-cash working
capital.
The Company has replaced the previously
announced extension on its existing US $7.9
million senior secured credit facility with a three-year
credit agreement for CDN $8.5 million
with Royal Capital Management as security agent. Unlike the
previously announced term sheet with HCP, this new credit agreement
does not require the Company to pay a net smelter return royalty.
For further details, please see the Company's press release dated
August, 8, 2013 and the Material Change Report to be filed on
SEDAR.
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. It
owns and operates the Galena Mine Complex in the heart of the
Silver Valley/Coeur d'Alene Mining
District, Shoshone County,
Idaho. It produces high-grade silver and is the second
most prolific silver mine in U.S. history, delivering over 200
million ounces to date. The Caladay Zone is being evaluated for
bulk mining development. U.S. Silver & Gold Inc. also
owns the Drumlummon Mine Complex in Lewis
and Clark County, Montana.
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 at which 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, that 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.