(All dollar amounts are United
States dollars unless otherwise stated)
VANCOUVER, BC, Nov. 6, 2020 /PRNewswire/ - Galiano Gold
Inc. ("Galiano" or the "Company") (TSX: GAU) (NYSE American:
GAU) (formerly Asanko Gold Inc.) reports third quarter
("Q3") 2020 operating and financial results for the Asanko Gold
Mine ("AGM"), located in Ghana,
West Africa. The AGM is a 50:50
joint venture ("JV") with Gold Fields Ltd (JSE, NYSE: GFI), which
is managed and operated by Galiano.
Q3 2020 Asanko Gold Mine Highlights (100% basis)
- There were no lost time injuries ("LTI") and two total
recordable injuries ("TRI")
- Quarterly gold production of 48,974 ounces at an all-in
sustaining cost1 ("AISC") of $1,488/oz
- Gold sales of 53,975 ounces at an average realized price of
$1,861/oz, generating gold sales
proceeds of $100.5 million
- Net income after tax of $12.4
million
- Generated operating cash flow of $18.5
million, and negative free cash flow1 of
$4.2 million after incurring
$14.2 million of non-sustaining
capital and exploration expenditure
- As at September 30, 2020, the JV
had cash of $43.3 million,
$16.3 million in receivables from
gold sales and $4.3 million in gold
on hand, with the RMB revolving credit facility of $30.0 million fully drawn
- Completed a 33-hole drilling program at the Nkran pit to
confirm and improve confidence in the Mineral Reserve estimate for
the third phase of mining and tested the extent of mineralization
below the proposed Cut 3 pit shell with positive results (refer to
news release dated September 8,
2020)
- Completed the exploration drilling program at Abore with
results indicating a strike extension of mineralization of the pit
(refer to news release dated July 6,
2020)
Q3 2020 Quarterly Highlights for Galiano Gold Inc.
- Net income after tax of $3.2
million and Adjusted EBITDA1 of $6.5 million
- At September 30, 2020, Galiano
held cash and receivables of $66.4
million
- Appointed Matt Badylak as
Executive Vice President and Chief Operating Officer
"Coming into the second half of 2020 with very strong
production and all-in sustaining cost performance, we expected
production to decrease and unit costs to increase in the second
half as the mine shifted to a lower grade production mix after the
depletion of Nkran Cut 2 late in Q2," said Greg McCunn, Chief Executive Officer. "For the
balance of 2020, ore will be sourced from the Esaase and Akwasiso
pits, augmented with run of mine stockpiles. This quarter was an
investment quarter where the Esaase and Akwasiso pits were
developed and optimised for sustainable ore production in Q4 and
beyond which put pressure on all-in sustaining costs. With the
continued strong gold price environment, the mine generated cash
from operations in excess of $18
million allowing it to fund pit development as well as its
ongoing exploration programs.
"The focus on exploration in Q3 was delineating and expanding
upon known mineralization at the highly prospective Miradani
targets and to confirm and improve confidence in the Mineral
Reserve Estimate for the third phase of mining at Nkran and to test
the extent of mineralization below the proposed Cut 3 pit
shell."
Asanko Gold Mine - Summary of Q3 2020 Operational and
Financial Results (100%)
AGM (100% basis
before any impairment adjustments)
|
Q3
2020
|
Q2
2020
|
Q3
2019
|
|
Ore mined
('000t)
|
958
|
1,361
|
1,105
|
|
Waste mined
('000t)
|
11,321
|
8,128
|
6,372
|
|
Total mined
('000t)
|
12,279
|
9,489
|
7,477
|
|
Strip ratio
(W:O)
|
11.8
|
6.0
|
5.8
|
|
Average gold grade
mined (g/t)
|
1.4
|
1.4
|
1.5
|
|
Mining cost ($/t
mined)
|
3.13
|
3.59
|
4.48
|
|
Ore milled
('000t)
|
1,467
|
1,638
|
1,439
|
|
Average mill head
grade (g/t)
|
1.1
|
1.4
|
1.4
|
|
Average recovery rate
(%)
|
93
|
94
|
94
|
|
Processing cost ($/t
treated)
|
10.80
|
9.77
|
10.42
|
|
Gold production
(oz)
|
48,974
|
69,026
|
62,440
|
|
Gold sales
(oz)
|
53,975
|
61,357
|
63,009
|
|
Average realized gold
price ($/oz)
|
1,861
|
1,651
|
1,443
|
|
Operating cash
costs1 ($/oz)
|
1,150
|
725
|
799
|
|
Total cash
costs1 ($/oz)
|
1,244
|
807
|
872
|
|
All-in sustaining
costs1 ($/oz)
|
1,488
|
1,067
|
1,179
|
|
All-in sustaining
margin1 ($/oz)
|
373
|
584
|
264
|
|
All-in sustaining
margin1 ($m)
|
20.1
|
35.8
|
16.6
|
|
Revenue
($m)
|
100.7
|
101.5
|
91.2
|
|
Income from mine
operations ($m)
|
17.4
|
35.9
|
11.2
|
|
Cash provided by
operating activities
|
18.5
|
48.8
|
45.6
|
|
- During the quarter, there were no LTI's and two TRI's reported
resulting in an LTI frequency rate of nil per million employee
hours worked and a TRI frequency rate of 0.72 per million employee
hours worked.
- Gold production of 48,974 ounces during the three months ended
September 30, 2020, in line with
plan. Lower relative production was impacted by lower head grade
driven by the mine shifting to a production mix excluding the
higher grade Nkran Cut 2 deposit which was depleted in Q2 as well
as a reliance on lower grade stockpiles to augment primary feed as
the Esaase and Akwasiso deposits were developed for sustainable ore
production in Q4 and beyond.
- During Q3 2020, the AGM sold 53,975 ounces of gold at an
average realized gold price of $1,861/oz. Revenues totaled $100.7 million (including $0.3 million of by-product revenue).
- The AGM incurred operating cash costs per ounce1 of
$1,150, total cash costs per
ounce1 of $1,244 and
AISC1 of $1,488 per ounce
in Q3 2020. The increase in total cash costs per ounce1
from Q2 2020 was primarily due to higher waste stripping at the
Esaase and Akwasiso pits. AISC1 were also relatively
higher than Q2 2020 due to higher royalty costs associated with an
increase in the gold price, as well as higher general and
administration ("G&A") costs associated with one-off COVID-19
related expenses and the completion of a lift on the tailings
storage facility. All unit cost metrics were also impacted by
relatively lower gold sales volumes in Q3 2020 which had the effect
of increasing costs on a per ounce basis.
- Total cost of sales (including depreciation and depletion and
royalties) amounted to $83.3 million
in Q3 2020, an increase of $3.4
million from Q3 2019. The increase in cost of sales was
primarily due to higher operating cash costs and royalty expense
arising from improvement in the gold price during Q3 2020 compared
to Q3 2019. These factors were partly offset by a decrease in gold
ounces sold in Q3 2020 compared to Q3 2019 and a reduction in
depreciation and depletion expense following the impairment
recorded in Q4 2019.
- The AGM generated $18.5 million
of cash flows from operating activities (after taking into account
unfavorable working capital changes of $9.9
million) and negative free cash flow1 of
$4.2 million during Q3 2020. This
compares to $45.6 million of cash
flows from operating activities and $13.9
million of free cash flow1 during Q3 2019. The
reduction in free cash flow1 was the result of a
$25.3 million unfavorable increase in
cash invested in non-cash working capital when comparing Q3 2020 to
Q3 2019 and a $3.7 million decrease
in income from operations (excluding depreciation and depletion).
These factors were partly offset by a $7.7
million decrease in cash flows associated with capital
expenditure from Q3 2019 to Q3 2020 and a $1.3 million reduction in mining services and
contractor lease payments.
- As at September 30, 2020, the JV
had cash of $43.3 million,
$16.3 million in receivables from
gold sales and $4.3 million in gold
on hand, with the RMB revolving credit facility of $30.0 million fully drawn.
Galiano Gold Inc. – Summary Q3 2020 Financial Results
Consolidated
|
Q3
2020
|
Q2
2020
|
Q3
2019
|
Net income (loss) for
the period ($m)
|
3.2
|
14.7
|
(147.5)
|
Net income (loss) per
share
|
$0.01
|
$0.07
|
$(0.65)
|
Adjusted
EBITDA1 ($m)
|
6.5
|
18.5
|
9.4
|
- The Company reported net income after tax of $3.2 million in Q3 2020 compared to a net loss of
$147.5 million in Q3 2019. The
improvement in earnings during Q3 2020 was predominantly due to the
fact that the Q3 2019 net loss included a $128.3 million impairment recognized on the
Company's equity investment in the AGM JV, as well as a
$20.0 million negative fair value
adjustment on the Company's redeemable preference shares, both of
which were associated with the update to the AGM Life of Mine plan.
Additionally, the improvement in earnings in Q3 2020 was also
partly due to an increase in the Company's 45% interest in the net
earnings of the JV which totaled $5.6
million for the quarter. These factors were partly offset by
restructuring costs recorded in Q3 2020 associated with the
intended closure of the Company's Johannesburg office.
- As at September 30, 2020, the
Company had cash on hand of $63.5
million and $2.9 million in
receivables for a gross liquidity position of $66.4 million and no debt.
- Adjusted EBITDA1 for Q3 2020 amounted to
$6.5 million, compared to
$9.4 million in Q3 2019. The decrease
in Adjusted EBITDA1 was primarily a result of an
increase in the AGM's total cash costs1 and increase in
corporate G&A expense associated with the intended closure of
the Company's Johannesburg office
(see "Management changes").
- Cash used in operating activities in Q3 2020 was $3.0 million, compared to $3.5 million in Q3 2019. The decrease in cash
used in operations was due to a reduction in the amount of cash
invested in working capital during Q3 2020, partly offset by higher
corporate G&A expense.
2020 Outlook
In 2020, the AGM is on track to deliver on its guidance with
gold production of approximately 245,000 ounces and AISC1 of
approximately $1,150 per ounce which
slightly exceeds the upper end of the AISC1 guidance of
$1,000 to $1,100/oz as a result of increased cost pressures
(as discussed below).
AISC1 includes budgeted sustaining capital
expenditures of $11.0 million (spend
to date: $11.5 million), primarily
for a planned tailings storage facility lift of $7.0 million (spend to date $9.5 million). Year-to-date AISC1
performance remained in line with the Company's guidance range,
however, certain cost factors continue to put pressure on the JV's
cost performance. Current cost pressures include higher royalty
expense associated with higher realized gold prices (approximately
$30 incremental per ounce), higher
sustaining capital expenditures associated with design changes to
the raise of the tailings dam as well as additional costs
associated with the JV's COVID-19 mitigation measures.
During Q4 2020 the mine expects to source ore primarily from the
lower grade Esaase and Akwasiso pits as the AGM's primary fresh ore
source. These ore sources will be augmented where necessary with
run-of-mine stockpile material.
Development capital is forecast at $24.0
million (spend to date: $21.0
million), primarily for the Tetrem village relocation. In
addition, $17.1 million was budgeted
for exploration (spend to date: $14.6
million), mainly around the Miradani mineralized trend.
Guidance
|
YTD
(Actual)
|
FY 2020
(Guidance)
|
FY 2020
(Forecast)
|
Gold Production
(oz)
|
184,333
|
225,000 –
245,000
|
~245,000
|
AISC1 ($/oz)
|
1,094
|
1,000 –
1,100
|
~1,150
|
Management Changes
During the quarter, Mr. Matt
Badylak was appointed Executive Vice President and Chief
Operating Officer. Mr. Badylak is based in the Company's head
office in Vancouver. Following the
appointment of Mr. Badylak, the Company initiated a process whereby
the majority of the Company's technical services will be
systematically migrated from the Company's Johannesburg office to Vancouver. As part of this process, the
Company appointed Mr. Eric Chen as
Vice President Mineral Resources and Ms. Victoria Bleppony as Vice
President Mining. Once this migration is complete, the role of
Senior Vice President, Technical Services is expected to be made
redundant.
COVID-19 Update
The JV continues to operate in all material respects with strict
hygiene, deep cleaning, restriction of personnel movement, ongoing
monitoring and physical distancing protocols in place in accordance
with the Ghanaian Ministry of Health Guidelines. The AGM has
established additional protocols and procedures to manage any
confirmed cases of COVID-19, including contact tracing, isolating
affected persons, rapid testing and isolation of affected persons.
The AGM recently procured a polymerase chain reaction testing
machine capable of processing up to 40 samples per day which is in
the process of being certified by the Ghana health authorities, additionally,
on-site accommodations have been modified to isolate infected and
suspected to be infected individuals limiting on-site cross
contamination and expediting return to work timelines. As a result,
though there have been several confirmed cases of COVID-19
among the operational personnel at the AGM (mostly asymptomatic),
to date the AGM's operations have been able to continue
uninterrupted in all material respects with all confirmed cases
cleared and those employees resuming normal duties after completing
a two-week regulatory isolation. The Company's offices in
Vancouver and Accra are observing local regulations and open
with restrictions and protocols in place. The Company's
Johannesburg office remains
closed, and staff are working remotely. The AGM has continued to
build its supply chain and has stockpiled key reagents,
consumables, critical spares and diesel supply. The AGM's primary
refiner, based in South Africa,
continues to receive shipments and refine gold doré from the
AGM.
This news
release should be read in conjunction with Galiano's Management's
Discussion and Analysis and the Condensed Consolidated Interim
Financial Statements for the three and nine months ended September
30, 2020 and 2019, which are available at www.galianogold.com and
filed on SEDAR.
|
1 Non-GAAP Performance
Measures
The Company has included certain non-GAAP performance measures
in this press release. These non-GAAP performance measures do not
have any standardized meaning. Accordingly, these performance
measures are intended to provide additional information and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. Refer to the Non-GAAP
Measures section of Galiano's Management Discussion and Analysis
for an explanation of these measures and reconciliations to the
Company's reported financial results in accordance with IFRS.
- Operating Cash Costs per ounce and Total Cash Costs per
ounce
Operating cash costs are reflective of the cost of
production, adjusted for share-based payments and by-product
revenue per ounce of gold sold. Total cash costs include production
royalties of 5%. Excluded from operating cash costs are one-time
severance charges.
- All-in Sustaining Costs Per Gold Ounce
The Company
has adopted the reporting of "all-in sustaining costs per gold
ounce" ("AISC") as per the World Gold Council's guidance. AISC
include total cash costs, corporate overhead expenses, sustaining
capital expenditure, capitalized stripping costs and reclamation
cost accretion per ounce of gold sold.
- Adjusted EBITDA
EBITDA provides an indication of the
Company's continuing capacity to generate income from operations
before taking into account the Company's financing decisions and
costs of amortizing capital assets. Accordingly, EBITDA comprises
net income (loss) excluding interest expense, interest income,
amortization and depletion, and income taxes. Adjusted EBITDA
adjusts EBITDA to exclude non-recurring items and to include the
Company's interest in the adjusted EBITDA of the JV. Other
companies and JV partners may calculate EBITDA and Adjusted EBITDA
differently.
- Free cash flow
The Company believes that in addition
to conventional measures prepared in accordance with IFRS, the
Company and certain investors and analysts use free cash flow to
evaluate the JV's performance with respect to its operating cash
flow capacity to meet non-discretionary outflows of cash. The
presentation of free cash flow is not meant to be a substitute for
the cash flow information presented in accordance with IFRS, but
rather should be evaluated in conjunction with such IFRS measures.
Free cash flow is calculated as cash flows from operating
activities of the JV adjusted for cash flows associated with
sustaining and non-sustaining capital expenditures and payments
made to mining contractors for leases capitalized under IFRS
16.
About Galiano Gold Inc.
Galiano is focused on creating a sustainable
business capable of long-term value creation for its
stakeholders through exploration and disciplined deployment of
its financial resources. The company currently operates and manages
the Asanko Gold Mine, located in Ghana, West
Africa which is jointly owned with Gold Fields Ltd.
The Company is strongly committed to the highest standards for
environmental management, social responsibility, and health and
safety for its employees and neighbouring communities. For more
information, please visit www.galianogold.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements and information contained in this news
release constitute "forward-looking statements" within the meaning
of applicable U.S. securities laws and "forward-looking
information" within the meaning of applicable Canadian securities
laws, which we refer to collectively as "forward-looking
statements". Forward-looking statements are statements and
information regarding possible events, conditions or results of
operations that are based upon assumptions about future conditions
and courses of action. All statements and information other than
statements of historical fact may be forward looking statements. In
some cases, forward-looking statements can be identified by the use
of words such as "seek", "expect", "anticipate", "budget", "plan",
"estimate", "continue", "forecast", "intend", "believe", "predict",
"potential", "target", "may", "could", "would", "might", "will" and
similar words or phrases (including negative variations) suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements in this news release include, but
are not limited to: estimates regarding the value of the gold
currently held at the AGM; expectations with respect to the
Company's exploration program, including the expected results
therefrom and the associated impact on the AGM's mineral reserve
and resource estimates, the timelines associated therewith,
additional follow-on exploration programs, the ability of the
exploration program to replace depletion from mining operations and
the expected cost of the exploration program; statements with
respect to future sales pursuant to the Company's at-the-market
offering; statements with respect to planned mining and development
operations at the AGM for the remainder of 2020; expectations
regarding development capital; expected gold
production; and cost estimates. Such forward-looking statements are
based on a number of material factors and assumptions, including,
but not limited to: the ability of the AGM to continue to operate
during the COVID-19 pandemic; that gold production and other
activities will not be curtailed as a result of the COVID-19
pandemic; that the AGM will be able to continue to ship doré
from the AGM site to be refined; that the doré
produced by the AGM will continue to be able to be refined at
similar rates and costs to the AGM, or at all; that the other
current or potential future effects of the COVID-19 pandemic on the
Company's business, operations and financial position, including
restrictions on the movement of persons (and in particular, the
AGM's workforce), restrictions on business activities, including
access to the AGM, restrictions on the transport of goods, trade
restrictions, increases in the cost of necessary inputs, reductions
in the availability of necessary inputs and productivity and
operational constraints, will not impact its 2020 production and
cost guidance; that the Company's and the AGM's responses to the
COVID-19 pandemic will be effective in continuing its operations in
the ordinary course; the accuracy of the estimates and
assumptions underlying the Mineral Resource and Mineral Reserve
estimates, including future gold prices, cut-off grades and
production and processing estimates; the successful completion of
development and exploration projects, planned expansions or other
projects within the timelines anticipated and at anticipated
production levels; that mineral resources can be developed as
planned; that the Company's relationship with joint venture
partners will continue to be positive and beneficial to the
Company; interest and exchange rates; that required financing and
permits will be obtained; general economic conditions; that labour
disputes or disruptions, flooding, ground instability, geotechnical
failure, fire, failure of plant, equipment or processes to operate
are as anticipated and other risks of the mining industry will not
be encountered; that contracted parties provide goods or services
in a timely manner; that there is no material adverse change in the
price of gold or other metals; competitive conditions in the mining
industry; title to mineral properties; costs; taxes; the retention
of the Company's key personnel; and changes in laws, rules and
regulations applicable to Galiano.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results,
performance or achievements to differ materially from those
anticipated in such forward-looking statements. The Company
believes the expectations reflected in such forward-looking
statements are reasonable, but no assurance can be given that these
expectations will prove to be correct and you are cautioned not to
place undue reliance on forward-looking statements contained
herein. Some of the risks and other factors which could cause
actual results to differ materially from those expressed in the
forward-looking statements contained in this news release, include,
but are not limited to: the Company's and/or the AGM's operations
may be curtailed or halted entirely as a result of the COVID-19
pandemic, whether as a result of governmental or regulatory law or
pronouncement, or otherwise; that the
doré produced at the AGM may not be able to be
refined at expected levels, on expected terms or at all; that the
Company and/or the AGM will experience increased operating costs as
a result of the COVID-19 pandemic; that the AGM may not be able to
source necessary inputs on commercially reasonable terms, or at
all; the Company's and the AGM's responses to the COVID-19 pandemic
may not be successful in continuing its operations in the ordinary
course; mineral reserve and resource estimates may change and may
prove to be inaccurate; life of mine estimates are based on a
number of factors and assumptions and may prove to be incorrect;
AGM has a limited operating history and is subject to risks
associated with establishing new mining operations; sustained
increases in costs, or decreases in the availability, of
commodities consumed or otherwise used by the Company may adversely
affect the Company; actual production, costs, returns and other
economic and financial performance may vary from the Company's
estimates in response to a variety of factors, many of which are
not within the Company's control; adverse geotechnical and
geological conditions (including geotechnical failures) may result
in operating delays and lower throughput or recovery, closures or
damage to mine infrastructure; the ability of the Company to treat
the number of tonnes planned, recover valuable materials, remove
deleterious materials and process ore, concentrate and tailings as
planned is dependent on a number of factors and assumptions which
may not be present or occur as expected; the Company's operations
may encounter delays in or losses of production due to equipment
delays or the availability of equipment; the Company's operations
are subject to continuously evolving legislation, compliance with
which may be difficult, uneconomic or require significant
expenditures; the Company may be unsuccessful in attracting and
retaining key personnel; labour disruptions could adversely affect
the Company's operations; the Company's business is subject to
risks associated with operating in a foreign country; risks related
to the Company's use of contractors; the hazards and risks normally
encountered in the exploration, development and production of gold;
the Company's operations are subject to environmental hazards and
compliance with applicable environmental laws and regulations; the
Company's operations and workforce are exposed to health and safety
risks; unexpected costs and delays related to, or the failure of
the Company to obtain, necessary permits could impede the Company's
operations; the Company's title to exploration, development and
mining interests can be uncertain and may be contested; the
Company's properties may be subject to claims by various community
stakeholders; risks related to limited access to infrastructure and
water; the Company's exploration programs may not successfully
expand its current mineral reserves or replace them with new
reserves; the Company's common shares may experience price and
trading volume volatility; the Company's revenues are dependent on
the market prices for gold, which have experienced significant
recent fluctuations; the Company may not be able to secure
additional financing when needed or on acceptable terms; Company
shareholders may be subject to future dilution; risks related to
changes in interest rates and foreign currency exchange rates;
changes to taxation laws applicable to the Company may affect the
Company's profitability and ability to repatriate funds; the
Company's primary asset is held through a joint venture, which
exposes the Company to risks inherent to joint ventures, including
disagreements with joint venture partners and similar risks; risks
related to the Company's internal controls over financial reporting
and compliance with applicable accounting regulations and
securities laws; the carrying value of the Company's assets may
change and these assets may be subject to impairment charges; the
Company may be liable for uninsured or partially insured losses;
the Company may be subject to litigation; the Company may be
unsuccessful in identifying targets for acquisition or completing
suitable corporate transactions, and any such transactions may not
be beneficial to the Company or its shareholders; the Company must
compete with other mining companies and individuals for mining
interests; and risks related to information systems security
threats.
Although the Company has attempted to identify important
factors that could cause actual results or events to differ
materially from those described in the forward-looking statements,
you are cautioned that this list is not exhaustive and there may be
other factors that the Company has not identified. Furthermore, the
Company undertakes no obligation to update or revise any
forward-looking statements included in, or incorporated by
reference in, this news release if these beliefs, estimates and
opinions or other circumstances should change, except as otherwise
required by applicable law.
Neither Toronto Stock Exchange nor the Investment Industry
Regulatory Organization of Canada
accepts responsibility for the adequacy or accuracy of this
release.
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SOURCE Galiano Gold Inc.