TORONTO, Nov. 8, 2017 /CNW/ - AuRico Metals Inc. (TSX:
AMI), ("AuRico" or the "Company") today reported its financial
results for the third quarter. For complete details of the
Financial Statements and associated Management's Discussion and
Analysis for the quarter ended September 30,
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:
- Entered into a definitive arrangement agreement with Centerra
Gold Inc. ("Centerra"), whereby Centerra will acquire all of the
issued and outstanding common shares of the Company for
$1.80 in cash consideration per
share;
- Achieved record royalty revenue of $2.9
million, an increase of 30% compared to Q3 2016;
- Reported a cash balance of $18.8
million at September 30, 2017,
an increase of 62% from Q3 2016;
- On August 31, 2017, submitted
Kemess Underground's permit applications to the Major Mines
Permitting Office ("MMPO") in British
Columbia;
- On November 2, 2017, Kemess
Underground's permit applications passed screening and were
accepted for review by the Mine Review Committee ("MRC");
- Completed a 13,923 metre drill campaign at Kemess East between
July and October 2017, with full
results anticipated to be available before the end of 2017;
and
- On November 7, 2017, Kirkland
Lake Gold Ltd. ("Kirkland") announced a 120 metre down-plunge
extension of the Swan Zone at Fosterville.
Chris Richter, President and CEO
of AuRico Metals, commented; "During the third quarter we continued
to progress the Kemess Underground Project towards 'construction
ready' status with the advancement of permitting and detailed
engineering. In parallel, we completed a 14,000 metre drill program
at Kemess East (with full assay results expected this quarter)
while also recording our best ever quarter for royalty
revenue."
He continued, "The definitive arrangement agreement announced
yesterday, whereby Centerra will acquire all of the issued and
outstanding common shares of AuRico for C$1.80 in cash consideration per share (a 38%
premium to our prior day closing price) represents an excellent
outcome for our shareholders, who have supported us in our efforts
to both surface value at Kemess and grow our royalty business since
the Company's inception in 2015."
Near-Term Corporate Objectives
The Company's key near-term objectives include:
- Progress permitting and detailed engineering for the Kemess
Underground project ahead of a potential decision to commence early
construction activities (H1 2018);
- Release results of 2017 Kemess East drill program (Q4 2017),
and updated Kemess East resource estimate (Q1 2018);
- Advance integrated Kemess Underground and Kemess East
Feasibility Study (mid-2018);
- Evaluation of funding alternatives for the potential
development of the Kemess Underground project (ongoing).
Proposed Transaction with Centerra
As announced on November 7, 2017
the Company has entered into a definitive arrangement agreement
(the "Arrangement Agreement") whereby Centerra will acquire all of
the issued and outstanding common shares of AuRico Metals (the
"Arrangement") for C$1.80 in cash
consideration per share (the "Purchase Price"), representing an
aggregate transaction value of C$310
million.
The Purchase Price represents a 38% premium to the closing price
of AuRico Metals' common shares on the Toronto Stock Exchange
("TSX") on November 6, 2017 and a
premium of 37% to the 20-day volume weighted average price ("VWAP")
as of such date.
The proposed business combination will be effected by way of a
plan of arrangement completed under the Business Corporations Act
(Ontario). The Arrangement will
require approval by 66 2/3 percent of the votes cast at a special
meeting of AuRico Metals shareholders. In addition to shareholder
and court approvals, the Arrangement is subject to applicable
regulatory approvals and the satisfaction of certain other closing
conditions customary in a transaction of this nature. Directors and
senior officers of AuRico Metals, in addition to Alamos Gold Inc.,
collectively representing approximately 11.4 percent of the
outstanding AuRico Metals common shares, have entered into support
agreements pursuant to which they have agreed to vote in favour of
the proposed transaction.
The Arrangement Agreement includes customary provisions
including non-solicitation provisions, including a C$12 million termination fee payable to Centerra
under certain customary circumstances. Full details of the
Arrangement will be included in the meeting materials which are
expected to be mailed to AuRico shareholders in connection with the
AuRico shareholder meeting that will take place in December 2017 with closing of the Arrangement
expected in January 2018.
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, by
advancing the Kemess East project, by completing an integrated
feasibility study, and by enhancing the value of our royalty
portfolio.
The section below contains forward looking information; please
refer to the Company's cautionary note regarding forward looking
statements. The Company is increasing its guidance at Kemess
East due to a decision to drill 2 additional holes. Aside
from Kemess East capital expenditures, Company guidance is
consistent with that disclosed in its Q2 Management's Discussion
& Analysis. assuming a 0.75 CAD
to USD exchange rate and $1,250 per
ounce gold price:
|
|
(in
millions)
|
2017
Guidance
|
|
|
Royalty revenues
(pre-tax)
|
$10.5 to
$11.0
|
|
|
General and
administrative expense, excluding stock-based
compensation
|
$3.0
|
|
|
Care and maintenance
expense, excluding powerline brushing
|
$4.0
|
|
|
Powerline brushing
campaign
|
$1.5
|
|
|
Kemess Underground
capital expenditures
|
$6.0 to
$7.0
|
|
|
Kemess East capital
expenditures
|
$4.4*
|
* Company guidance has been increased from $4.0 million to $4.4
million due to expansion of its Kemess East drill program
from 12,000 metres to 14,000 metres.
Royalty revenue guidance has been maintained for 2017. 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
|
1.5%
|
200,000
|
210,000
|
Fosterville
|
2.0%
|
250,000
|
260,000
|
Hemlo*
|
0.3%
|
205,000
|
220,000
|
Eagle
River
|
0.5%
|
45,000
|
49,000
|
* Company guidance assumes that 75% of production at
Hemlo will be from the Williams
mine.
Operations Update
Kemess Underground
On August 31, 2017, the Company
submitted its Kemess Underground Project permit applications to the
MMPO for screening. On November 2,
2017, the Company was notified by the MMPO that the permit
applications have passed screening and have been accepted for
review by the MRC. The MRC will begin the review process on
November 7, 2017. The permitting
process is anticipated to be completed in Q2 2018.
During the first quarter, the EAO granted an Environmental
Assessment Certificate for the Kemess Underground project. Earlier
this year, the Company 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 of panel caving and surface construction, and experience
in British Columbia.
In May 2017, the Company announced
the signing of an IBA for the Kemess Underground project with
Takla Lake, Tsay Key Dene and Kwadacha First Nations,
collectively Tse Key Nay ("TKN"), an
alliance of three Sekani First
Nations. The IBA provides a framework that formalizes the
long-term cooperative relationship between the Company and the TKN
First Nations over the life of the project. The IBA captures the
mutual commitment to consult and maintain an open, respectful and
cooperative relationship throughout the development, operation and
closure of the Kemess Underground project. The IBA further provides
for meaningful TKN participation in Kemess Underground through
training, employment, business opportunities, environmental
protection and other means.
In anticipation of all required construction and operating
permits being received by the end of Q2 2018, detailed engineering
on access corridor construction related activities has been
completed. 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.
Tender documents related to initial construction activities have
been issued and proposal assessment is in progress. The awarding of
contracts will ultimately be subject to a decision by the Company's
Board of Directors to advance initial construction activities.
Kemess East
On May 29, 2017, the Company
announced the results of a Preliminary Economic Assessment on the
Kemess East project.
The Company recently completed a 13,923 metre drill program at
Kemess East. Complete assay results are expected before the end of
the year. This program included infill drilling, expansion drilling
on the outer edges of the known deposit, and exploration holes
testing 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 Metals
entered into a binding Letter Agreement with First Quantum on the
Kliyul property, located in British
Columbia, approximately 50 km south of AuRico Metals'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 Metals will be entitled to receive advance royalty
payments of C$2 million per year
until the commencement of commercial production, and will retain a
0.5% NSR royalty once production commences.
As part of its evaluation of the property, First Quantum agreed
to fund an early stage exploration program at Kliyul during 2017,
up to an approved amount. The program was conducted in
August 2017 and total expenditures
were in-line with budget.
Royalties
During the three and nine months ended September 30, 2017, the Company recognized
revenues from the following royalty assets:
|
|
|
|
|
|
($ in
millions)
|
Fosterville
|
Young-Davidson
|
Hemlo*
|
Eagle
River
|
Total
|
|
(2%
NSR)
|
(1.5%
NSR)
|
(0.25%
NSR)
|
(0.5%
NSR)
|
|
Q3 2017
Revenue
|
$1.6
|
$1.0
|
$0.2
|
$0.1
|
$2.9
|
Q2 2017
Revenue
|
$1.7
|
$0.9
|
$0.1
|
$0.1
|
$2.8
|
Q1 2017
Revenue
|
$1.1
|
$0.8
|
$0.2
|
$0.1
|
$2.2
|
|
YTD
Revenue
|
$4.4
|
$2.7
|
$0.5
|
$0.3
|
$7.9
|
|
|
|
|
|
Operator's
Production
|
Fosterville
|
Young-Davidson
|
Hemlo*
|
Eagle
River
|
(in
ounces)
|
|
|
|
|
Q3 2017
Production
|
61,500
|
55,800
|
37,000
|
13,313
|
Q2 2017
Production
|
77,069
|
47,300
|
42,000
|
10,597
|
Q1 2017
Production
|
46,083
|
40,400
|
54,000
|
13,588
|
|
YTD
Production
|
184,652
|
143,500
|
133,000
|
37,498
|
* Note that the Company's royalty is on the Williams mine at
Hemlo.
The Company recognizes quarterly revenue from its royalty assets
based on a combination of confirmation of quarterly sales amounts,
production guidance and recent sales of the underlying
operations. During the three months ended September 30, 2017, the Young-Davidson mine reported sales of 55,267 gold
ounces and the Fosterville mine
reported sales of 62,998 gold ounces.
Recent royalty portfolio highlights include:
- On November 7, 2017, Kirkland announced a 120 metre down-plunge
extension of the Swan Zone at Fosterville. The Swan Zone is the highest
grade area of the Fosterville
mine, with an initial Mineral Reserve of 532,000 ounces at an
average grade of 58.8 gold grams per tonne. The continuity of
high-grade visible gold mineralization in the Swan Zone is now
defined over a plunge length of 460 metres and vertical extent of
300 metres (for more information visit the Kirkland Lake Gold
website at http://www.klgold.com and refer to the press release
dated November 7, 2017).
- On November 1, 2017, Wesdome Gold
Mines Ltd. ("Wesdome") announced recent underground drilling
results that confirmed continuity and extended up-plunge gold
mineralization at the Eagle River 300E Zone (for more information
visit the Wesdome website at http://www.wesdome.com and refer to
the press release dated November 1,
2017)..
- On October 18, 2017, the Company
entered into an agreement to sell 100% of the Williams property in
British Columbia, which was
acquired as part of the Kiska transaction, to International Samuel
Exploration Corporation ("International Samuel") in exchange for an
upfront payment of four million common shares of International
Samuel (with potential additional milestone payments of up to 1.75
million shares dependent on project milestones) and a 0.50% NSR
royalty (in addition to the 0.75% NSR already held by AuRico Metals
on the property).
- On October 12, 2017, Alamos Gold
Inc. ("Alamos") announced record gold production of 55,800 ounces
at Young-Davidson during the third quarter, 28% higher
than the same period of 2016 and 18% higher than the second quarter
of 2017 (for more information visit the Alamos Gold website at
http://www.alamosgold.com and refer to the press release dated
October 12, 2017).
- On October 11, 2017, Kirkland announced gold production of 61,500
ounces at Fosterville during the
third quarter, 66% higher than the same period of 2016 (for more
information visit the Kirkland Lake Gold website at
http://www.klgold.com and refer to the press release dated
October 11, 2017).
- On September 20, 2017, the
Company entered into an agreement to sell 100% of the Grizzly
property to International Samuel in exchange for three million
common shares of International Samuel (two million upfront and an
additional one million in October
2018) and a 1% NSR royalty.
- On September 11, 2017,
Kirkland filed a technical report
for Fosterville, updating its
mineral reserves to 1,031,000 ounces of gold, from 490,000 ounces
of gold at December 31, 2016,
increasing the mineral reserves by 110% (for more information visit
the Kirkland Lake Gold website at http://www.klgold.com and refer
to the press release dated September 11,
2017).
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:
- The completion of the Arrangement in accordance with its terms,
including the receipt of all required approvals to consummate the
Arrangement.
- 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 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, optimization efforts by management, and credit market
conditions and conditions in financial markets generally.
- Kemess East capital expenditures will be impacted by changes in
foreign exchange rates, weather conditions, 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
Underground Feasibility Study, including planned production rates,
which may be impacted by changes in commodity prices and the
exchange rate between the Canadian dollar and US dollar from
assumed levels, estimated future production and cost of sales
forecasts meeting expectations, estimated labour and materials
costs being consistent with the Company's expectations, the
accuracy of current mineral reserve and mineral resource estimates
as contemplated by the Feasibility Study, the viability of Kemess
Underground including, but not limited to, permitting, development
and expansion being consistent with the Company's current
expectations, access to capital markets, including but not limited
to identifying financing options and securing partial project
financing for the Kemess Underground project, being consistent with
the Company's current expectations.
- The estimates, models and assumptions contained in the Kemess
East Preliminary Economic Assessment and Mineral Resource estimate,
including planned production rates, which may be impacted by
changes in commodity prices and the exchange rate between the
Canadian dollar and US dollar from assumed levels, estimated future
production and cost of sales forecasts meeting expectations,
estimated labour and materials costs being consistent with the
Company's expectations, the accuracy of current mineral resource
estimates, the viability of Kemess East including, but not limited
to, permitting, development and expansion 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, progress on 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 timing of the integrated Kemess Underground and
Kemess East Feasibility Study, ability and timing of a potential
development decision on Kemess Underground, 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: the completion of the Arrangement in
accordance with its terms and the receipt of the required approvals
to so complete, 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