El Gallo as the mine transitioned from mining operations to residual leaching, and fewer sales at a higher cost at Black Fox mine as a result of temporary operational challenges during Q2 19.
The higher depreciation and depletion reflects Gold Bar commencing production, which has higher depreciable assets and depleteable mineral property interests in comparison to El Gallo, which is now winding down operations as it is in residual leaching.
CONSOLIDATED FINANCIAL REVIEW
Revenue from gold and silver sales
in Q2 19 increased by 8% to $36.4 million compared to Q2 18, due to higher gold equivalent ounces sold (6% higher) and a higher average realized gold price. Increased ounces sold in Q2 19 reflect the start-up of the Gold Bar mine in 2019, partially offset by fewer ounces sold at the El Gallo Project (transitioned to residual heap leaching in the second half of 2018) and Black Fox mine due to lower production.
The first gold ingot at Gold Bar was poured on February 16, 2019 and the mine reached commercial production on May 23, 2019; 8.7 thousand gold equivalent ounces were sold in Q2 19.
Revenue from gold and silver sales
in H1 19 decreased by 31% to $52.0 million compared to the same period in 2018. The decrease reflects the El Gallo project transitioning from mine operations to residual leaching in mid-2018, resulting in lower production from El Gallo, and fewer ounces produced and sold at Black Fox due to temporary operational issues, partially offset by production from the start up of the Gold Bar.
Production Costs applicable to sales
in Q2 19
increased by 20% to $24. 7 million compared to Q2 18, reflecting higher cost per ounce sold and more ounces sold as explained in the “
Selected Consolidated Financial Performance and Operating Results
” section above.
Production costs applicable to sales
in H1 19 decreased by 19% to $35.8 million compared to the same period in 2018, reflecting fewer ounces sold (30% fewer ounces) and higher cash cost per ounce sold, due to similar operational factors as explained in the decrease in revenue above.
Depreciation and depletion
for Q2 and H1 19, respectively of $7.0 million and $10.0 million, increased by $2.9 million and $2.8 million compared to the same periods in 2018, primarily reflecting the inclusion of Gold Bar mine depreciation and depletion which has a significantly higher depreciation per ounce as compared to the El Gallo mine.
Advanced projects
of $2.1 million and $4.7 million, respectively for Q2 and H1 19, decreased by $0.7 million and $1.0 million, respectively, from the same periods in 2018. Advanced projects in 2019 included spending on the Fenix project in Mexico and pre-production spending at the Gold Bar mine up to February 16, 2019 when the first gold ingot was poured compared to the same periods in 2018 when Gold Bar mine was in pre-production during the full period.
Exploration costs
of $5.9 million and $10.0 million, respectively for Q2 and H1 19, decreased by $3.7 million and $11.5 million from same periods in 2018 as the exploration activities in 2019 were reduced in Q1 19 to conserve capital. Exploration spending ramped up in Q2 19 and is expected to increase during the second half of the year. During H1 19, $3.4 million of flow-through qualifying exploration expenditures were incurred.
General and administrative
expenses of $3.2 million for Q2 19 were comparable to expenditures in Q2 18. General and administrative expenses of $5.4 million for H1 19 decreased by $0.7 million from the same period in 2018 as a result of the reduction of corporate activities in the first quarter of 2019 to conserve capital.
Loss from investment in MSC
of $4.1 million and $6.4 million, respectively in Q2 and H1 19, increased by $1.9 million and $4.0 million, from the same periods in 2018, as a result of higher operating costs, including the export tax introduced in 2018 by the Argentine government, and a lower deferred tax recovery, partially offset by higher revenue from a higher number of ounces sold. The deferred tax recovery is denominated in Argentina pesos, and is thus impacted by fluctuations in the peso to the U.S. dollar.