Strengthens Balance Sheet and Increases
Royalty Revenue Guidance
TORONTO, May 4, 2017 /CNW/ - AuRico Metals Inc. (TSX:
AMI), ("AuRico" or the "Company") today reported its financial
results for the quarter ended March
31, 2017. For complete details of the Financial
Statements and associated Management's Discussion and Analysis for
the quarter ended March 31, 2017,
please see the Company's filings on SEDAR (www.sedar.com) or the
Company's website (www.auricometals.ca). All amounts are in US
dollars unless otherwise indicated.
Recent Highlights include:
- Receipt of an Environmental Assessment Certificate for the
Kemess Underground project;
- A 188% increase in the Indicated resource for the Kemess East
deposit. A further 12,000 metre drill program is planned for 2017
to infill and potentially extend the Kemess East deposit;
- Cash of $11.5 million
(C$15.3 million) as at March 31, 2017, or $19.9
million (C$26.5 million),
adjusted for the release of $8.4
million of restricted cash subsequent to the end of the
quarter;
- Royalty revenue for the quarter increased by 35% to
$2.2 million compared to Q1
2016;
- Increase in 2017 royalty revenue guidance range to $9.5 to $10.4 million from $8.0 to $8.4
million;
- Kirkland Lake Gold Ltd. ("Kirkland") announced a 66% increase
in reserves at Fosterville (AMI
2.0% NSR), accompanied by a 27% increase in grade; and
- The Company completed the acquisition of Kiska Metals
Corporation ("Kiska").
Commenting on the results, Chris
Richter, President and CEO stated, "The milestones achieved
in the first quarter demonstrate the deep and growing value of
AuRico Metals. The granting of the Environmental Assessment
Certificate at Kemess uniquely positions the project as a stand-out
development opportunity which has the potential to dramatically
increase shareholder value. We expect 2017 to be a pivotal
year as we continue to further advance Kemess Underground, complete
a preliminary economic assessment at Kemess East, and further
enhance our high quality royalty portfolio."
Near-Term Corporate Objectives
The Company's key
near-term objectives include:
- Sign Impact Benefits Agreement for Kemess Underground project
with local First Nations (May
2017);
- Progress permitting and detailed engineering for Kemess
Underground project ahead of potential development decision (H1
2018);
- Release of Kemess East Preliminary Economic Assessment (Q2
2017), to be followed by further evaluation of potential
integration synergies with the Kemess Underground project
(ongoing);
- Release results of 2017 Kemess East drill program (Q4
2017);
- Evaluation of funding alternatives for the potential
development of the Kemess Underground project (ongoing); and
- Selectively pursue accretive royalty acquisition opportunities
(ongoing).
2017 Outlook
AuRico Metals' goal is to deliver sustained value creation for
the Company's many stakeholders. We will look to continue to create
shareholder value by advancing the Kemess Underground project
towards a potential development decision, by advancing the Kemess
East project, and through accretive royalty acquisitions. The
section below contains forward looking information; please refer to
the Company's cautionary note regarding forward looking
statements.
The Company is providing the following revised guidance for
2017, assuming a 0.75 CAD to USD
exchange rate and $1,250 per ounce
gold price:
|
|
|
(in
millions)
|
Revised
Guidance
|
Original
Guidance
|
|
|
|
Royalty revenues
(pre-tax)
|
$9.5 to
$10.4
|
$8.0 to
$8.4
|
General and
administrative expense, excluding stock-based
compensation
|
$3.0
|
$3.0
|
Care and maintenance
expense
|
$4.0
|
$4.0
|
Kemess Underground
capital expenditures
|
$5.5 to
$6.0
|
$5.5 to
$6.0
|
Kemess East capital
expenditures
|
$4.0
|
$0.6
|
Royalty revenue guidance has been increased, due to an increase
in guidance at Fosterville. The guidance range disclosed in
the table above is based on the following guidance ranges provided
by the operators:
|
|
|
|
Asset
|
Royalty
|
Guidance
Low
|
Guidance
High
|
Young-Davidson
|
1.50%
|
200,000
|
210,000
|
Fosterville
|
2.00%
|
200,000
|
225,000
|
Hemlo*
|
0.25%
|
205,000
|
220,000
|
Eagle
River
|
0.50%
|
45,000
|
49,000
|
* Company guidance assumes that 75% of production at
Hemlo will be from the Williams
mine.
Guidance at Kemess East has been revised to incorporate the
planned drill program, outlined below, which has increased its
guidance to up to $4.0 million for
2017.
In its December 31, 2016 MD&A
the Company noted that its general and administrative guidance
would be revisited upon completion of the Kiska transaction. The
acquisition is not expected to have a significant impact on general
and administrative expense during the remainder of 2017 and,
therefore, the Company maintains its annual general and
administrative expense guidance.
Operations Update
Kemess Underground
During the first quarter, the Canadian Environmental Assessment
Agency ("CEAA") issued a positive Decision Statement and the
British Columbia Environmental Assessment Office ("EAO") granted an
Environmental Assessment Certificate for the Kemess Underground
project. The Company is currently preparing the necessary
permits to commence construction of Kemess Underground, with
permitting anticipated to be completed in Q2 2018.
The Company has also recently announced the addition of two
project managers to the Kemess Underground project team, a Mining
Project Manager and a Surface Construction Project Manager.
Both new hires bring a wealth of experience to the Company, both in
technical knowledge surrounding panel caving and surface
construction, and experience in British
Columbia.
In anticipation of all required construction and operating
permits being received in Q2 2018, detailed engineering is in
progress with a focus on access corridor construction related
activities which are expected to account for the first twelve
months in the construction schedule. The access corridor includes a
road from the Kemess South site to the location of the triple
decline portals that will be used to access the Kemess Underground
orebody. Additional access corridor activities include a 0.9
kilometre access tunnel, laydown areas, and camp refurbishment
activities.
Tender documents related to initial construction activities are
planned to be issued to contracting companies in Q3 2017.
Kemess East
On January 13, 2017, the Company
announced an updated resource for the Kemess East project.
The Company is currently working on the completion of a preliminary
economic assessment on the Kemess East project, which is
anticipated to be released in Q2 2017.
The Company has planned an approximately 12,000 metre drill
program at Kemess East in 2017. This program will include
infill drilling targeting the potassic strong zone, growth holes on
the outer edges of the known deposit and exploration holes looking
for higher grade material within the Kemess Offset Zone. The
Kemess Offset Zone is located between the Kemess Underground and
Kemess East deposits, which are one kilometre apart.
Kliyul
On March 17, 2017, AuRico entered
into a binding Letter Agreement with First Quantum Minerals Ltd
("First Quantum") on the Kliyul property, located in British Columbia, approximately 50 km south of
AuRico's Kemess property. Under the terms of the agreement,
First Quantum has 12 months to evaluate the Kliyul project.
It can then choose to enter into an Option to earn a 51% interest
by incurring a minimum of C$5 million
of expenditures on the project prior to December 31, 2021. First Quantum's interest
will increase by a further 29% (80% total) when a decision to mine
is made. Upon a decision to mine, AuRico will be entitled to
receive advance royalty payments of C$2
million per year until the commencement of commercial
production, and will retain a 0.5% NSR royalty once production
commences.
Royalties
During the three months ended March 31,
2017, the Company recognized revenues from the following
royalty assets:
|
|
|
(in
millions)
|
Q1
2017
|
Q1
2016
|
Fosterville 2% NSR
royalty
|
$1.1
|
$0.7
|
Young-Davidson 1.5%
NSR royalty
|
$0.8
|
$0.7
|
Other
royalties
|
$0.3
|
$0.3
|
|
Total
|
$2.2
|
$1.7
|
The Company recognizes quarterly revenue from its royalty assets
based on a combination of confirmation of quarterly sales amounts,
production guidance and recent production of the underlying
operations.
Fosterville (2% NSR
Royalty)
On April 12, 2017, Kirkland announced record quarterly gold
production at Fosterville of
46,083 ounces at an average mill grade of 11.1 g/t Au. On
May 4, 2017, Kirkland increased its 2017 production
guidance at Fosterville to between
200,000 to 225,000 gold ounces from 140,000 to 145,000 gold ounces
previously.
On March 28, 2017, Kirkland announced that updated mineral
reserves at the Fosterville gold
mine increased by 66%, to 643,000 ounces of gold, after depletion,
accompanied by a 27% increase in grade to 9.2 g/t Au from the prior
year estimate. Measured and Indicated mineral resources, inclusive
of reserves, increased by 23% to 2,790,000 ounces of gold
accompanied by a 25% increase in grade to 5.7 g/t Au.
As stated in Kirkland's press
release dated March 28, 2017, the
significant increase in mineral reserves is underpinned by
down-plunge extensions of the high-grade, visible gold-bearing
Lower Phoenix Gold Zone and the discovery of visible gold-bearing
Harrier Zone. Fosterville
continues to maintain a large underlying mineral resource base that
is expected to support future additions to mineral reserves, with
potential to further extend the current known mineral resource
following ongoing surface and underground drilling, testing
near-mine gold systems up and down-plunge from current mineral
reserves and resources.
Significant drilling activity continues at Fosterville with seven rigs in operation at
quarter end. On May 3, 2017,
Kirkland released further high
grade drill results from definition drilling of the Lower Phoenix
gold system, including the Eagle structure. Results include
345 g/t Au over 7.0 metres from hole UDH1991 at Lower Phoenix
Footwall and 404 g/t Au over 16.0 metres from hole UDH1970 at
Eagle.
For more information, visit the Kirkland website at www.klgold.com and refer
to the press releases dated 28, 2017, April
12, 2017, May 3, 2017 and
May 4, 2017.
Young-Davidson (1.5% NSR Royalty)
On May 4, 2017, Alamos Gold Inc.
("Alamos") announced quarterly gold production at Young-Davidson of 40,400 ounces. Production is
expected to increase over the remainder of the year and 2017
production guidance is for between 200,000 and 210,000 gold
ounces.
On February 23, 2017, Alamos
announced updated mineral reserves and resources at Young-Davidson at December
31, 2016. Mineral reserves at Young-Davidson decreased by 0.2 million ounces, to
3.7 million gold ounces, due to mining depletion. Alamos
added 0.3 million ounces of Measured and Indicated mineral
resources through infill drilling bringing total Measured and
Indicated mineral resources to 1.2 million gold ounces.
Inferred mineral resources were largely unchanged and 0.3 million
gold ounces.
For more information, visit the Alamos website at
www.alamosgold.com and refer to the press releases dated
February 23, 2017 and May 4, 2017.
Hemlo (0.25% NSR Royalty on
Williams Mine)
On April 24, 2017, Barrick Gold
Corporation ("Barrick") announced production of 54,000 ounces at
Hemlo, which was consistent with
its annual guidance of 205,000 to 220,000 ounces of gold.
On February 15, 2017, Barrick Gold announced a 73% increase in mineral
reserves at Hemlo from 917,000
ounces of gold at the end of 2015 to 1,588,000 ounces at the end of
2016, after mining depletion. Measured and Indicated mineral
resources, exclusive of reserves, increased 19% to 1,720,000 ounces
of gold. Annual production at Hemlo totaled 235,000 ounces of gold in 2016,
representing an increase of 7% from the prior year.
For more information, visit Barrick
Gold's website at www.barrick.com and refer to the press
releases on February 15, 2017 and
April 24, 2017.
Eagle River (0.5% NSR
Royalty)
On April 12, 2017, Wesdome Gold
Mine Ltd's ("Wesdome") announced production of 13,588 ounces from
the Eagle River underground mine at a head grade of 11.5 g/t
Au. Wesdome previously provided gold production guidance at
Eagle River of between 45,000 and
49,000 ounces for 2017 at grades of between 8.8 and 9.2 g/t Au.
On February 22, 2017, Wesdome
announced a 15% increase in mineral reserves at Eagle River from 300,000 ounces of gold at the
end of 2015 to 344,000 ounces of gold at the end of 2016, after
mining depletion. Wesdome has stated that it will continue
its focus on development into higher grade areas of the Eagle River
Underground Mine with initial stope production from the 7 Zone
which commenced in Q4 2016, well ahead of schedule. This will
enable stope production from multiple high grade areas within the
Eagle River Mine earlier than expected.
On April 27, 2017, Wesdome
announced recent underground drilling results on the Eagle River
300 Zone, which is a recently recognized structure located 300-400
metres north of the main 8 Zone structure. The 8 Zone has
provided the bulk of the Eagle River Mine's production over the
past 20 years. Recent underground drilling results have
extended the 300W Zone 250 metres above the 942 metre level drift,
which averaged 16.54 g/t Au over a length of 141 metres with an
average width of 1.61 metres.
For more information, visit Wesdome's website at www.wesdome.com
and refer to the press releases dated February 22, 2017, April
12, 2017 and April 27,
2017.
GJ Donnelly Deposit (1% NSR Royalty)
On April 20, 2017, Skeena
Resources Ltd. ("Skeena") announced the results of a preliminary
economic assessment and mineral resource update for its Spectrum-GJ
copper-gold project located in the Golden Triangle of northwest
British Columbia. The Company owns a 1% NSR royalty on the
Donnelly Deposit at GJ. The updated Indicated resource at GJ
Donnelly totaled 215 million tonnes at 0.31 gold grams per tonne
and 0.26% copper for total contained metal of 2.1 million ounces of
gold and 1.2 billion pounds of copper. The preliminary
economic assessment outlines an open pit operation at Donnelly.
The preliminary economic assessment for the combined project
calculates a base case net present value of C$314 million after-tax using a gold price of
$1,250, a copper price of
$2.75, an exchange rate of
0.75 CAD/USD, and a discount rate of
8%. The project offers an internal rate of return of 20.6%
and an estimated payback of 4.2 years on total capital expenditures
of C$216 million.
For more information, visit Skeena's website at
www.skeenaresources.com and refer to the press release dated
April 20, 2017.
Acquisition of Kiska
On March 8, 2017, the Company
completed the acquisition of Kiska for total consideration paid of
approximately $8.7 million, including
the issuance of 8,249,866 common shares. In addition to
$3.1 million in cash and $1.5 million in marketable investments, the
Company acquired the following royalty assets:
- 0.5% NSR royalty on the East
Timmins property owned by Kirkland;
- 1% NSR royalty on the Boulevard property owned by Independence
Gold Corp;
- 0.5% NSR royalty on the Cumobabi property owned by Evrim
Resources Corp;
- 1% NSR royalty on the Goodpaster property owned by Millrock
Resources Inc.;
- 2% NSR royalty on the Mount Dunn property owned by Metallis
Resources Inc.; and
- 1.33% NSR royalty on the RDN property operated by Aben
Resources Ltd.
The Company also acquired the following wholly owned mineral
properties: the Kliyul, Chuchi, Williams, Grizzly and Redton
properties located in British Columbia,
Canada, the Copper Joe property located in Alaska, USA, and the Hilltop property located
in Nevada, USA.
The acquisition is not anticipated to have a significant impact
on general and administrative expenses during the remainder of
2017. The Company will conduct early stage exploration work
at Kliyul with its partner, First Quantum, but these expenditures
will be funded by First Quantum, and will therefore not have a
significant impact on the Company's 2017 financial results.
Kiska also held historical non-capital loss carryforwards
totaling $27.1 million and Canadian
Exploration Expense ("CEE") resource pools of $4.6 million at March
7, 2017. The temporary differences associated with
these pools were not recognized as deferred tax assets for
accounting purposes because the acquisition of Kiska was accounted
for as an asset acquisition, and the initial recognition exemption
was applied in accordance with International Accounting Standard
12, Income Taxes. If these tax attributes are utilized in
future periods, they will positively impact the Company's net
income reported.
About AuRico Metals
AuRico Metals is a mining development and royalty company with a
100% interest in the Kemess property in British Columbia, Canada. The Kemess property
hosts the feasibility-stage Kemess Underground Gold-Copper project,
the Kemess East exploration project, and the infrastructure
pertaining to the past producing Kemess South mine. AuRico's
royalty portfolio includes a 1.5% NSR royalty on the Young-Davidson
Gold Mine and a 2% NSR royalty on the Fosterville Mine, as well as
a portfolio of additional producing and pre-production royalty
assets located in North America
and Australia.
Cautionary Statement on Forward-Looking
Information
This press release contains forward-looking statements and
forward-looking information as defined under Canadian and U.S.
securities laws. All statements, other than statements of
historical fact, are, or may be deemed to be, forward-looking
statements. The words "expect", "believe", "anticipate", "will",
"intend", "estimate", "forecast", "budget" and similar expressions
identify forward-looking statements. Forward-looking statements
include statements related to the Company's outlook and key
deliverables for Kemess over the next year. These statements
are based on a number of factors and assumptions that, while
considered reasonable by management at the time of making such
statements, are inherently subject to significant business,
economic and competitive uncertainties and contingencies.
Known and unknown factors could cause actual results to differ
materially from those projected in the forward-looking
statements. Such forward-looking statements and the factors
and assumptions underlying them in this document include, but are
not limited to:
- Royalty revenue guidance may be impacted by the performance of
the Young-Davidson, Fosterville, Hemlo and Eagle
River mines. Management has based its revenue assumptions on
the latest guidance provided by the operators of these assets, but
there is uncertainty as to whether operators will achieve stated
production guidance. Royalty revenue is also based on an assumed
gold price of $1,250 per ounce. The
Company's gold price assumption may be inaccurate; every
$50 change in gold price assumption
impacts pre-tax revenue by approximately $0.4 million.
- General and administrative expense guidance may be impacted by
changes in foreign exchange rates, the integration of Kiska,
employee relations, litigation, time spent by officers and
employees on general and administrative activities, and business
opportunities that may be pursued by the Company.
- Care and maintenance expense guidance may be impacted by
changes in foreign exchange rates, employee relations, electricity
rates in British Columbia, weather
in the region surrounding the Kemess site, equipment reliability,
extent of powerline brushing required, if any, to optimally
maintain the powerline, quality of service received by vendors and
consultants, and the price of consumables.
- Kemess underground capital expenditures are at the Company's
discretion and will be impacted by changes in foreign exchange
rates, the number of comments or questions raised by First Nations
partners and Government during the review of project permits,
additional studies required in order to address concerns raised and
the results of those studies, quality of service received by
consultants, the extent of which early construction activities can
be commenced at Kemess Underground during 2017, optimization
efforts by management, and credit market conditions and conditions
in financial markets generally.
- Kemess east capital expenditures are at the Company's
discretion and will be impacted by changes in foreign exchange
rates, quality of service received by consultants, and the extent
of any additional drilling conducted at Kemess East in 2017.
- The estimates, models and assumptions contained in the Kemess
East Mineral Resource estimate, which may be impacted by changes in
commodity prices and the exchange rate between the Canadian dollar
and US dollar from assumed levels, the accuracy of current mineral
resource estimates, as contemplated by the Mineral Resource
estimate, and metallurgical recoveries being consistent with the
Company's current expectations.
The Company has made forward-looking statements relating to
corporate objectives and key deliverables over the next 12 months,
including permitting, timing of regulatory decisions relating to
permitting, commencement of detailed engineering, the Company's
ability to fund forecasted cash shortfalls, the Company's ability
to create value for shareholders, sufficiency of working capital
for future commitments, the expected release of further updates on
Kemess East, and other statements that express management's
expectations or estimates of future performance.
Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the
forward-looking statements contained herein. Such statements are
based on a number of assumptions which may prove to be incorrect,
including assumptions about: business and economic conditions;
commodity prices and the price of key inputs such as labour, fuel
and electricity; credit market conditions and conditions in
financial markets generally; development schedules and the
associated costs; ability to procure equipment and supplies and on
a timely basis; the timing and ability to obtain permits and other
approvals for projects and operations; the ability to attract and
retain skilled employees and contractors for the operations; the
accuracy of reserve and resource estimates; the integration of
Kiska; the impact of changes in currency exchange rates on costs
and results; interest rates; taxation; and ongoing relations with
employees and business partners. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required by applicable law.
Readers are cautioned that forward-looking statements are not
guarantees of future performance. All of the forward-looking
statements made in this press release are qualified by these
cautionary statements.
Other information
The technical information disclosed
in this press release relating to the Kemess Underground project,
Kemess East project and the Company's material royalty properties,
being the Young-Davidson and Fosterville NSR royalties, has
been approved by Mr. John
Fitzgerald, an officer of the Company, who is a qualified
person within the meaning of National Instrument 43-101.
SOURCE AuRico Metals