UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2015
Commission File Number: 001-35783
Alamos Gold
Inc.
(Translation of registrant’s name into English)
130 Adelaide Street West, Suite 2200
Toronto, Ontario, Canada
M5H 3P5
(Address of
principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F ¨ Form 40-F x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7): ¨
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No
x
If “Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- .
EXHIBIT INDEX
|
|
|
| EXHIBIT
NO. |
|
DESCRIPTION |
|
|
| 99.1 |
|
Press release, dated August 12, 2015. |
|
|
| 99.2 |
|
AGI Legacy Unaudited Condensed Interim Consolidated Financial Statements. |
|
|
| 99.3 |
|
AGI Legacy Management’s Discussion and Analysis. |
|
|
| 99.4 |
|
AUQ Legacy Unaudited Condensed Interim Consolidated Financial Statements. |
|
|
| 99.5 |
|
AUQ Legacy Management’s Discussion and Analysis. |
|
|
| 99.6 |
|
Form 52 - 109F2 - Certification of Interim Filings - CEO |
|
|
| 99.7 |
|
Form 52 - 109F2 - Certification of Interim Filings - CFO |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Alamos Gold Inc. |
| Date: Aug 12, 2015 |
|
|
|
|
|
|
|
|
|
|
By: |
|
/s/ Scott Parsons |
|
|
|
|
Name: |
|
Scott Parsons |
|
|
|
|
Title: |
|
Vice President of Investor Relations |
Exhibit 99.1
TRADING SYMBOL: TSX:AGI NYSE:AGI
|
|
|
|
|
Alamos Gold Inc. |
|
|
130 Adelaide Street West, Suite 2200 |
|
|
Toronto, Ontario M5H 3P5 |
|
|
Telephone: (416) 368-9932 or 1 (866) 788-8801 |
All amounts are in United States dollars, unless otherwise stated.
Alamos Reports Second Quarter 2015 Results
Toronto, Ontario (August 12, 2015) - Alamos Gold Inc. (TSX:AGI; NYSE:AGI) (“Alamos” or the “Company”) today reported
financial results for the quarter ended June 30, 2015 and reviewed its operating, exploration and development activities.
Subsequent to the end of
the second quarter, on July 2, 2015, Alamos Gold Inc. (“Former Alamos”) and AuRico Gold Inc. (“AuRico”) completed the previously announced agreement to merge the two companies (the “Merger”). Accordingly, the
financial statements and associated Management’s Discussion and Analysis of both AuRico and Former Alamos for the three and six-month periods ended June 30, 2015 have been reported separately. For the purposes of this press release, the
merged company, which retained the Alamos name, has included the operating and financial results of both Former Alamos and AuRico. The first, second, third and fourth quarters of the Company’s fiscal year are referred to as “Q1”,
“Q2”, “Q3” and “Q4”, respectively.
Merger with AuRico Gold Inc.
On April 13, 2015, Former Alamos announced a definitive agreement with AuRico to combine the respective companies by way of a Plan of Arrangement (the
“Arrangement”), creating a new, leading intermediate gold producer. The Merger combined two top-quality, highly-complementary asset portfolios, including two long-life, cash flow generating gold mines: AuRico’s Young-Davidson mine in
Ontario, Canada and Former Alamos’ Mulatos mine in Sonora, Mexico.
The Arrangement was completed on July 2, 2015 and AuRico and Former Alamos
amalgamated to form Alamos. As part of the Arrangement, certain assets of AuRico, including the Kemess project, a 1.5% net smelter return royalty on the Young-Davidson mine, AuRico’s Fosterville and Stawell royalties, and $20 million of cash,
were transferred to a new company, AuRico Metals Inc. (“AuRico Metals”). Approximately 95.1% of the common shares of AuRico Metals were distributed to Former Alamos and AuRico shareholders. Following completion of the Arrangement, the
Company held an equity interest of approximately 4.9% in AuRico Metals.
Under the terms of the Arrangement, each Former Alamos share held was exchanged
for 1 Class A common share of Alamos (“Class A Shares”), $0.0001 in cash, and 0.4397 common shares of AuRico Metals, and each AuRico share held was exchanged for 0.5046 Class A Shares and 0.2219 AuRico Metals Shares. Upon
closing, Alamos had approximately 255,505,000 Class A Shares outstanding, with Former Alamos and AuRico shareholders each owning approximately 50%, and AuRico Metals had approximately 118,120,000 shares outstanding, with Former Alamos and
AuRico shareholders each owning approximately 50% of the shares not held by Alamos.
President and Chief Executive Officer of Alamos, John A. McCluskey
commented on the Merger and second quarter results as follows: “We have created a stronger and better company through the merger. On a combined basis, the Young-Davidson, Mulatos and El Chanate gold mines produced over 95,000 ounces of gold in
the second quarter of 2015. With our strong balance sheet, diversified North American based operations and low cost production growth, the merged company is well positioned to succeed in the current gold price environment”.
Second Quarter 2015 Highlights
Financial Performance
– AuRico
| |
• |
|
Sold 59,725 ounces of gold at an average realized gold price of $1,194. Revenues totaled $72.1 million in the quarter |
| |
• |
|
Recognized a quarterly loss of $379.5 million or $1.43 per share, reflecting transaction costs of $16.3 million ($11.1 million after-tax) and non-cash
charges of approximately $365 million on an after-tax basis, |
TRADING SYMBOL: TSX:AGI NYSE:AGI
| |
comprised of impairment charges and net realizable value (“NRV”) inventory adjustments associated with the Young-Davidson and El Chanate mines, as well as a revaluation charge
associated with the Kemess project. |
| |
• |
|
Reported cash of $129.7 million as at June 30, 2015, which is net of the $20.0 million transferred to AuRico Metals on July 2, 2015 |
Operational Performance – AuRico
| |
• |
|
Produced a total of 62,606 ounces of gold from the Young-Davidson and El Chanate mines |
| |
• |
|
Gold production from Young-Davidson totaled 39,365 ounces of gold at a total cash cost of $697 per ounce of gold sold before NRV adjustments ($777 per ounce of gold sold after NRV adjustments) and all-in sustaining cost
(“AISC”) of $1,008 per ounce of gold sold before NRV adjustments ($1,088 per ounce of gold sold after NRV adjustments) |
| |
• |
|
Achieved average daily underground mining rates of 5,149 tonnes of ore per day (“TPD”) for the quarter |
| |
• |
|
Underground mining costs of $33 per tonne decreased significantly from $45 per tonne in the second quarter of 2014 and $39 per tonne in the first quarter of 2015 reflecting ongoing productivity improvements and weakness
in the Canadian dollar. |
| |
• |
|
Reported record gold production at the El Chanate mine of 23,241 ounces of gold at a total cash cost of $621 per ounce of gold sold before NRV adjustments ($838 per ounce of gold sold after NRV adjustments) and AISC of
$878 per ounce of gold sold before NRV adjustments ($1,094 per ounce of gold sold after NRV adjustments) |
Financial Performance –
Former Alamos
| |
• |
|
Sold 36,748 ounces of gold at an average realized gold price of $1,198 for revenues of $44.0 million |
| |
• |
|
Recognized a quarterly loss of $14.2 million, or $0.11 per share, reflecting a $3.0 million loss from operations, $8.2 million of transaction costs associated with the Merger and a $1.4 million foreign exchange loss
|
| |
• |
|
Reported cash and cash equivalents of $249.1 million as at June 30, 2015 |
Operational Performance
– Former Alamos
| |
• |
|
Produced 33,000 ounces of gold at a total cash cost of $861 per ounce of gold sold and AISC of $1,154 per ounce of gold sold |
| |
• |
|
Achieved above budgeted crusher throughput levels at the Mulatos mine of 18,100 TPD |
| |
• |
|
Received a positive ruling from the Turkish High Administrative Court which reinstated the Environmental Impact Assessment (“EIA”) certificate for the Kirazli gold project |
Subsequent to quarter-end
| |
• |
|
Completed the merger between AuRico and Former Alamos on July 2, 2015. The new company, Alamos, commenced trading on the Toronto Stock Exchange and New York Stock Exchange on July 6, 2015 under the symbol
“AGI”. Former Alamos and AuRico shares were delisted on the same day |
| |
• |
|
In conjunction with the merger, certain assets of AuRico were transferred to a new company, AuRico Metals, including $20 million cash, the Kemess project, a 1.5% net smelter royalty on the Young Davidson mine and the
Fosterville and Stawell royalties |
2 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
Combined Production & Cost Summary(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
Change (%) |
|
| Gold Production (ounces) |
|
|
|
|
|
|
|
|
| Young-Davidson |
|
|
39,365 |
|
|
|
40,166 |
|
|
|
(2 |
%) |
| Mulatos |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
— |
% |
| El Chanate |
|
|
23,241 |
|
|
|
16,032 |
|
|
|
45 |
% |
| Total Gold Production |
|
|
95,606 |
|
|
|
89,198 |
|
|
|
7 |
% |
|
|
|
| Total cash cost per gold ounce sold (2) (3) |
|
|
|
|
|
|
|
|
| Young-Davidson |
|
$ |
697 |
|
|
$ |
871 |
|
|
|
(20 |
%) |
| Mulatos |
|
$ |
861 |
|
|
$ |
663 |
|
|
|
30 |
% |
| El Chanate |
|
$ |
621 |
|
|
$ |
618 |
|
|
|
— |
% |
|
|
|
| All-in sustaining cost per gold ounce sold (2) (3) |
|
|
|
|
|
|
|
|
| Young-Davidson |
|
$ |
1,008 |
|
|
$ |
1,144 |
|
|
|
(12 |
%) |
| Mulatos |
|
$ |
1,154 |
|
|
$ |
1,047 |
|
|
|
10 |
% |
| El Chanate |
|
$ |
878 |
|
|
$ |
975 |
|
|
|
(10 |
%) |
| 1. |
Includes results for Former Alamos and AuRico for the three-months ended June 30, 2015 and June 30, 2014 |
| 2. |
“Total cash cost per ounce” and “All-in sustaining cost per ounce” are non-GAAP measures. Refer to the “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of
this press release for a description of these measures. |
| 3. |
Excludes Net Realizable Value (“NRV”) adjustments as discussed in further detail below in the operational review section. |
Second Quarter 2015 Results
YOUNG
DAVIDSON OPERATIONAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Underground Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore mined |
|
|
468,564 |
|
|
|
327,131 |
|
|
|
840,253 |
|
|
|
562,117 |
|
| Average grade of gold(1) |
|
|
2.64 |
|
|
|
3.29 |
|
|
|
2.78 |
|
|
|
3.09 |
|
| Metres developed |
|
|
3,789 |
|
|
|
3,545 |
|
|
|
7,198 |
|
|
|
7,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Open Pit Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes mined |
|
|
— |
|
|
|
1,012,465 |
|
|
|
— |
|
|
|
3,392,509 |
|
| Tonnes of ore mined |
|
|
— |
|
|
|
506,038 |
|
|
|
— |
|
|
|
1,343,083 |
|
| Average grade of gold(1) |
|
|
— |
|
|
|
0.94 |
|
|
|
— |
|
|
|
0.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes stockpiled ahead of the mill |
|
|
1,994,205 |
|
|
|
3,245,667 |
|
|
|
1,994,205 |
|
|
|
3,245,667 |
|
| Average grade of gold(1) |
|
|
0.76 |
|
|
|
0.77 |
|
|
|
0.76 |
|
|
|
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mill Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore processed |
|
|
698,644 |
|
|
|
748,967 |
|
|
|
1,345,393 |
|
|
|
1,393,657 |
|
| Average grade of gold(1) |
|
|
2.02 |
|
|
|
2.16 |
|
|
|
2.01 |
|
|
|
1.99 |
|
| Average gold recovery rate |
|
|
88 |
% |
|
|
88 |
% |
|
|
87 |
% |
|
|
88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total gold ounces produced |
|
|
39,365 |
|
|
|
40,166 |
|
|
|
77,463 |
|
|
|
75,270 |
|
| Total gold ounces sold |
|
|
37,573 |
|
|
|
42,134 |
|
|
|
74,525 |
|
|
|
78,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold, before NRV adjustments(2) |
|
$ |
697 |
|
|
$ |
871 |
|
|
$ |
721 |
|
|
$ |
935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold (2) |
|
$ |
777 |
|
|
$ |
871 |
|
|
$ |
761 |
|
|
$ |
935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AISC per gold ounce sold, before NRV adjustments (2) |
|
$ |
1,008 |
|
|
$ |
1,144 |
|
|
$ |
997 |
|
|
$ |
1,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AISC per gold ounce sold (2) |
|
$ |
1,088 |
|
|
$ |
1,144 |
|
|
$ |
1,038 |
|
|
$ |
1,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Grams per tonne of gold. |
| (2) |
See the Non-GAAP Measures and Additional GAAP Measures section |
3 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
The Company mined 468,564 ore tonnes, or 5,149 TPD, from the Young-Davidson underground mine during Q2 2015,
at a grade of 2.64 grams per tonne of gold (“g/t Au”). During the first six months of 2015, the Company mined 840,253 ore tonnes, or 4,642 TPD, at a grade of 2.78 g/t Au. Mining rates increased significantly from the 3,595 TPD and 3,106
TPD realized during the three and six months ended June 30, 2014 due to planned productivity improvements, namely an increase in personnel and equipment, and increased development. This also represented a significant increase from average
underground mining rates of 4,130 TPD in Q1 2015. Further productivity improvements in the current year are anticipated to position the Company to achieve targets of 6,000 TPD by the end of 2015, increasing to an ultimate target of 8,000 TPD.
Underground mine grades decreased in the first half of 2015 compared to the same period in 2014, due to stope sequencing.
The Young-Davidson open pit
mine ceased operations in early June 2014 when it reached the end of its planned life. At the end of Q2 2015, the Company had 1,994,205 tonnes of low grade open pit ore stockpiled ahead of the mill at an average grade of 0.76 g/t Au. Mill feed from
the underground mine continues to be supplemented by the stockpiled open pit ore while underground mining levels ramp up to mill capacity.
During Q2
2015, the Company processed 698,644, or 7,677 TPD, at the Young-Davidson mill facility, with grades averaging 2.02 g/t Au. During the six months ended June 30, 2015, the Company processed 1,345,393 tonnes, or 7,433 TPD, at the Young-Davidson
mill facility at an average grade of 2.01 g/t Au, consistent with the 7,700 TPD processed at a grade of 1.99 g/t Au during the first half of 2014.
Young-Davidson produced 39,365 ounces of gold during Q2 2015 consistent with the 40,166 ounces produced in Q2 2014. During the six months ended June 30,
2015, Young-Davidson produced 77,463 gold ounces, a 3% increase over the same period in 2014.
Underground unit mining costs decreased to $33 per tonne in
the second quarter of 2015, a significant decrease from approximately $45 per tonne in the second quarter of 2014 and $39 per tonne in the first quarter of 2015 reflecting ongoing productivity improvements and the weaker Canadian dollar.
Q2 2015 total cash costs per gold ounce, including the impact of NRV adjustments, were $777, representing an 11% decrease from the same period in 2014.
Year-to-date, total cash costs per gold ounce, net of by-product revenues, were $761, representing a 19% decrease from the same period in 2014. Total cash costs per ounce were higher in the second quarter of 2015 due to a $4.8 million NRV adjustment
on stockpile ore inventories at June 30, 2015, of which $3.0 million was recognized in production costs and $1.8 million was recognized in amortization and depletion. This NRV adjustment was caused by a decrease in estimated future gold prices
on inventory stockpiled in previous periods, and had the impact of increasing total cash costs and AISC per gold ounce in the current quarter by $80 per ounce of gold sold. Excluding the NRV adjustment, total cash costs and AISC in the second
quarter were $697 and $1,008, respectively. The decreased cost per ounce in Q2 2015 and on a year-to-date basis was due primarily to the increase in the underground contribution to overall production, and the favourable weakening of the Canadian
dollar in the current period as compared to the prior year. Total cash costs at Young-Davidson are expected to decrease in the future as throughput is ramped up, and grades mined from underground return to reserve grade of 2.74 g/t Au.
4 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
MULATOS OPERATIONAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Open Pit & Underground Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore mined - open pit |
|
|
1,756,000 |
|
|
|
2,096,000 |
|
|
|
3,603,000 |
|
|
|
3,825,000 |
|
| Tonnes of ore mined - underground |
|
|
35,000 |
|
|
|
9,000 |
|
|
|
51,000 |
|
|
|
28,000 |
|
| Total waste mined |
|
|
2,390,000 |
|
|
|
1,580,000 |
|
|
|
3,533,000 |
|
|
|
2,530,000 |
|
| Total tonnes mined |
|
|
4,181,000 |
|
|
|
3,685,000 |
|
|
|
7,187,000 |
|
|
|
6,383,000 |
|
| Waste-to-ore ratio |
|
|
1.33 |
|
|
|
0.75 |
|
|
|
0.97 |
|
|
|
0.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Crushing and Heap Leach Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore crushed and placed on the heap leach pad |
|
|
1,632,500 |
|
|
|
1,580,200 |
|
|
|
3,184,500 |
|
|
|
3,063,700 |
|
| Average grade of gold processed(1) |
|
|
0.83 |
|
|
|
0.93 |
|
|
|
0.87 |
|
|
|
0.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contained ounces stacked on the heap leach pad |
|
|
43,400 |
|
|
|
47,300 |
|
|
|
89,300 |
|
|
|
96,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of high grade ore milled |
|
|
19,400 |
|
|
|
6,800 |
|
|
|
39,750 |
|
|
|
36,900 |
|
| Average grade of gold processed(1) |
|
|
5.78 |
|
|
|
8.65 |
|
|
|
8.13 |
|
|
|
4.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contained ounces |
|
|
3,600 |
|
|
|
1,900 |
|
|
|
10,400 |
|
|
|
5,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total contained ounces stacked and milled |
|
|
47,000 |
|
|
|
49,200 |
|
|
|
99,700 |
|
|
|
101,600 |
|
| Gold ounces produced |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
71,000 |
|
|
|
70,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recovery ratio |
|
|
70 |
% |
|
|
67 |
% |
|
|
71 |
% |
|
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold(2) |
|
$ |
861 |
|
|
$ |
663 |
|
|
$ |
833 |
|
|
$ |
641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AISC per gold ounce sold(2) |
|
$ |
1,154 |
|
|
$ |
1,047 |
|
|
$ |
1,134 |
|
|
$ |
980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Grams per tonne of gold. |
| (2) |
See the Non-GAAP Measures and Additional GAAP Measures section |
In Q2 2015, the Mulatos mine (“Mulatos”) produced 33,000 ounces, consistent with the second quarter of 2014. Open pit, heap leach operations at
Mulatos continue to meet expectations and remain the driver of the operation, contributing strong production in the second quarter.
Grades stacked on the
leach pad in the quarter were 4% above the annual budget of 0.80 g/t Au, as the Company continued to benefit from positive grade reconciliations in the Mulatos pit; however, not to the same extent as in the previous quarter.
Mill production was below budget reflecting lower throughput and recoveries. Throughout the second quarter, the Company continued to process lower grade
material at lower throughput rates until the vertical grinding mill was installed. The installation of the vertical grinding mill was completed in July and is currently being commissioned. With the installation complete, the mill is achieving the
grind size required to meet budgeted recoveries of 75%. The Company expects production from the high-grade mill to improve significantly as mill throughput is increased in the second half of the year. At the end of June, the Company had stockpiles
of approximately 45,000 tonnes of high grade ore from the San Carlos deposit at grades in excess of 7 g/t Au.
Development of the San Carlos underground
deposit continued to be a focus during the second quarter. The Company is currently mining from the western zone of the deposit, and has focused development to the east of current mining activities to assess opportunities in the central zone of the
deposit.
Total crusher throughput in the second quarter of 2015 averaged 18,100 TPD, above the annual budgeted rate of 17,850 TPD, despite lower mill
throughput. The Company expects mill throughput to ramp up in the second half of 2015 with the completion of mill commissioning.
The recovery ratio in
the second quarter was 70%. This was below the Company’s annual budget of 74% reflecting lower than budgeted recoveries from the high-grade mill.
Total cash costs of $861 per ounce of gold sold in the second quarter of 2015 were in line with the Company’s annual guidance of $865 per ounce, but 30%
higher than $663 per ounce reported in the second quarter of 2014. On a year-to-date basis, total cash costs were $833 per ounce of gold sold, a 30% increase from the same period of 2014. The increase relative to the prior year is attributable to
lower grades stacked on the leach pad, a higher waste-to-ore ratio, and a higher cost per tonne of ore mined. Cash operating costs were in line with budget with the material stacked on the leach pad and the waste-to-ore ratio consistent with budget.
AISC in the quarter were
5 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
$1,154 per gold ounce sold, 10% greater than the second quarter of 2014, and higher than budget of $1,100. AISC in the second quarter of 2015 were impacted by lower production, as the impact of
fixed costs, such as sustaining capital and general and administration costs, had a higher per ounce impact given lower production.
EL
CHANATE OPERATIONAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| Open Pit Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes mined |
|
|
7,973,305 |
|
|
|
8,536,557 |
|
|
|
15,958,516 |
|
|
|
17,122,757 |
|
| Tonnes of ore mined |
|
|
1,813,274 |
|
|
|
2,517,914 |
|
|
|
3,670,927 |
|
|
|
4,832,120 |
|
| Capitalized stripping tonnes |
|
|
3,011,836 |
|
|
|
2,208,712 |
|
|
|
7,511,788 |
|
|
|
6,081,766 |
|
| Average grade of gold(1) |
|
|
0.72 |
|
|
|
0.39 |
|
|
|
0.69 |
|
|
|
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Crushing and Heap Leach Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore crushed and stacked on the heap leach pad |
|
|
1,541,221 |
|
|
|
1,782,144 |
|
|
|
3,108,266 |
|
|
|
3,555,563 |
|
| Average grade of gold processed(1) |
|
|
0.84 |
|
|
|
0.50 |
|
|
|
0.78 |
|
|
|
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of low grade ore stacked on the heap leach pad |
|
|
319,871 |
|
|
|
848,224 |
|
|
|
566,203 |
|
|
|
1,418,968 |
|
| Average grade of gold processed(1) |
|
|
0.19 |
|
|
|
0.20 |
|
|
|
0.19 |
|
|
|
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes of ore processed |
|
|
1,861,092 |
|
|
|
2,630,368 |
|
|
|
3,674,469 |
|
|
|
4,974,531 |
|
| Average grade of gold processed(1) |
|
|
0.73 |
|
|
|
0.40 |
|
|
|
0.69 |
|
|
|
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recovery Ratio |
|
|
53 |
% |
|
|
47 |
% |
|
|
48 |
% |
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold ounces produced |
|
|
23,241 |
|
|
|
16,032 |
|
|
|
39,170 |
|
|
|
35,142 |
|
| Gold ounces sold |
|
|
22,152 |
|
|
|
16,143 |
|
|
|
38,295 |
|
|
|
33,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold, before NRV adjustments(2) |
|
$ |
621 |
|
|
$ |
618 |
|
|
$ |
606 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold (2) |
|
$ |
838 |
|
|
$ |
618 |
|
|
$ |
731 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AISC per gold ounce sold, before NRV adjustments (2) |
|
$ |
878 |
|
|
$ |
975 |
|
|
$ |
948 |
|
|
$ |
1,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AISC per gold ounce sold(2) |
|
$ |
1,094 |
|
|
$ |
975 |
|
|
$ |
1,073 |
|
|
$ |
1,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Grams per tonne of gold. |
| (2) |
See the Non-GAAP Measures and Additional GAAP Measures section |
During Q2 2015, the Company mined 7,973,305 tonnes at the El Chanate open pit, including 1,813,274 ore tonnes, at an average grade of 0.72 g/t Au.
During the first six months of 2015, the Company mined 15,958,516 tonnes, including 3,670,927 ore tonnes, at an average grade of 0.69 g/t Au. Ore tonnes mined in the three and six months ended June 30, 2015 were 28% and 24% less than the same
periods in 2014. The decrease in tonnage and increase in average grades during Q2 2015 and the first half of the year as compared to the prior year were due to mine sequencing.
Capitalized stripping activities totaled 3,011,836 and 7,511,788 tonnes mined during Q2 2015 and year-to-date 2015 respectively, compared to 2,208,712 and
6,081,766 tonnes during the same periods in 2014. Stripping activities at El Chanate represented a capital investment of $4.7 million during the second quarter of 2015, compared to an investment of $3.5 million in Q2 2014. Capital stripping
activities are expected to decrease in the second half of 2015.
The Company crushed and stacked 1,541,221 tonnes of open pit ore on the heap leach pad in
Q2 2015, at an average rate of 16,936 TPD, compared to the average rate during Q2 2014 of 19,584 TPD. During Q2 2015, the Company also stacked 319,871 tonnes of low grade run-of-mine material on the heap leach pad. Total tonnes processed in Q2 2015
of 1,861,092 tonnes, or 20,452 TPD, were lower than total tonnes processed in Q2 2014 of 2,630,368, due to a decrease in ore tonnes mined as noted above. During the first six months of 2015, the Company crushed and stacked 3,108,266 tonnes of ore at
an average rate of 17,173 TPD, compared to the 19,644 TPD stacked in the first six months of 2014.
The grade of ore crushed and stacked averaged 0.84 g/t
Au during Q2 2015 as compared to an average grade of 0.50 g/t Au in Q2 2014. Year-to-date grades crushed and stacked in 2015 averaged 0.78 g/t Au compared to an average grade of 0.52 g/t Au in 2014. The variances in grades in the current year versus
prior year were largely due to mine sequencing. During Q2 2015, the grade of all material processed, including run-of-mine material, averaged 0.73 g/t Au stacked as compared to 0.40 g/t Au stacked in Q2 2014.
6 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
During the second quarter and year-to-date, El Chanate produced 23,241 and 39,170 gold ounces, respectively,
compared to production of 16,032 and 35,142 gold ounces in the same periods of the prior year. These increases are primarily the result of higher average grade crushed and stacked in the first half of 2015 compared to the same period in 2014, offset
by a decrease in ore tonnes stacked on the leach pads.
Total cash costs per gold ounce, net of by-product revenues, were $838 in Q2 2015, 36% higher than
Q2 2014. Year-to-date, total cash costs per gold ounce were $731, 21% higher than the same period in 2014. Total cash costs per ounce were higher in the second quarter of 2015 due to a $7.0 million NRV adjustment on leach pad inventories at
June 30, 2015, of which $5.6 million was recognized in production costs and $1.4 million was recognized in amortization and depletion. This NRV adjustment was caused by a decrease in estimated future gold prices and an increase in estimated
future processing costs on leach pad inventory stacked in previous periods, and had the impact of increasing total cash costs and AISC in the second quarter by $217 per ounce of gold sold. Excluding the NRV adjustment, total cash costs and AISC per
gold ounce in the second quarter were $621 and $878, respectively.
Second Quarter 2015 Financial Results - AuRico
During the second quarter of 2015, AuRico sold 59,725 ounces of gold at the El Chanate and Young-Davidson mines, a 2% increase over 58,277 ounces of gold sold
in Q2 2014. Revenue of $72.1 million in the second quarter of 2015 was down from $75.5 million in the second quarter of 2014 reflecting lower realized gold prices, partially offset by the increase in ounces sold.
AuRico reported operating cash flow (after changes in non-cash working capital) of $20.8 million during the second quarter, an increase of $16.2 million over
operating cash flow of $4.6 million in Q2 2014. The increase in operating cash flow was primarily the result of paying down accounts payable at Young-Davidson during Q2 2014, resulting in a lower operating cash flow contribution as compared to Q2
2015. After deducting capital expenditures of $40.7 million, negative net free cash flow in the second quarter of 2015 was $19.9 million. Capital spending totaled $72 million through the first half of 2015 and the rate of spending is expected to
decrease in the second half of the year. The negative free cash flow in the quarter reflects care and maintenance and exploration spending at the Kemess project which will not be incurred going forward, as well as transaction costs incurred related
to the Merger.
A loss from operations of $417.0 million was recognized in the second quarter of 2015, compared to a loss from operations of
$16.3 million in the same period of 2014. The Q2 2015 loss included non-cash impairment charges of $326.0 million and $40.0 million recorded against the carrying values of the Young-Davidson and El Chanate mines, respectively. Also
contributing to the loss from operations was a $40.1 million loss on the revaluation of assets held for distribution, including the Kemess project, to fair value. In addition, NRV adjustments on in process heap leach inventory at El Chanate and low
grade stockpile inventory at Young-Davidson of $7.0 million and $4.8 million were incurred, respectively. These non-cash adjustments totaled $417.9 million on a pre-tax basis.
AuRico reported a net loss of $379.5 million in the second quarter of 2015, compared to a net loss of $16.8 million in Q2 2014. Net losses increased in the
current quarter primarily due to the impairment charges, revaluation loss, and NRV adjustments noted above, which on an after-tax basis, combined to result in a $365.0 million dollar charge in the second quarter of 2015. In addition, the AuRico
incurred approximately $16.3 million ($11.1 million after-tax) in transaction costs during the quarter.
Key financial highlights for the three and
six-months ended June 30, 2015 and 2014 are presented at the end of this release in Table 1.
Second Quarter 2015 Financial Results - Former
Alamos
Former Alamos’ operating margins in the second quarter of 2015 were negatively impacted by a weaker gold price and higher total cash
costs. Former Alamos generated $0.1 million ($0.00 per share) cash from operating activities (before changes in non-cash working capital). Cash used for operating activities of $1.9 million or $0.02 per share in the second quarter decreased 44%
relative to the same period of 2014 as a result of higher cash operating costs and transaction costs incurred associated with the Merger.
Loss before
income taxes was $12.2 million or $0.10 per share for the second quarter of 2015 compared to earnings of $4.5 million or $0.04 per share in the same period of 2014. Loss for the second quarter of 2015 included approximately $8.2 million in
transaction costs incurred in the period. On an after-tax basis, Former Alamos recorded a loss in the second quarter 2015 of $14.2 million or $0.11 per share compared to earnings of $0.7 million in the same period of 2014 as a result of lower
gold prices, higher operating costs and transaction costs.
7 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
Capital expenditures in the second quarter of 2015 totaled $13.7 million. Sustaining capital in Mexico in the
second quarter of 2015 totaled $3.5 million and included $1.2 million on leach pad interlift liners and maintenance of the ponds, $1.1 million for component changes, and $0.5 million to complete the move and replacement of the agglomerators. Full
year sustaining capital guidance at Mulatos remains $12.5 million.
Development activities at Mulatos in the second quarter of 2015 were focused on
underground development of the San Carlos deposit and waste removal at El Victor. In addition, exploration and permitting activities continued at La Yaqui and Cerro Pelon. Capitalized exploration and development spending in second quarter of 2015
included $2.7 million in capitalized exploration at San Carlos, La Yaqui and Cerro Pelon. In addition, $0.9 million was invested at the Esperanza Gold Project advancing the EIA baseline study work. Capital expenditures in Turkey and Toronto were
minimal in the second quarter of 2015.
Key financial highlights of Former Alamos for the three and six-months ended June 30, 2015 and 2014 are
presented at the end of this release in Table 2.
Second Quarter 2015 Development Project Update
Turkey
In April 2015, the Company received notice that
the injunction order granted against the Turkish Ministry of the Environment and Urbanization’s (the “Ministry”) approval of the Environmental Impact Assessment (“EIA”) for the Ağı Dağı gold project had
been dismissed by the Çanakkale Administrative Court. With this ruling, the Ministry’s approval of the EIA has been returned to good standing.
In addition, in June 2015 the Turkish High Administrative Court overturned a Lower Court ruling that had previously cancelled EIA permits granted to Alamos by
the Ministry. With the ruling from the High Court, the EIA certificate for the Kirazlı gold project was reinstated. Obtaining forestry and operating permits are the next steps in the permitting process. The Company remains confident that these
permits will be granted. The Company expects first gold production from Kirazlı within 18 months of receipt of the outstanding permits.
In the
six-months ended June 30, 2015, total development expenditures in Turkey were $1.0 million. A full development budget for Kirazlı and Ağı Dağı will be re-initiated once the required permits are received. The capital
spending budget for these projects is not expected to differ materially from the June 2012 preliminary feasibility study. The Company is however in the process of evaluating the impact of updated capital costs, the recently approved new mining law,
forestry fee changes, tax incentive availability changes and the devaluation of the Turkish Lira on the operating costs and overall economics of its projects.
Esperanza
The Company capitalized $0.9 million at the
Esperanza Gold Project in the second quarter of 2015. These development costs were primarily related to the collection of baseline study data to support resubmission of the EIA.
Lynn Lake
In 2014, the Company completed a private
placement with Carlisle Goldfields Limited (“Carlisle”) in which the Company invested CAD $5.6 million in exchange for 19.9% of the outstanding common shares of Carlisle. In conjunction with the private placement, the Company entered into
an agreement on November 11, 2014 with respect to Carlisle’s Lynn Lake Gold Camp. Under the agreement, the Company acquired a 25% interest in the Lynn Lake Project and can earn up to a 60% interest by funding CAD $20.0
million on the project over a three-year period and delivering a feasibility study within that time period. The Company is currently managing the exploration and technical work related to a future feasibility study on the Lynn Lake Project.
Outlook
With diversified North American-based gold
production, a strong balance sheet, and a portfolio of low cost growth projects, all located in safe political jurisdictions, Alamos is well positioned to deliver shareholder value.
Alamos is on track to achieve its full year production and cost guidance. On a combined full year 2015 basis, the Company anticipates total production from
the Young Davidson, Mulatos and El Chanate mines to be between 375,000 and 425,000 ounces of gold.
The Company continues to invest in its primary
producing operations, including ramping up underground production at Young Davidson and development of the Cerro Pelon and La Yaqui satellite deposits at Mulatos. This is expected
8 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
to drive low cost production growth at both operations while substantially reducing costs. The Company’s balance sheet provides the financial flexibility to complete these planned expansions
in the current gold price environment.
The underground ramp up at Young Davidson remains well on track with average underground mining rates of 5,150 TPD
in the second quarter of 2015. The Company is well positioned to achieve year end targeted rates of 6,000 TPD, followed by the ultimate target of 8,000 TPD. Underground unit mining costs were significantly lower in the second quarter at $33 per
tonne reflecting ongoing productivity improvements and the weaker Canadian dollar. The ramp up in underground mining rates is expected to result in further decreases in unit costs along with supplying an increasing proportion of mill feed, driving
milled grades and gold production higher. Both are expected to drive total cash costs lower and combined with declining development capital requirements starting in 2017, an increase in free cash flow generation. The current objective at the
Young-Davidson mine is for cash flow from operations to finance the growth capital required to develop the lower mine over the next two years, while achieving targeted underground mining rates. Current gold prices have made this objective a
challenge, but the Company has the balance sheet strength to self-finance the underground ramp up and position the mine to generate strong free cash flow once the 8,000 TPD target has been met.
At Mulatos, the Company expects a significant increase in second half 2015 production reflecting stronger high grade mill production from the San Carlos
deposit. The high grade mill modifications are being commissioned and recoveries are expected to increase to 75% from current levels of approximately 60%. In addition, the Company will ramp up throughput to the mill, supplementing underground ore
production with existing high grade stockpiles. At the end of June, the Company had over 45,000 tonnes of high grade stockpiles, at grades in excess of 7 g/t Au. Production from high-grade ore at San Carlos has a lower total cash cost profile than
leach pad production, therefore, increased mill production is expected to result in lower total cash costs and stronger operating cash flow in the second half of the year. Looking beyond 2015, total cash costs are expected to improve as open pit
grades increase and the waste-to-ore ratio normalizes to life-of-mine levels. Mulatos will be further bolstered by the development of Cerro Pelon and La Yaqui. With Cerro Pelon and La Yaqui averaging double the 2015 budgeted heap leach grade, these
deposits are expected to both increase production and drive costs substantially lower.
The El Chanate mine exceeded expectations in the second quarter
achieving record production of 23,241 ounces of gold and positive free-cash flow in the first half of the year. This performance reflected higher recoveries, and the operation remains well-positioned to achieve its full year production and cost
guidance.
Management is focused on successfully integrating AuRico and Former Alamos, and is continuously seeking opportunities for cost savings and
synergies. The Company has committed to a minimum annual savings of $10 million from corporate G&A, tax and purchasing efficiencies, and believes there are opportunities to increase this further. With two producing operations in the state of
Sonora, Mexico, the Company is confident that purchasing efficiencies will be realized, and mine operating costs will be reduced accordingly.
The
Company’s cash position and balance sheet remain strong, which is a critical asset in the current economic environment. Young-Davidson and Mulatos are expected to self-finance the majority of their development spending over the next two years.
Further, the recent weakness in both the Canadian dollar and Mexican peso relative to the United States dollar have partially offset the impact of the lower gold price on free cash flow as both operating and capital costs have benefitted.
The Company’s long-term growth is further supported by a strong portfolio of low-cost, low capital intensity development projects, which are at various
stages of exploration, permitting and development. Development spending with respect to the Company’s project pipeline is largely discretionary. The Company is prioritizing its development spending and allocating resources to those projects
with the highest potential returns. At current gold prices, the Company’s advanced development projects are economic and are expected to generate strong returns.
Associated Documents
This press release should be read
in conjunction with the Company’s interim consolidated financial statements for the three and six-month periods ended June 30, 2015 and June 30, 2014 and associated Management’s Discussion and Analysis (“MD&A”), for
both Alamos (AuRico) and Former Alamos, which are available from the Company’s website, www.alamosgold.com, in the “Investors” section under “Reports and Financials”, and on SEDAR (www.sedar.com) and EDGAR (www.sec.gov).
Reminder of Second Quarter 2015 Results Conference Call
The Company’s senior management will host a conference call on Wednesday, August 12, 2015 at 12:00 pm ET to discuss the second quarter 2015 financial
results and provide an update on operating, exploration, and development activities.
9 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
Participants may join the conference call by dialling (416) 340-2216 or (866) 223-7781 for calls
within Canada and the United States, or via webcast at www.alamosgold.com.
A playback will be available until August 26, 2015 by dialling
(905) 694-9451 or (800) 408-3053 within Canada and the United States. The pass code is 1040518. The webcast will be archived at www.alamosgold.com.
Qualified Persons
Chris Bostwick, FAusIMM, Alamos
Gold’s Vice President, Technical Services, has reviewed and approved the scientific and technical information contained in this news release. Chris Bostwick is a Qualified Person within the meaning of Canadian Securities Administrator’s
National Instrument 43-101 (“NI 43-101”). Information pertaining to the Mulatos District exploration program has been reviewed and approved by Aoife McGrath, M.Sc., M.AIG, the Corporation’s Vice President, Exploration, who is a
Qualified Persons within the meaning of NI 43-101. All field work is directly supervised and directed by Kristen Simpson, P.Geo., Alamos’ Exploration Manager (Mexico), a Qualified Person as defined by NI 43-101 Drilling, sampling, QA/QC
protocols and analytical methods for work areas in Mexico are as outlined in the NI 43-101 report titled, “Mulatos Project Technical Report Update” dated December 21, 2012, which can be viewed on SEDAR (www.sedar.com).
About Alamos
Alamos is a Canadian-based intermediate
gold producer with diversified production from three operating mines in North America. This includes the Young-Davidson mine in northern Ontario, Canada and the Mulatos and El Chanate mines in Sonora State, Mexico. Additionally, the Company has a
significant portfolio of development stage projects in Mexico, Turkey, Canada and the United States. Alamos employs more than 1,300 people and is committed to the highest standards of sustainable development. The Company’s shares are traded on
the TSX and NYSE under the symbol “AGI”.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Scott K. Parsons
Vice-President, Investor Relations
(416) 368-9932 x 5439
The TSX and NYSE have not reviewed and do not
accept responsibility for the adequacy or accuracy of this release.
Cautionary Note
This news 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. Words such as “expect”, “believe”, “anticipate”, “will”, “intend”, “estimate”,
“forecast”, “budget” and similar expressions identify forward-looking statements.
Forward-looking statements include information as
to strategy, plans or future financial or operating performance, such as the Company’s expansion plans, project timelines, production plans and expected sustainable productivity increases, expected increases in mining activities and
corresponding cost efficiencies, expected results of the merger integration of the Company and Alamos, expected drilling targets, expected sustaining costs, expected improvements in cash flows and margins, expectations of changes in capital
expenditures, forecasted cash shortfalls and the Company’s ability to fund them, cost estimates, projected exploration results, reserve and resource estimates, expected production rates and use of the stockpile inventory, expected recoveries,
sufficiency of working capital for future commitments and other statements that express management’s expectations or estimates of future performance.
Forward-looking statements are necessarily based upon 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, political 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 factors and assumptions underlying the forward-looking statements in this document include, but are not limited to:
changes to current estimates of mineral reserves and resources; changes to production estimates (which assume accuracy of projected ore grade, mining rates, recovery timing and recovery rate estimates and may be impacted by unscheduled maintenance,
labour and contractor availability and other operating or technical difficulties); fluctuations in the price of gold; changes in foreign exchange rates (particularly the Canadian dollar, Mexican peso, Turkish Lira and U.S. dollar); the impact of
10 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
inflation; changes in our credit rating; any decision to declare a quarterly dividend; employee relations; litigation; disruptions affecting operations; availability of and increased costs
associated with mining inputs and labour; development delays at the Young-Davidson mine; inherent risks associated with mining and mineral processing; the risk that the Young-Davidson, Mulatos and El Chanate mines may not perform as planned;
uncertainty with the Company’s ability to secure additional capital to execute its business plans; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits, including the
necessary licenses, permits, authorizations and/or approvals from the appropriate regulatory authorities for the Company’s development stage assets, including specifically its Turkish mineral properties ; contests over title to properties;
changes in national and local government legislation (including tax legislation) in Canada, Mexico, Turkey, the United States and other jurisdictions in which the Company does or may carry on business in the future; risk of loss due to sabotage and
civil disturbances; the impact of global liquidity and credit availability and the values of assets and liabilities based on projected future cash flows; risks arising from holding derivative instruments; and business opportunities that may be
pursued by the Company
Additional risk factors and details with respect to risk factors affecting the Company are set out in: (i) each of AuRico and
Former Alamos’ Annual Information Forms for the year ended December 31, 2014 under the headings “Risk Factors”; and, (ii) the joint management information circular of AuRico and Former Alamos dated May 22, 2015, under
the heading “Risk Factors”, which is available on the SEDAR website at www.sedar.com. The foregoing should be reviewed in conjunction with the information found in this news release. 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.
Cautionary Note to U.S. Investors Concerning Measured, Indicated and Inferred Resources
The Company is required to prepare its resource estimates in accordance with standards of the Canadian Institute of Mining, Metallurgy and Petroleum
referred to in Canadian National Instrument 43-101 (NI 43-101). These standards are materially different from the standards generally permitted in reports filed with the United States Securities and Exchange Commission. This MD&A uses the
terms “measured”, “indicated” or “inferred” resources which are not recognized by the United States Securities and Exchange Commission. The estimation of measured resources and indicated resources involve greater
uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. U.S. investors are cautioned not to assume that any part of measured or indicated resources will ever be converted into economically or
legally mineable proven or probable reserves. The estimation of inferred resources may not form the basis of a feasibility or other economic studies and involves far greater uncertainty as to their existence and economic viability than the
estimation of other categories of resources.
Cautionary non-GAAP Measures and Additional GAAP Measures
Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain non-GAAP and additional GAAP measures as
indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. Non-GAAP and additional GAAP measures do not
have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies.
Additional GAAP
measures that are presented on the face of the Company’s consolidated statements of comprehensive income include “Mine operating costs”, “Earnings from mine operations” and “Earnings from operations”. These
measures are intended to provide an indication of the Company’s mine and operating performance. “Cash flow from operating activities before changes in non-cash working capital” is a non-GAAP performance measure that could provide an
indication of the Company’s ability to generate cash flows from operations, and is calculated by adding back the change in non-cash working capital to “Cash provided by (used in) operating activities” as presented on the
Company’s consolidated statements of cash flows. “Free cash flow” is a non-GAAP performance measure that is calculated as cash flows from operations net of cash flows invested in mineral property, plant and equipment and exploration
and evaluation assets as presented on the Company’s consolidated statements of cash flows and that would provide an indication of the Company’s ability to generate cash flows from its mineral projects. Return on Equity is defined as
Earnings from Continuing Operations divided by the average Total Equity for the current and previous year. “Mining cost per tonne of ore” and “Cost per tonne of ore” are non-GAAP performance measures that could provide an
indication of the mining and processing efficiency and effectiveness of the mine. These measures are calculated by dividing the relevant mining and processing costs and total costs by the tonnes of ore processed in the period. “Cost per tonne
of ore” is usually affected by operating efficiencies and waste-to-ore ratios in the period. “Cash operating costs per ounce”, “total cash costs per ounce” and “all-in sustaining costs per ounce” as used in this
analysis are non-GAAP terms typically used by gold mining companies to assess the level of gross margin available to the Company by subtracting these costs from the unit price realized during the period. These non-GAAP terms are also used to assess
the ability of a mining company to generate cash flow from operations. There may be some variation in the method of computation of these metrics as determined by the Company compared with other mining companies. In this context, “cash operating
costs per ounce” reflects the cash operating costs allocated from in-process and dore inventory associated with ounces of gold sold in the period. “Cash operating costs per ounce”
11 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
may vary from one period to another due to operating efficiencies, waste-to-ore ratios, grade of ore processed and gold recovery rates in the period. “Total cash costs per ounce”
includes “cash operating costs per ounce” plus applicable royalties. Cash operating costs per ounce and total cash costs per ounce are exclusive of exploration costs. “All-in sustaining costs per ounce” include total cash costs,
exploration, corporate and administrative, share based compensation and sustaining capital costs. “All-in cost per ounce” reflects total all-in sustaining cash costs, plus capital, operating, and exploration costs associated with the
Company’s development projects.
For a reconciliation of non-GAAP and GAAP measures, please refer to Alamos’ and Former Alamos’ respective
Management Discussion and Analysis dated August 11, 2015, for the three and six-month periods ended June 30, 2015, as presented on SEDAR and the Company’s website.
12 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
Table 1: Financial Highlights – AuRico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Cash provided by operating activities before changes in non-cash working capital (000)
(1) (2) |
|
$ |
7,582 |
|
|
$ |
12,258 |
|
|
$ |
24,530 |
|
|
$ |
25,727 |
|
|
|
|
|
|
| Changes in non-cash working capital |
|
$ |
13,219 |
|
|
($ |
7,609 |
) |
|
$ |
10,303 |
|
|
$ |
3,413 |
|
| Cash provided by (used for) operating activities (000) |
|
$ |
20,801 |
|
|
$ |
4,649 |
|
|
$ |
34,833 |
|
|
$ |
29,140 |
|
| (Loss) before income taxes (000) |
|
($ |
436,259 |
) |
|
($ |
25,060 |
) |
|
($ |
442,784 |
) |
|
($ |
57,569 |
) |
| (Loss) (000) |
|
($ |
379,542 |
) |
|
($ |
16,776 |
) |
|
($ |
414,800 |
) |
|
($ |
45,667 |
) |
| (Loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
($ |
1.43 |
) |
|
($ |
0.07 |
) |
|
($ |
1.57 |
) |
|
($ |
0.18 |
) |
| - diluted |
|
($ |
1.43 |
) |
|
($ |
0.07 |
) |
|
($ |
1.57 |
) |
|
($ |
0.18 |
) |
| Comprehensive (loss) / income (000) |
|
($ |
379,596 |
) |
|
($ |
17,004 |
) |
|
($ |
414,846 |
) |
|
($ |
40,564 |
) |
| Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
|
264,939,446 |
|
|
|
248,495,726 |
|
|
|
263,453,673 |
|
|
|
248,343,301 |
|
| - diluted |
|
|
264,939,446 |
|
|
|
248,495,726 |
|
|
|
263,453,673 |
|
|
|
248,343,301 |
|
| Assets (000) (3) |
|
|
|
|
|
|
|
|
|
$ |
1,958,771 |
|
|
$ |
2,431,585 |
|
| 1. |
A non-GAAP measure calculated as cash provided by operating activities as presented on the consolidated statements of cash flows and adding back changes in non-cash working capital. |
| 2. |
Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release for a description of this measure. |
| 3. |
Assets are shown as at June 30, 2015 and June 30, 2014. |
13 | Alamos
Gold Inc
TRADING SYMBOL: TSX:AGI NYSE:AGI
Table 2: Financial Highlights – Former Alamos
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Cash provided by operating activities before changes in non-cash working capital (000)
(1) (2) |
|
$ |
66 |
|
|
$ |
13,212 |
|
|
$ |
7,425 |
|
|
$ |
29,153 |
|
|
|
|
|
|
| Changes in non-cash working capital |
|
($ |
1,955 |
) |
|
($ |
3,514 |
) |
|
($ |
6,888 |
) |
|
($ |
12,189 |
) |
| Cash provided by (used for) operating activities (000) |
|
($ |
1,889 |
) |
|
$ |
9,698 |
|
|
$ |
537 |
|
|
$ |
16,964 |
|
| Loss / Earnings before income taxes (000) |
|
($ |
12,207 |
) |
|
$ |
4,490 |
|
|
($ |
7,215 |
) |
|
$ |
9,211 |
|
| Loss / Earnings (000) |
|
($ |
14,163 |
) |
|
$ |
733 |
|
|
($ |
11,948 |
) |
|
$ |
3,479 |
|
| Loss / Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
| - diluted |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
| Comprehensive loss / income (000) |
|
($ |
18,475 |
) |
|
$ |
675 |
|
|
($ |
15,929 |
) |
|
$ |
2,922 |
|
| Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
|
127,371,000 |
|
|
|
127,357,000 |
|
|
|
127,364,000 |
|
|
|
127,420,000 |
|
| - diluted |
|
|
127,371,000 |
|
|
|
127,359,000 |
|
|
|
127,364,000 |
|
|
|
127,428,000 |
|
| Assets (000) (3) |
|
|
|
|
|
|
|
|
|
$ |
874,180 |
|
|
$ |
889,539 |
|
| 1. |
A non-GAAP measure calculated as cash provided by operating activities as presented on the consolidated statements of cash flows and adding back changes in non-cash working capital. |
| 2. |
Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this press release for a description of this measure. |
| 3. |
Assets are shown as at June 30, 2015 and June 30, 2014. |
14 | Alamos
Gold Inc
Exhibit 99.2
ALAMOS GOLD INC.
SECOND QUARTER 2015 REPORT
June 30, 2015
(Based on International Financial Reporting Standards (“IFRS”) and stated in thousands of United States dollars, unless otherwise indicated)
INDEX
Unaudited Condensed Interim
Consolidated Financial Statements
| • |
|
Consolidated Statements of Financial Position |
| • |
|
Consolidated Statements of Comprehensive Income |
| • |
|
Consolidated Statements of Changes in Equity |
| • |
|
Consolidated Statements of Cash Flows |
| • |
|
Notes to Condensed Interim Consolidated Financial Statements |
Notice of no auditor review of interim
consolidated financial statements
National instrument 51-102, Part 4, subsection 4.3(3)(a), requires that if an auditor has not performed a review of
the interim financial statements, they must be accompanied by a notice indicating the financial statements have not been reviewed by an auditor.
The
Company’s independent auditors have not performed a review of these financial statements in accordance with the standards established by CPA Canada for a review of interim financial statements by an entity’s auditors.
The accompanying unaudited interim financial statements of the Company have been prepared by management and approved by the Board of Directors.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
ALAMOS GOLD INC.
Consolidated Statements of Financial Position
(Unaudited
- stated in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
| |
|
2015 |
|
|
2014 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
249,067 |
|
|
$ |
353,293 |
|
| Short-term investments |
|
|
— |
|
|
|
4,792 |
|
| Available-for-sale securities (note 4) |
|
|
79,154 |
|
|
|
2,201 |
|
| Amounts receivable (note 4) |
|
|
18,444 |
|
|
|
8,950 |
|
| Income taxes receivable (note 4) |
|
|
15,792 |
|
|
|
15,534 |
|
| Advances and prepaid expenses |
|
|
6,047 |
|
|
|
4,750 |
|
| Inventory (note 5) |
|
|
55,445 |
|
|
|
55,358 |
|
|
|
|
|
|
|
|
|
|
| Total Current Assets |
|
|
423,949 |
|
|
|
444,878 |
|
|
|
|
| Non-Current Assets |
|
|
|
|
|
|
|
|
| Other non-current assets (note 5) |
|
|
6,809 |
|
|
|
5,861 |
|
| Exploration and evaluation assets (note 6) |
|
|
222,870 |
|
|
|
220,132 |
|
| Mineral property, plant and equipment (note 7) |
|
|
220,552 |
|
|
|
208,640 |
|
|
|
|
|
|
|
|
|
|
| Total Assets |
|
$ |
874,180 |
|
|
$ |
879,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities |
|
$ |
42,222 |
|
|
$ |
33,389 |
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
|
42,222 |
|
|
|
33,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Current Liabilities |
|
|
|
|
|
|
|
|
| Deferred income taxes |
|
|
43,815 |
|
|
|
39,815 |
|
| Decommissioning liability (note 9) |
|
|
22,646 |
|
|
|
22,302 |
|
| Other liabilities |
|
|
411 |
|
|
|
671 |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
|
|
109,094 |
|
|
|
96,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| EQUITY |
|
|
|
|
|
|
|
|
| Share capital (note 10a) |
|
$ |
509,314 |
|
|
$ |
509,068 |
|
| Warrants |
|
|
21,667 |
|
|
|
21,667 |
|
| Contributed surplus |
|
|
27,458 |
|
|
|
26,202 |
|
| Accumulated other comprehensive loss |
|
|
(4,822 |
) |
|
|
(841 |
) |
| Retained earnings |
|
|
211,469 |
|
|
|
227,238 |
|
|
|
|
|
|
|
|
|
|
| Total Equity |
|
|
765,086 |
|
|
|
783,334 |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Equity |
|
$ |
874,180 |
|
|
$ |
879,511 |
|
|
|
|
|
|
|
|
|
|
| Commitments and Contingencies (note 12) |
|
|
|
|
|
|
|
|
| Subsequent events (note 13) |
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
ALAMOS GOLD INC.
Consolidated Statements of Comprehensive Income
For
the three and six-month periods ended June 30, 2015 and 2014
(Unaudited - stated in thousands of United States dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three-month
periods ended |
|
|
For the six-month
periods ended |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| OPERATING REVENUES |
|
$ |
44,007 |
|
|
$ |
43,843 |
|
|
$ |
88,735 |
|
|
$ |
85,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MINE OPERATING COSTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mining and processing |
|
|
29,319 |
|
|
|
20,256 |
|
|
|
55,935 |
|
|
|
37,802 |
|
| Royalties (note 12a) |
|
|
2,312 |
|
|
|
2,315 |
|
|
|
5,133 |
|
|
|
4,620 |
|
| Amortization |
|
|
8,652 |
|
|
|
9,738 |
|
|
|
17,605 |
|
|
|
21,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,283 |
|
|
|
32,309 |
|
|
|
78,673 |
|
|
|
63,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EARNINGS FROM MINE OPERATIONS |
|
|
3,724 |
|
|
|
11,534 |
|
|
|
10,062 |
|
|
|
21,809 |
|
|
|
|
|
|
| EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exploration |
|
|
1,657 |
|
|
|
1,465 |
|
|
|
3,389 |
|
|
|
2,900 |
|
| Corporate and administrative |
|
|
3,887 |
|
|
|
4,350 |
|
|
|
7,324 |
|
|
|
8,434 |
|
| Share-based compensation (notes 10 d, e, f) |
|
|
1,170 |
|
|
|
1,784 |
|
|
|
2,288 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,714 |
|
|
|
7,599 |
|
|
|
13,001 |
|
|
|
12,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (LOSS)/EARNINGS FROM OPERATIONS |
|
|
(2,990 |
) |
|
|
3,935 |
|
|
|
(2,939 |
) |
|
|
9,475 |
|
|
|
|
|
|
| OTHER (EXPENSES)/INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finance income |
|
|
474 |
|
|
|
788 |
|
|
|
1,080 |
|
|
|
1,507 |
|
| Financing expense |
|
|
(366 |
) |
|
|
(352 |
) |
|
|
(727 |
) |
|
|
(698 |
) |
| Foreign exchange (loss)/gain |
|
|
(1,390 |
) |
|
|
350 |
|
|
|
(3,157 |
) |
|
|
40 |
|
| Other loss (notes 7, 13) |
|
|
(7,935 |
) |
|
|
(231 |
) |
|
|
(1,472 |
) |
|
|
(1,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (LOSS)/EARNINGS BEFORE INCOME TAXES |
|
|
(12,207 |
) |
|
|
4,490 |
|
|
|
(7,215 |
) |
|
|
9,211 |
|
|
|
|
|
|
| INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current tax recovery/(expense) |
|
|
1,744 |
|
|
|
(3,207 |
) |
|
|
(733 |
) |
|
|
(2,982 |
) |
| Deferred tax expense |
|
|
(3,700 |
) |
|
|
(550 |
) |
|
|
(4,000 |
) |
|
|
(2,750 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (LOSS)/EARNINGS |
|
($ |
14,163 |
) |
|
$ |
733 |
|
|
($ |
11,948 |
) |
|
$ |
3,479 |
|
|
|
|
|
|
| Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Unrealized loss on securities |
|
|
(4,282 |
) |
|
|
(58 |
) |
|
|
(4,428 |
) |
|
|
(557 |
) |
| - Unrealized loss on derivative contracts |
|
|
(30 |
) |
|
|
— |
|
|
|
(180 |
) |
|
|
— |
|
| - Reclassification of realized losses on
available-for-sale securities included in earnings |
|
|
— |
|
|
|
— |
|
|
|
627 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD |
|
($ |
18,475 |
) |
|
$ |
675 |
|
|
($ |
15,929 |
) |
|
$ |
2,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (LOSS)/EARNINGS PER SHARE FOR THE PERIOD (note 10 g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
| - diluted |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
|
127,371,000 |
|
|
|
127,357,000 |
|
|
|
127,364,000 |
|
|
|
127,420,000 |
|
| - diluted |
|
|
127,371,000 |
|
|
|
127,359,000 |
|
|
|
127,364,000 |
|
|
|
127,428,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
ALAMOS GOLD INC.
Consolidated Statements of Changes in Equity
For the
six-month periods ended June 30, 2015 and 2014
(Unaudited - stated in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Number of
shares
outstanding |
|
|
Share capital |
|
|
Warrants |
|
|
Contributed
surplus |
|
|
Accumulated
other
comprehensive
loss |
|
|
Retained
earnings |
|
|
Total Equity |
|
| Balance at January 1, 2014 |
|
|
127,708,986 |
|
|
$ |
510,473 |
|
|
$ |
21,667 |
|
|
$ |
24,236 |
|
|
($ |
1,093 |
) |
|
$ |
256,664 |
|
|
$ |
811,947 |
|
| Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
840 |
|
|
|
— |
|
|
|
— |
|
|
|
840 |
|
| Shares repurchased and cancelled |
|
|
(351,500 |
) |
|
|
(1,405 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,828 |
) |
|
|
(3,233 |
) |
| Dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,736 |
) |
|
|
(12,736 |
) |
| Earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,479 |
|
|
|
3,479 |
|
| Other comprehensive loss (tax impact; nil) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(557 |
) |
|
|
— |
|
|
|
(557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at June 30, 2014 |
|
|
127,357,486 |
|
|
$ |
509,068 |
|
|
$ |
21,667 |
|
|
$ |
25,076 |
|
|
($ |
1,650 |
) |
|
$ |
245,579 |
|
|
$ |
799,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Number of
shares
outstanding |
|
|
Share capital |
|
|
Warrants |
|
|
Contributed
surplus |
|
|
Accumulated
other
comprehensive
Income/(loss) |
|
|
Retained
earnings |
|
|
Total Equity |
|
| Balance at January 1, 2015 |
|
|
127,357,486 |
|
|
$ |
509,068 |
|
|
$ |
21,667 |
|
|
$ |
26,202 |
|
|
($ |
841 |
) |
|
$ |
227,238 |
|
|
$ |
783,334 |
|
| Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,256 |
|
|
|
— |
|
|
|
— |
|
|
|
1,256 |
|
| Dividends |
|
|
38,616 |
|
|
|
246 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,821 |
) |
|
|
(3,575 |
) |
| Earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,948 |
) |
|
|
(11,948 |
) |
| Other comprehensive income (tax impact; nil) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,981 |
) |
|
|
— |
|
|
|
(3,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at June 30, 2015 |
|
|
127,396,102 |
|
|
$ |
509,314 |
|
|
$ |
21,667 |
|
|
$ |
27,458 |
|
|
($ |
4,822 |
) |
|
$ |
211,469 |
|
|
$ |
765,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
ALAMOS GOLD INC.
Consolidated Statements of Cash Flows
For the three
and six-month periods ended June 30, 2015 and 2014
(Unaudited - stated in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three-month
periods ended |
|
|
For the six-month
periods ended |
|
| |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
| CASH PROVIDED BY (USED IN): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss)/Earnings for the period |
|
($ |
14,163 |
) |
|
$ |
733 |
|
|
($ |
11,948 |
) |
|
$ |
3,479 |
|
| Adjustments for items not involving cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization |
|
|
8,652 |
|
|
|
9,738 |
|
|
|
17,605 |
|
|
|
21,122 |
|
| Financing expense |
|
|
366 |
|
|
|
352 |
|
|
|
727 |
|
|
|
698 |
|
| Unrealized foreign exchange loss |
|
|
354 |
|
|
|
(408 |
) |
|
|
1,650 |
|
|
|
2 |
|
| Deferred tax expense |
|
|
3,700 |
|
|
|
550 |
|
|
|
4,000 |
|
|
|
2,750 |
|
| Share-based compensation |
|
|
1,170 |
|
|
|
1,784 |
|
|
|
2,288 |
|
|
|
1,000 |
|
| Gain on disposal of mineral property, plant and equipment |
|
|
— |
|
|
|
— |
|
|
|
(6,975 |
) |
|
|
— |
|
| Other |
|
|
(13 |
) |
|
|
463 |
|
|
|
78 |
|
|
|
102 |
|
| Changes in non-cash working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value of forward contracts |
|
|
30 |
|
|
|
(16 |
) |
|
|
180 |
|
|
|
40 |
|
| Amounts receivable |
|
|
(8,068 |
) |
|
|
(6,929 |
) |
|
|
(10,620 |
) |
|
|
(9,238 |
) |
| Inventory |
|
|
(1,422 |
) |
|
|
(5,817 |
) |
|
|
(2,123 |
) |
|
|
(11,056 |
) |
| Advances and prepaid expenses |
|
|
(1,602 |
) |
|
|
2,444 |
|
|
|
(1,297 |
) |
|
|
4,002 |
|
| Accounts payable and accrued liabilities, and income taxes payable |
|
|
9,107 |
|
|
|
6,804 |
|
|
|
6,972 |
|
|
|
4,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,889 |
) |
|
|
9,698 |
|
|
|
537 |
|
|
|
16,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Purchases)/Sales of securities |
|
|
(83,280 |
) |
|
|
— |
|
|
|
(81,025 |
) |
|
|
835 |
|
| Short-term investments (net) |
|
|
— |
|
|
|
9,864 |
|
|
|
4,792 |
|
|
|
7,792 |
|
| Contractor advances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,100 |
) |
| Proceeds on sale of mineral property, plant and equipment |
|
|
440 |
|
|
|
— |
|
|
|
7,900 |
|
|
|
— |
|
| Exploration and evaluation assets |
|
|
(1,332 |
) |
|
|
(1,430 |
) |
|
|
(2,738 |
) |
|
|
(2,770 |
) |
| Mineral property, plant and equipment |
|
|
(12,348 |
) |
|
|
(13,331 |
) |
|
|
(28,427 |
) |
|
|
(22,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(96,520 |
) |
|
|
(4,897 |
) |
|
|
(99,498 |
) |
|
|
(18,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares repurchased and cancelled |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,233 |
) |
| Dividends paid |
|
|
(3,575 |
) |
|
|
(12,736 |
) |
|
|
(3,575 |
) |
|
|
(12,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,575 |
) |
|
|
(12,736 |
) |
|
|
(3,575 |
) |
|
|
(15,969 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rates on cash and cash equivalents |
|
|
(390 |
) |
|
|
365 |
|
|
|
(1,690 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
|
|
(102,374 |
) |
|
|
(7,570 |
) |
|
|
(104,226 |
) |
|
|
(17,193 |
) |
| Cash and cash equivalents - beginning of year |
|
|
351,441 |
|
|
|
400,040 |
|
|
|
353,293 |
|
|
|
409,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS - END OF PERIOD |
|
$ |
249,067 |
|
|
$ |
392,470 |
|
|
$ |
249,067 |
|
|
$ |
392,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest paid |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Interest received |
|
$ |
464 |
|
|
$ |
769 |
|
|
$ |
1,053 |
|
|
$ |
1,470 |
|
| Income taxes paid |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
ALAMOS GOLD INC.
Notes to Condensed Interim Consolidated Financial Statements
June 30, 2015 and 2014
(Unaudited - stated in United
States dollars, unless otherwise indicated)
Alamos Gold Inc., a resident Canadian company, and its wholly-owned subsidiaries (collectively the “Company”) are engaged in the acquisition,
exploration, development and extraction of precious metals. The Company owns and operates the Mulatos mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes several known satellite
gold occurrences. In addition, the Company owns the Ağı Dağı, Kirazlı and Çamyurt gold development projects in Turkey. In 2013, the Company acquired the Esperanza Gold Project in the state of Morelos, Mexico, as well
as an option to acquire a 100% interest in the Quartz Mountain Gold Project in Oregon, USA.
See note 13 for a description of the Merger with AuRico Gold
Inc.; as a result of the Merger, the Company ceased to be a reporting issuer on July 2, 2015.
Statement of Compliance
These condensed interim
consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting, and as such do not contain all disclosures required for annual
financial statements.
The policies applied in these condensed interim consolidated financial statements are consistent with the policies disclosed in
Notes 2 and 3 of the consolidated financial statements for the year ended December 31, 2014. These condensed interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for
the year ended December 31, 2014.
The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on
August 11, 2015.
| 3. |
FUTURE ACCOUNTING POLICY CHANGES ISSUED BUT NOT YET IN EFFECT |
The following are new pronouncements approved by the IASB. The following new standards and interpretations are not yet effective and have not been applied in
preparing these financial statements, however, they may impact future periods.
(i) IFRS 9 Financial Instruments (Revised) was issued by the IASB in
October 2010. It incorporates revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement. The revised
financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion
of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. On July 24, 2014, the IASB issued the final version of IFRS 9 with an effective
adoption date of January 1, 2018, with early adoption permitted. The impact of IFRS 9 on the Company’s financial instruments has not yet been determined.
(ii) IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) was issued in May 2014, which covers principles for reporting about the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
IFRS 15 is effective for annual periods beginning on or after December 15, 2017. The Company has commenced a review process to determine the impact of adopting this standard on its
consolidated financial statements.
(iii) IAS 16 Property, Plant and Equipment (IAS 16) and IAS 38, Intangibles (IAS 38) were issued in May 2014 and
prohibit the use of revenue-based depreciation methods for property, plant and equipment and limits the use of revenue-based amortization for intangible assets. These amendments are effective for annual periods beginning on or after January 1,
2016 and are to be applied prospectively. The Company does not expect that the adoption of these amendments will have a material impact on its consolidated financial statements.
| 4. |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
| a) |
Financial Assets and Liabilities |
The carrying values of the Company’s financial instruments are
classified into the following categories:
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2015 |
|
|
December 31, 2014 |
|
| |
|
($000) |
|
|
($000) |
|
| Fair value through profit or loss (“FVTPL”) (1) |
|
|
249,067 |
|
|
|
358,085 |
|
| Available-for-sale securities (2) |
|
|
79,154 |
|
|
|
2,201 |
|
| Loans and receivables (3) |
|
|
34,236 |
|
|
|
24,484 |
|
| Derivative contracts designated as FVTPL(4) |
|
|
— |
|
|
|
— |
|
| Derivative contracts designated as effective hedges (5) |
|
|
(405 |
) |
|
|
(225 |
) |
| Other financial liabilities (6) |
|
|
(41,894 |
) |
|
|
(33,266 |
) |
| (1) |
Includes cash of $232.4 million (December 31, 2014 - $209.3 million), cash equivalents of $16.7 million (December 31, 2014 – $143.9 million) and nil short-term investments (December 31, 2014 –
$4.8 million). |
| (2) |
Includes the Company’s investment in the common shares of publicly traded entities including a private placement in AuRico Gold Inc. (note 13). |
| (3) |
Includes amounts receivable and income tax receivable. |
| (4) |
Includes the Company’s foreign currency forward contracts and gold forward contracts which, for accounting purposes, are not designated as effective hedges. These are classified within accounts payable and accrued
liabilities in the consolidated balance sheet. |
| (5) |
Includes the Company’s foreign currency collar contracts which are designated as effective hedges for accounting purposes which are recorded in accounts payable and accrued liabilities. |
| (6) |
Includes all other accounts payable and accrued liabilities, income taxes payable, and certain other liabilities. |
For all financial assets and liabilities listed above, fair value approximates carrying value as at June 30, 2015 and December 31, 2014.
| b) |
Derivative Financial Instruments |
The Company may utilize financial instruments to manage the risks
associated with fluctuations in the market price of gold and foreign exchange rates. As at June 30, 2015, the Company had no outstanding gold forward contracts. The mark-to-market loss associated with outstanding gold forward contracts as at
December 31, 2014 was nominal.
At June 30, 2015, the Company had an outstanding contract to deliver $5 million Canadian dollars
(“CAD”) in exchange for a fixed amount of USD on July 2, 2015, at a rate of CAD:USD 1.25:1. The mark-to-market gain associated with these contracts as at June 30, 2015 was nominal (December 31, 2014 – nominal).
The Company has entered into foreign exchange collar contracts to hedge a portion of its Mexican peso denominated operating expenditures. The Company has
entered into contracts totaling $24 million as at June 30, 2015, with scheduled expiries
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
monthly throughout 2015. The mark-to-market loss associated with these contracts as at June 30, 2015 was $0.4 million (December 31, 2014 - $0.2 million). The transactions have been
designated as effective hedges, with changes in fair value recorded in other comprehensive income (loss).
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2015 |
|
|
December 31, 2014 |
|
| |
|
($000) |
|
|
($000) |
|
| Precious metals dore and refined precious metals |
|
|
10,262 |
|
|
|
10,680 |
|
| In-process precious metals |
|
|
26,948 |
|
|
|
27,064 |
|
| Ore in stockpiles |
|
|
6,809 |
|
|
|
5,861 |
|
| Parts and supplies |
|
|
18,235 |
|
|
|
17,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
62,254 |
|
|
|
61,219 |
|
| Less: Non-current portion |
|
|
(6,809 |
) |
|
|
(5,861 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
55,445 |
|
|
$ |
55,358 |
|
|
|
|
|
|
|
|
|
|
The carrying value of inventory is calculated using weighted average cost. The amount of inventory charged to operations as
mining and processing costs during the three and six-month period ended June 30, 2015 was $29.6 million and $56.6 million (three and six-month June 30, 2014 - $21.5 million and $38.3 million). The
amount of inventory charged to operations as amortization in the three and six-month period ended June 30, 2015 was $6.1 million and $12.1 million (three and six-month June 30, 2014 - $7.9 million and $14.9 million).
| 6. |
EXPLORATION AND EVALUATION ASSETS |
The Company classifies the Aği Daği, Kirazlı, and Çamyurt Projects in Turkey, the Esperanza Gold Project in Mexico, and the Quartz
Mountain Project in Oregon as exploration and evaluation assets. Exploration and evaluation assets are not subject to amortization.
The following is a
continuity of the Company’s exploration and evaluation assets for the six-month period ended June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Mexico |
|
|
Turkey |
|
|
United States |
|
|
Total |
|
| |
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
|
|
|
|
| Cost as at January 1, 2014 |
|
|
63,633 |
|
|
$ |
145,090 |
|
|
|
5,664 |
|
|
$ |
214,387 |
|
| Additions |
|
|
4,054 |
|
|
|
1,691 |
|
|
|
— |
|
|
|
5,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost as at December 31, 2014 |
|
$ |
67,687 |
|
|
$ |
146,781 |
|
|
$ |
5,664 |
|
|
$ |
220,132 |
|
| Additions |
|
|
1,712 |
|
|
|
1,026 |
|
|
|
— |
|
|
|
2,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost as at June 30, 2015 |
|
$ |
69,399 |
|
|
$ |
147,807 |
|
|
$ |
5,664 |
|
|
$ |
222,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7. |
MINERAL PROPERTY, PLANT AND EQUIPMENT |
The Company owns 100% of the Salamandra group of concessions in Mexico. Included within the Salamandra group of concessions is the Mulatos mine which began
operations in 2005.
The majority of the Company’s property, plant and equipment in operations is amortized on a units-of-production basis over the
remaining recoverable proven and probable mineral reserves. Certain mining and office equipment is amortized on a straight line basis over periods ranging from two to five years.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
The following is a continuity of the Company’s mineral property, plant and equipment for the six-month
period ended June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Mining plant
and
equipment |
|
|
Office and
computer
equipment |
|
|
Construction
in progress |
|
|
Subtotal |
|
|
Mineral
property and
deferred
development |
|
|
Total |
|
| |
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
| Cost as at January 1, 2015 |
|
$ |
227,463 |
|
|
$ |
6,965 |
|
|
$ |
5,435 |
|
|
$ |
239,863 |
|
|
$ |
212,351 |
|
|
$ |
452,214 |
|
| Additions |
|
|
12,794 |
|
|
|
443 |
|
|
|
973 |
|
|
|
14,210 |
|
|
|
12,786 |
|
|
|
26,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost as at June 30, 2015 |
|
$ |
240,257 |
|
|
$ |
7,408 |
|
|
$ |
6,408 |
|
|
$ |
254,073 |
|
|
$ |
225,137 |
|
|
$ |
479,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization and impairment as at January 1, 2015 |
|
$ |
126,526 |
|
|
$ |
3,869 |
|
|
$ |
— |
|
|
$ |
130,395 |
|
|
$ |
113,179 |
|
|
$ |
243,574 |
|
| Amortization expense |
|
|
8,599 |
|
|
|
537 |
|
|
|
— |
|
|
|
9,136 |
|
|
|
5,948 |
|
|
|
15,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization and impairment as at June 30, 2015 |
|
$ |
135,125 |
|
|
$ |
4,406 |
|
|
$ |
— |
|
|
$ |
139,531 |
|
|
$ |
119,127 |
|
|
$ |
258,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value as at June 30, 2015 |
|
$ |
105,132 |
|
|
$ |
3,002 |
|
|
$ |
6,408 |
|
|
$ |
114,542 |
|
|
$ |
106,010 |
|
|
$ |
220,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net book value as at December 31, 2014 |
|
$ |
100,937 |
|
|
$ |
3,096 |
|
|
$ |
5,435 |
|
|
$ |
109,468 |
|
|
$ |
99,172 |
|
|
$ |
208,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six-month period, the Company sold a non-core portion of the Salamandra group of concessions for $7 million and a
2% net smelter royalty on the concessions. The transaction resulted in a gain of $7 million which is recorded in Other Loss.
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
June 30, 2015 |
|
| |
|
($000) |
|
|
|
| Declared and paid |
|
|
3,821 |
|
|
|
|
|
|
|
|
$ |
3,821 |
|
| Weighted average number of common shares outstanding |
|
|
127,364,000 |
|
| Dividend per share |
|
$ |
0.03 |
|
|
|
|
|
|
| 9. |
DECOMMISSIONING LIABILITY |
A decommissioning liability is recognized in the period in which it is incurred, on a discounted cash flow basis, if a reasonable estimate can be made. The
liability accretes to its full value over time through charges to earnings. In addition, the discounted value is added to the carrying amount of the Company’s mineral property, plant and equipment, and is amortized on a units-of-production
basis over the life of the Mine.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
A continuity of the decommissioning liability is as follows:
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
June 30, 2015 |
|
| |
|
($000) |
|
|
|
| Obligations at beginning of period |
|
|
22,302 |
|
| Payments made against the liability |
|
|
(381 |
) |
| Accretion of discounted cash flows |
|
|
725 |
|
|
|
|
|
|
| Obligations at end of period |
|
$ |
22,646 |
|
|
|
|
|
|
| a) |
Authorized share capital of the Company consists of an unlimited number of fully paid common shares without par value. |
|
|
|
|
|
|
|
|
|
| |
|
Number of Shares |
|
|
Amount |
|
| |
|
|
|
|
($000) |
|
| Outstanding at December 31, 2014 and March 31, 2015 |
|
|
127,357,486 |
|
|
$ |
509,068 |
|
| Shares issued through dividend reinvestment plan |
|
|
38,616 |
|
|
|
246 |
|
|
|
|
|
|
|
|
|
|
| Outstanding at June 30, 2015 |
|
|
127,396,102 |
|
|
$ |
509,314 |
|
The Company has a stock option plan (the “Plan”), originally approved by the Board of
Directors (the “Board”) on April 17, 2003, and amended and ratified on May 25, 2007, May 15, 2008, April 7, 2009, June 2, 2010 and May 31, 2012, which allows the Company to grant incentive stock
options to officers of the Company. Under the Plan, the number of shares reserved for issuance cannot exceed 7% of the total number of shares which are outstanding on the date of grant. The exercise price, term (not to exceed ten years) and vesting
provisions are authorized by the Board at the time of the grant. The plan is subject to shareholder approval and ratification every three years.
Stock
options granted under the Plan are exercisable for a five-year period. Incentive stock options granted vest 1/3 on the first anniversary date, 1/3 on the second anniversary and 1/3 on the third anniversary date.
The following is a continuity of the changes in the number of stock options outstanding for the six-month period ended June 30, 2015:
|
|
|
|
|
|
|
|
|
| |
|
Number |
|
|
Weighted average
exercise price ($CAD) |
|
| Outstanding at December 31, 2014 |
|
|
4,741,300 |
|
|
$ |
14.04 |
|
| Granted |
|
|
997,400 |
|
|
|
7.50 |
|
| Forfeited |
|
|
(1,650,000 |
) |
|
|
14.81 |
|
|
|
|
|
|
|
|
|
|
| Outstanding at June 30, 2015 |
|
|
4,088,700 |
|
|
$ |
12.14 |
|
There were no stock options exercised in the three-month periods ended June 30, 2015 and June 30, 2014.
For the six-month period ended June 30, 2015, the Company granted 997,400 incentive stock options at an exercise price of CAD$7.50, compared to 835,000
stock options granted in the six-month period ended June 30, 2014.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
The fair value of stock options granted was estimated using the Black-Scholes option pricing model, applying
the following assumptions:
|
|
|
|
|
|
|
|
|
| For options granted in the six-month period ended: |
|
June 30,
2015 |
|
|
June 30,
2014 |
|
| Weighted average share price at grant date ($CAD) |
|
$ |
7.50 |
|
|
$ |
9.17 |
|
| Risk-free rate |
|
|
0.46% - 0.57 |
% |
|
|
1.05% - 1.44 |
% |
| Expected dividend yield |
|
|
1.0 |
% |
|
|
2.3 |
% |
| Expected stock price volatility (based on historical volatility) |
|
|
42% - 45 |
% |
|
|
43 |
% |
| Expected life, based on terms of the grants (months) |
|
|
30-60 |
|
|
|
30-60 |
|
| Weighted average per share fair value of stock options granted ($CAD) |
|
$ |
2.29 |
|
|
$ |
2.57 |
|
Option pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of
the stock. Changes in these assumptions can materially affect the fair value estimate, and therefore it is management’s view that the existing models may not provide a single reliable measure of the fair value of the Company’s stock option
grants.
As at June 30, 2015, 2,143,526 stock options were exercisable. The remaining 1,945,174 outstanding stock options vest over the following
three years.
Stock options outstanding and exercisable as at June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding |
|
|
Exercisable |
|
| Range of exercise prices ($CAD) |
|
Number of
options |
|
|
Weighted average
exercise price
($CAD) |
|
|
Weighted average
remaining
contractual life
(years) |
|
|
Number of
options |
|
|
Weighted average
exercise price
($CAD) |
|
| $6.01 - $9.00 |
|
|
997,400 |
|
|
|
7.50 |
|
|
|
4.66 |
|
|
|
— |
|
|
|
— |
|
| $9.01 - $12.00 |
|
|
770,000 |
|
|
|
9.17 |
|
|
|
3.91 |
|
|
|
256,664 |
|
|
|
9.17 |
|
| $12.01 - $15.00 |
|
|
1,018,000 |
|
|
|
14.24 |
|
|
|
0.87 |
|
|
|
1,018,000 |
|
|
|
14.24 |
|
| $15.01 - $18.00 |
|
|
1,303,300 |
|
|
|
15.80 |
|
|
|
2.42 |
|
|
|
868,862 |
|
|
|
15.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,088,700 |
|
|
$ |
12.14 |
|
|
|
2.86 |
|
|
|
2,143,526 |
|
|
$ |
14.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| e) |
Stock Appreciation Rights (“SARs”) |
In 2011, the Company’s Board approved a cash-settled stock
appreciation rights plan (“SARs Plan”) to grant incentive SARs to its directors, officers, employees and consultants. Under the SARs Plan, the number of units reserved for issuance cannot exceed 8% of the total number of common shares
which are outstanding on the date of grant. The exercise price, term (not to exceed ten years) and vesting provisions are authorized by the Board at the time of the grant.
SARs granted to directors, officers, employees and certain consultants under the SARs Plan are exercisable for a five-year period. SARS granted vest 1/3 on
the first anniversary date, 1/3 on the second anniversary and 1/3 on the third anniversary date.
SARs are cash-settled liabilities, which are remeasured
at each reporting date and at the settlement date. Any changes in the fair value of the liability are recognized as an expense to share-based compensation in the Statements of Comprehensive Income. As at June 30, 2015, the SARs liability was
$0.9 million compared to $0.6 million at December 31, 2014. The SARs liability is recorded in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
The following is a continuity of the changes in the number of SARs outstanding for the six-month period ended
June 30, 2015:
|
|
|
|
|
|
|
|
|
| |
|
Number |
|
|
Weighted average
exercise price ($CAD) |
|
| Outstanding at December 31, 2014 |
|
|
2,057,557 |
|
|
$ |
14.20 |
|
| Granted |
|
|
754,100 |
|
|
|
7.59 |
|
| Forfeited |
|
|
(120,712 |
) |
|
|
16.98 |
|
|
|
|
|
|
|
|
|
|
| Outstanding at June 30, 2015 |
|
|
2,690,945 |
|
|
$ |
12.22 |
|
The fair value of SARs granted were estimated using the Black-Scholes option pricing model with the following assumptions:
|
|
|
|
|
|
|
|
|
| For SARS granted in the six-month period ended: |
|
June 30,
2015 |
|
|
June 30,
2014 |
|
| Weighted average share price at grant date ($CAD) |
|
$ |
7.59 |
|
|
$ |
9.26 |
|
| Risk-free rate |
|
|
0.46% - 0.57 |
% |
|
|
1.02% - 1.44 |
% |
| Expected dividend yield |
|
|
1.00 |
% |
|
|
1.9% - 2.3 |
% |
| Expected stock price volatility (based on historical volatility) |
|
|
42% - 45 |
% |
|
|
41% - 44 |
% |
| Expected life, based on terms of the grants (months) |
|
|
30-60 |
|
|
|
30-60 |
|
| Weighted average per share fair value of SARs granted ($CAD) |
|
$ |
2.29 |
|
|
$ |
2.61 |
|
Stock appreciation rights outstanding and exercisable as at June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding |
|
|
Exercisable |
|
| Range of exercise prices ($CAD) |
|
Number of SARs |
|
|
Weighted average
exercise price
($CAD) |
|
|
Weighted average
remaining
contractual life
(years) |
|
|
Number of SARs |
|
|
Weighted average
exercise price
($CAD) |
|
| $7.00 - $10.00 |
|
|
1,319,811 |
|
|
|
8.25 |
|
|
|
4.38 |
|
|
|
158,015 |
|
|
|
9.18 |
|
| $10.01 - $13.00 |
|
|
207,500 |
|
|
|
12.47 |
|
|
|
2.94 |
|
|
|
124,998 |
|
|
|
12.60 |
|
| $13.01 - $16.00 |
|
|
500,634 |
|
|
|
15.26 |
|
|
|
3.03 |
|
|
|
283,574 |
|
|
|
15.15 |
|
| $16.01 - $19.00 |
|
|
428,000 |
|
|
|
17.00 |
|
|
|
1.98 |
|
|
|
322,661 |
|
|
|
17.01 |
|
| $19.01 - $22.00 |
|
|
235,000 |
|
|
|
19.11 |
|
|
|
2.25 |
|
|
|
156,662 |
|
|
|
19.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,690,945 |
|
|
$ |
12.22 |
|
|
|
3.45 |
|
|
|
1,045,910 |
|
|
$ |
15.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| f) |
Restricted Share Units (“RSUs”) and Deferred Share Units (“DSUs”) |
In 2013, the
Company’s Board approved a cash-settled RSU plan available to its officers, employees and consultants, and a DSU plan available to its directors. Under the RSU plan, each RSU has a value equivalent to one common share of the Company. RSUs vest
on December 31 of the year of the third anniversary of the grant and are settled in cash upon vesting. Additional RSUs are credited to reflect dividends paid on common shares over the vesting period. A liability for RSUs is measured at fair
value on the grant date and is subsequently adjusted for changes in fair value. The liability is recognized on a straight-line basis over the vesting period, with a corresponding charge to share-based compensation expense. Compensation expense for
RSUs incorporate an estimate for expected forfeitures.
During the six-month period ended June 30, 2015, the Company granted 526,300 RSUs. As at
June 30, 2015, there are 1,199,320 RSUs outstanding, with a corresponding liability of $1.9 million, which is recorded in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
Under the DSU plan, Directors can elect to receive a specified portion of their basic annual retainer in the
form of DSUs, with the option to elect to receive 100% of such retainer in DSUs. Directors must receive fifty percent of their annual retainer in the form of DSUs until such time that the minimum share ownership requirements have been met. Each DSU
has the same value as one common share of the Company. DSUs must be retained until the Director leaves the Board, at which time the cash value of the DSUs is paid out. Additional DSUs are credited to reflect dividends paid on common shares. The
initial fair value of the liability is calculated as of the grant date and is recognized immediately. Subsequently, at each reporting date and on settlement, the liability is remeasured, with any change in fair value recorded as compensation expense
in the period.
During the six-month period ended June 30, 2015, the Company granted 67,186 DSUs. As at June 30, 2015, there are 160,212 DSUs
outstanding, with a corresponding liability of $0.9 million, which is recorded in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.
| g) |
(Loss)/Earnings per share |
Basic earnings per share amounts are calculated by dividing earnings for the period
by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding during the period, plus the effects of the dilutive common
share equivalents.
|
|
|
|
|
|
|
|
|
| |
|
For the six months period ended |
|
| |
|
June 30,
2015 |
|
|
June 30,
2014 |
|
| (Loss)/Earnings for the period (000) |
|
($ |
11,948 |
) |
|
$ |
3,479 |
|
| Weighted average number of common shares outstanding |
|
|
127,364,000 |
|
|
|
127,420,000 |
|
|
|
|
|
|
|
|
|
|
| Basic (loss)/earnings per share for the period |
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
|
|
|
| Dilutive effect of stock options outstanding |
|
|
— |
|
|
|
8,000 |
|
| Dilutive effect of share purchase warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
8,000 |
|
| Diluted weighted average number of common shares outstanding |
|
|
127,364,000 |
|
|
|
127,428,000 |
|
|
|
|
|
|
|
|
|
|
| Diluted (loss)/earnings per share for the period |
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
The Company operates in one business segment (the exploration, mine development and extraction of precious metals, primarily gold) in three geographic areas:
Canada, United States of America, Mexico and Turkey.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at |
|
June 30, 2015 |
|
|
December 31, 2014 |
|
| |
|
Non-current
Assets |
|
|
Assets |
|
|
Liabilities |
|
|
Non-current
Assets |
|
|
Assets |
|
|
Liabilities |
|
| |
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
| Mexico |
|
|
295,804 |
|
|
|
424,632 |
|
|
|
95,175 |
|
|
|
281,105 |
|
|
|
414,225 |
|
|
|
91,206 |
|
| Turkey |
|
|
148,034 |
|
|
|
149,842 |
|
|
|
196 |
|
|
|
147,073 |
|
|
|
151,013 |
|
|
|
401 |
|
| Canada |
|
|
705 |
|
|
|
293,823 |
|
|
|
13,622 |
|
|
|
791 |
|
|
|
308,514 |
|
|
|
4,348 |
|
| United States |
|
|
5,688 |
|
|
|
5,883 |
|
|
|
101 |
|
|
|
5,664 |
|
|
|
5,759 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
450,231 |
|
|
$ |
874,180 |
|
|
$ |
109,094 |
|
|
$ |
434,633 |
|
|
$ |
879,511 |
|
|
$ |
96,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30, 2015 |
|
|
June 30, 2014 |
|
| |
|
Revenues |
|
|
Earnings (loss) |
|
|
Revenues |
|
|
Earnings (loss) |
|
| |
|
($000) |
|
|
($000) |
|
|
($000) |
|
|
($000) |
|
| Mexico |
|
|
88,735 |
|
|
|
8,942 |
|
|
|
85,353 |
|
|
|
11,213 |
|
| Turkey |
|
|
— |
|
|
|
(980 |
) |
|
|
— |
|
|
|
(1,091 |
) |
| Canada |
|
|
— |
|
|
|
(18,133 |
) |
|
|
— |
|
|
|
(6,425 |
) |
| United States |
|
|
— |
|
|
|
(1,777 |
) |
|
|
— |
|
|
|
(218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
88,735 |
|
|
($ |
11,948 |
) |
|
$ |
85,353 |
|
|
$ |
3,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12. |
COMMITMENTS AND CONTINGENCIES |
Production from certain concessions within the Salamandra district, including the Mulatos Mine,
is subject to a production royalty payable to Royal Gold at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs (the “Royal Gold royalty”). The Royal Gold royalty is calculated
based on the daily average London PM Fix gold market prices, not actual prices realized by the Company. Production to a maximum of two million ounces of gold is subject to the Royal Gold royalty. As at June 30, 2015, the royalty was paid or
accrued on approximately 1.4 million ounces of applicable gold production. Royalty expense related to the Royal Gold royalty was $4.8 million for the six-month period ended June 30, 2015 (June 30, 2014: $4.3 million). In addition,
royalty expense includes the 0.5% Extraordinary Mining Duty, which totaled $0.6 million for the six-month period ended June 30, 2015.
A third party
has a 2% Net Smelter Return Royalty on production from the Company’s Ağı Dağı project. The Company has not recorded an accrual for this royalty at June 30, 2015 as the project is not in production. The Company is also
subject to 2% state royalty on production in Turkey, subject to certain deductions.
In addition, a third party has a 3% Net Smelter Royalty on production
from the Company’s Esperanza Gold Project. The Company has not recorded an accrual for this royalty at June 30, 2015, as the project is not in production.
| b) |
Mulatos Town Relocation |
The Company enters into temporary occupation agreements with the Ejido and
non-Ejido members in Mexico and is also in negotiations with Ejido and non-Ejido members to relocate the existing community of Mulatos, and to acquire additional surface rights. Negotiations with the Ejido can be challenging and uncertain. There are
financial and other considerations associated with the negotiating process, and failure to reach agreement could result in significant downtime and associated costs, or suspension of operations and loss of production.
The Company commenced the planned relocation of the town of Mulatos in 2007 and relocation contracts were signed with over half of the families residing in
Mulatos at that time. Property owners and possessors were offered a comprehensive benefits package including compensation for their property at a premium to independent third-party valuations and/or relocation benefits. In certain cases, relocation
benefits include deferred monthly payments. Since the start of the Mulatos relocation effort in 2007, the Company has invested approximately $7.5 million in property acquisition, relocation benefits, legal, and related costs. In addition, the
Company has recognized a liability of $0.1 million representing the discounted value of expected future payments for relocation benefits to property owners and possessors that had signed contracts with the Company as at June 30, 2015. The
discounted value of the liability was capitalized to mineral property, plant and equipment.
During 2008, the Company, through its wholly-owned
subsidiary, Minas de Oro Nacional SA de CV (“MON”), entered into a land purchase agreement with the Mulatos Ejido, the local landowners. In 2010, the Ejido filed with the Unitary Agrarian Court an action to nullify the 2008 Surface Rights
Agreement. On June 13, 2012, the Agrarian Court resolved the judicial claim in favor of MON by dismissing the action and discharging all of the defendants named in the lawsuit, including MON.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
On March 1, 2014, MON entered into an amendment agreement with the Ejido (the “2014 Amendment
Agreement”) to formally resolve all the remaining disputes between the parties relating to previous Surface Rights Agreements. In April 2014, certain Ejido members filed a lawsuit requesting access to the 2014 Amendment Agreement for the
purposes of potentially challenging the land allocation approved by the March 1, 2014 Ejido meeting. The Company expects to obtain a positive resolution to claims challenging the 2014 Amendment Agreement. As part of the 2014 Amendment
Agreement, the Company has accrued $2.8 million (based on current exchange rates), which will be paid upon positive resolution of the legal challenge to the 2014 Amendment Agreement.
Additional future property acquisition, relocation benefits, legal and related costs may be material. The Company cannot currently determine the expected
timing, outcome of negotiations or costs associated with the relocation of the remaining property owners and possessors and potential land acquisitions.
Merger with AuRico Gold Inc.
On July 2, 2015, the
Company completed a Merger with AuRico Gold Inc. (“AuRico”) pursuant to which the Company and AuRico combined by way of a statutory arrangement under the Business Corporations Act (Ontario) (the “Arrangement”) to form a company
continuing under the name of Alamos Gold Inc. (“Alamos”). AuRico is a Canadian gold producer with mines and projects in North America, including the Young-Davidson gold mine in northern Ontario, and the El Chanate mine in Sonora State,
Mexico.
The Company determined that the Merger was a business combination in accordance with the definition in IFRS 3, Business combinations, and as such
has accounted for it in accordance with this standard, with AuRico being the accounting acquirer on the acquisition date of July 2, 2015. As a result, the Company ceased to be a reporting issuer upon closing of the Arrangement on July 2,
2015.
In connection with the Merger, on April 10, 2015 the Company subscribed for approximately 27.9 million common shares of AuRico on a
private placement basis, which were classified as available-for-sale securities as at June 30, 2015 with a fair value of $79.1 million. The common shares held by the Company were repurchased and cancelled upon closing of the transaction on
July 2, 2015.
The Arrangement included the following:
| |
a. |
The exchange of common shares of the Company for AuRico common shares based on an exchange ratio of 1.9818 and cash of $0.0001; |
| |
b. |
The amalgamation of the Company and AuRico, forming the resulting company, Alamos; |
| |
c. |
The formation of a new spin-off company named AuRico Metals Inc. (“AuRico Metals”), a public company listed on the TSX, to hold certain assets as described in more detail below. |
| |
d. |
The reorganization of the capital of Alamos into Class A common shares, and the distribution of common shares of AuRico Metals to former holders of AuRico common shares and holders of the Company’s common
shares. |
Upon completion of the Arrangement, holders of the Company’s common shares had received 1 Class A common share of Alamos
and $0.0001 in cash for each common share held.
Under the Arrangement, all options and stock appreciation rights of the Company were replaced and
converted to awards of Alamos, and warrants, restricted share units and deferred share units of the Company were exchanged for awards of Alamos.
In
addition, in accordance with the Arrangement, AuRico Metals, AuRico and Alamos entered into a contribution agreement, whereby AuRico Metals will hold AuRico’s Kemess Project, a new 1.5% net smelter return royalty on AuRico’s Young-Davidson
mine, AuRico’s Fosterville, and Stawell net smelter return royalties, and cash in an amount equal to $20 million.
Upon completion of the
Arrangement, Alamos owned 4.9% of AuRico Metals, and the remaining 95.1% of AuRico Metals shares were distributed to holders of Class A common shares pro rata to their holdings of Class A common shares.
|
|
|
|
|
|
|
|
|
SECOND QUARTER REPORT 2015 |
In connection with the Merger, the Company incurred transaction costs of approximately $9.0 million for the
period ended June 30, 2015, which is included in other loss in the Consolidated Statement of Comprehensive Income.
Exhibit 99.3
Alamos Gold Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
(All amounts
are expressed in United States dollars, unless otherwise stated)
This management’s discussion and analysis (“MD&A”) of the operating
results and financial position of Alamos Gold Inc. and its subsidiaries (the “Company”) is for the three and six-month period ended June 30, 2015 compared to the three and six-month period ended June 30, 2014. Together with the
consolidated financial statements and related notes, the MD&A provides a detailed account and analysis of the Company’s financial and operating performance for the period. The Company’s functional and presentation currency is the
United States dollar. This MD&A is current to August 11, 2015 and should be read in conjunction with the Company’s Annual Information Form and other public filings available at the System for Electronic Document Analysis and Retrieval
- www.sedar.com (“SEDAR”) and at the Electronic Data Gathering, Analysis, and Retrieval - www.sec.gov (“EDGAR”). Management is responsible for the condensed interim consolidated financial statements referred to in this
MD&A, and provides officers disclosure certifications filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian provincial securities commissions. The Audit Committee reviews the condensed interim consolidated
financial statements and MD&A, and recommends approval to the Company’s Board of Directors.
The MD&A should be read in conjunction with the
condensed interim consolidated financial statements of the Company and related notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Refer to Note 3 of the December 31, 2014
consolidated financial statements for disclosure of the Company’s significant accounting policies, which outlines matters the Company considers important for an understanding of its financial condition and results of operations as at, and for
the three and six-month period ending June 30, 2015.
Note to U.S. Investors
All references to mineral reserves and resources contained in this MD&A are determined in accordance with National Instrument 43-101, Standards of
Disclosure for Mineral Projects (“NI 43-101”) of the Canadian Securities Administrators (“CSA”) and Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) standards. Canadian standards differ significantly from
the requirements of the SEC. While the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource,” and “inferred mineral resource” are recognized and required by Canadian regulations,
they are not defined terms under SEC standards. As such, information contained in this MD&A concerning descriptions of mineralization and resources under Canadian standards may not be comparable to similar information made public by U.S.
companies subject to the reporting and disclosure requirements of the SEC. “Indicated mineral resource” and “inferred mineral resource” have a great amount of uncertainty as to their existence and economic and legal feasibility.
It cannot be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a higher category of resource. Investors are cautioned not to assume that all or any part of the
mineral deposits in these categories will ever be converted into proven and probable mineral reserves.
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Merger with AuRico Gold Inc.
On April 13, 2015,
Alamos Gold Inc. (“Former Alamos”) announced a definitive agreement with AuRico to combine the respective companies (the “Merger”) by way of a Plan of Arrangement (the “Arrangement”), creating a new, leading
intermediate gold producer. The Merger combines two top-quality, highly-complementary asset portfolios, including two long-life, cash flow generating gold mines: AuRico’s Young-Davidson mine in Ontario, Canada and Former Alamos’ Mulatos
mine in Sonora, Mexico.
The Arrangement was completed on July 2, 2015 and AuRico and Former Alamos amalgamated to form Alamos Gold Inc,
(“Alamos”). In addition, in accordance with the Arrangement, certain assets of Former AuRico, including the Kemess project, a 1.5% net smelter return royalty on the Young-Davidson mine, AuRico’s Fosterville and Stawell royalties, and
$20 million of cash, were transferred to a new company, AuRico Metals Inc. (“AuRico Metals”). Approximately 95.1% of the common shares of AuRico Metals (“AuRico Metals Shares”) were distributed to Former Alamos and AuRico
shareholders. Following completion of the Arrangement, the Company holds an equity interest of approximately 4.9% in AuRico Metals.
Under the terms of
the Arrangement, each Former Alamos share held was exchanged for 1 Class A common share of Alamos (“Class A Shares”), $0.0001 in cash, and 0.4397 common shares of AuRico Metals, and each AuRico share held was exchanged for 0.5046
Class A Shares and 0.2219 AuRico Metals Shares. Upon closing, Alamos had approximately 255,505,000 Class A Shares outstanding, with Former Alamos and AuRico shareholders each owning approximately 50%, and AuRico Metals had approximately
118,120,000 shares outstanding, with Former Alamos and AuRico shareholders each owning approximately 50% of the shares not held by Alamos.
The Merger was
completed subsequent to the end of the second quarter, therefore the financial results of both AuRico and Former Alamos will be reported separately for the three and six month periods ended June 30, 2015. The combined company commenced trading
on the Toronto Stock Exchange and New York Stock Exchange on July 6, 2015 under the symbol “AGI”. Former Alamos and AuRico shares were delisted on that same day.
Overview
The Company was a publicly-traded company on
the Toronto Stock Exchange and New York Stock Exchange. However, as a result of the previously discussed merger with AuRico, the Company ceased to be a reporting issuer on July 6, 2015.
The Company owns and operates the Mulatos mine (“Mulatos” or the “Mine”) located in the state of Sonora in northwest Mexico, the Esperanza
Gold Project in the state of Morelos, Mexico, the Ağı Dağı, Kirazlı and Çamyurt gold development projects, located in the Biga Peninsula of northwestern Turkey, and the Quartz Mountain Property in Oregon, U.S.A.
Mulatos (Mexico - producing)
The Mulatos mine is located
within the 28,773 hectare Salamandra group of concessions in the state of Sonora in northwest Mexico. The Mulatos mine achieved commercial production in 2006 as an open pit, heap leach mining operation and has produced approximately 1.4 million
ounces of gold to-date.
2
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Based on December 31, 2014 proven and probable mineral reserves of 46.6 million tonnes grading 1.16
grams of gold per tonne of ore (“g/t Au”) for 1.7 million contained ounces of gold, the Mulatos mine has a remaining life of approximately seven years. In 2014, the Mulatos mine transitioned from open pit to both open pit and
underground mining in order to access higher grade mineral reserves.
Esperanza (Mexico - development stage)
The Esperanza Gold Project has measured and indicated mineral resources (reported at a 0.4 g/t Au cut-off) at December 31, 2014 of 34.4 million
tonnes grading 0.98 g/t Au and 8.1 g/t silver (“Ag”) for approximately 1.1 million ounces of gold and 8.9 million ounces of silver.
The Company acquired the Esperanza Gold Project in 2013. In September 2011, the previous owners completed a Preliminary Economic Assessment (“PEA”)
on the Esperanza Gold Project outlining an initial six-year mine life with expected total production of 0.6 million ounces of gold at an average rate of 103,000 ounces per year at total cash operating costs of $499 per ounce (net of by-product
credits). Applying a gold price assumption of $1,150 per ounce, the September 2011 PEA indicated that the Esperanza Gold Project has an after-tax internal rate of return of 26% and an after-tax 5% net present value of $122 million.
Ağı Dağı, Kirazlı and Çamyurt (Turkey - development stage)
In early 2010, the Company acquired the 8,317 hectare Ağı Dağı and Kirazlı gold development projects in Turkey, which contain
established mineral resources and several highly prospective exploration targets. In June 2012, the Company published a positive preliminary feasibility study for the Ağı Dağı and Kirazlı projects, showing total life of mine
production of 1.5 million ounces of gold and 4.9 million ounces of silver, at an average rate of 166,000 ounces of gold per year and cash operating costs of $544 per ounce (net of by-product credits) over a nine-year mine life. In
addition, in 2011 the Company discovered the Çamyurt project located approximately three kilometres (“km”) southeast of Ağı Dağı.
Measured and Indicated mineral resources at Ağı Dağı, Kirazlı and Çamyurt (reported at a 0.2 g/t Au cut-off) at
December 31, 2014 total 140.5 million tonnes grading 0.66 g/t Au and 5.36 g/t Ag for approximately 3.0 million ounces of gold and 24.5 million ounces of silver. Inferred mineral resources total an additional 25.2 million
tonnes grading 0.54 g/t Au and 4.55 g/t Ag, for 0.4 million contained ounces of gold and 3.7 million contained ounces of silver.
Quartz
Mountain (U.S.A. - exploration stage)
On September 13, 2013, the Company completed the acquisition of Orsa Ventures Corporation
(“Orsa”), a junior exploration company focused on advancing its precious metal properties located in the Western United States. By acquiring Orsa, the Company obtained the right to earn a 100% interest in the Quartz Mountain Property in
Oregon as well as other assets in Oregon and Nevada. The Quartz Mountain Property is located on the northern extension of the prolific Basin and Range Province of Nevada, and has an Inferred mineral resource (reported at a 0.21 g/t Au cut-off
(oxide) and 0.58 g/t Au cut-off (sulphide) at December 31, 2014 of 110.4 million tonnes grading 0.80 g/t Au for 2.85 million ounces of gold.
3
Second Quarter 2015 Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
Change (%) |
|
| Ounces produced |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
— |
% |
| Ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
8 |
% |
|
|
|
|
| Operating Revenues (000) |
|
$ |
44,007 |
|
|
$ |
43,843 |
|
|
|
— |
% |
| (Loss) Earnings before income taxes (000) |
|
($ |
12,207 |
) |
|
$ |
4,490 |
|
|
|
(372 |
%) |
| (Loss) Earnings (000) |
|
($ |
14,163 |
) |
|
$ |
733 |
|
|
|
(2,032 |
%) |
| (Loss) Earnings per share (basic and diluted) |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
|
(1,200 |
%) |
|
|
|
|
| Cash flow from operating activities before changes in non-cash working capital (000) |
|
$ |
66 |
|
|
$ |
13,212 |
|
|
|
(100 |
%) |
| Cash flow (used in) from operating activities (000) |
|
($ |
1,889 |
) |
|
$ |
9,698 |
|
|
|
(119 |
%) |
|
|
|
|
| Cash and short-term investments (000) (2) |
|
$ |
249,067 |
|
|
$ |
392,470 |
|
|
|
(37 |
%) |
|
|
|
|
| Realized gold price per ounce |
|
$ |
1,198 |
|
|
$ |
1,288 |
|
|
|
(7 |
%) |
| Average London PM Fix gold price per ounce |
|
$ |
1,192 |
|
|
$ |
1,288 |
|
|
|
(7 |
%) |
|
|
|
|
| Total cash cost per ounce (1) |
|
$ |
861 |
|
|
$ |
663 |
|
|
|
30 |
% |
| All-in sustaining cost per ounce (1) |
|
$ |
1,154 |
|
|
$ |
1,047 |
|
|
|
10 |
% |
| All-in cost per ounce (1) |
|
$ |
1,422 |
|
|
$ |
1,333 |
|
|
|
7 |
% |
| (1) |
“Total cash cost per ounce”, “All-in sustaining cost per ounce” and “All-in cost per ounce” are non-GAAP measures. Refer to the “Cautionary non-GAAP Measures and Additional GAAP
Measures” disclosure at the end of this MD&A for a description and calculation of these measures. |
| (2) |
Cash and short-term investments are shown as at June 30, 2015 and June 30, 2014. |
Second Quarter
2015
Financial Performance
| |
• |
|
Sold 36,748 ounces of gold at an average realized gold price of $1,198 per ounce for quarterly revenues of $44.0 million |
| |
• |
|
Realized a quarterly loss of $14.2 million ($0.11 per share) compared to earnings of $0.7 million ($0.01 per share) in the second quarter of 2014. Second quarter 2015 loss reflected a $1.4 million unrealized foreign
exchange loss and $8.2 million of transactions costs related to the Merger |
| |
• |
|
Reported cash and cash equivalents of $249.1 million as at June 30, 2015 |
Operational Performance
| |
• |
|
Produced 33,000 ounces of gold at a total cash cost of $861 per ounce of gold sold, and at an all-in sustaining cost of $1,154 per ounce of gold sold |
| |
• |
|
Achieved above budgeted crusher throughput of 18,100 tonnes per day (“tpd”) in the second quarter, despite lower high-grade mill feed. |
4
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
| |
• |
|
Received a positive ruling from the Turkish High Administrative Court which reinstated the Environmental Impact Assessment (“EIA”) certificate for the Kirazli gold project. |
| |
• |
|
Continued exploration activities at the Cerro Pelon and La Yaqui satellite deposits |
Subsequent to
quarter-end:
| |
• |
|
Completed the merger between AuRico and Former Alamos on July 2, 2015. The new company, Alamos, commenced trading on the Toronto Stock Exchange and New York Stock Exchange on July 6, 2015 under the symbol
“AGI”. Former Alamos and AuRico shares were delisted on the same day. |
| |
• |
|
In conjunction with the merger, certain assets of AuRico were transferred to a new company, AuRico Metals Inc., including $20 million cash, the Kemess project, a 1.5% net smelter royalty on the Young Davidson mine and
the Fosterville and Stawell royalties. |
Results of Operations
Gold production of 33,000 ounces in the second quarter of 2015 was consistent with production of 33,000 ounces in 2014. The table below outlines key production
indicators for the second quarters of 2015 and 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production summary |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
Change (#) |
|
|
Change (%) |
|
| Ounces produced (1) |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
— |
|
|
|
— |
% |
|
|
|
|
|
| Crushed ore stacked on leach pad (tonnes) (2) |
|
|
1,632,500 |
|
|
|
1,580,200 |
|
|
|
52,300 |
|
|
|
3 |
% |
|
|
|
|
|
| Grade (g/t Au) |
|
|
0.83 |
|
|
|
0.93 |
|
|
|
(0.1 |
) |
|
|
(11 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contained ounces stacked |
|
|
43,400 |
|
|
|
47,300 |
|
|
|
(3,900 |
) |
|
|
(8 |
%) |
|
|
|
|
|
| Crushed ore milled (tonnes) |
|
|
19,400 |
|
|
|
6,800 |
|
|
|
12,600 |
|
|
|
185 |
% |
| Grade (g/t Au) |
|
|
5.78 |
|
|
|
8.65 |
|
|
|
(2.87 |
) |
|
|
(33 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contained ounces milled |
|
|
3,600 |
|
|
|
1,900 |
|
|
|
1,700 |
|
|
|
89 |
% |
|
|
|
|
|
| Ratio of total ounces produced to contained ounces stacked and milled |
|
|
70 |
% |
|
|
67 |
% |
|
|
3 |
% |
|
|
4 |
% |
|
|
|
|
|
| Total ore mined (tonnes) (3) |
|
|
1,791,000 |
|
|
|
2,105,000 |
|
|
|
(314,000 |
) |
|
|
(15 |
%) |
| Waste mined (tonnes) |
|
|
2,390,000 |
|
|
|
1,580,000 |
|
|
|
810,000 |
|
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total mined (tonnes) |
|
|
4,181,000 |
|
|
|
3,685,000 |
|
|
|
496,000 |
|
|
|
13 |
% |
|
|
|
|
|
| Waste-to-ore ratio |
|
|
1.33 |
|
|
|
0.75 |
|
|
|
0.58 |
|
|
|
77 |
% |
|
|
|
|
|
| Ore crushed per day (tonnes) - combined |
|
|
18,100 |
|
|
|
17,400 |
|
|
|
700 |
|
|
|
4 |
% |
| (1) |
Reported gold production for Q2 2015 is subject to final refinery settlement and may be adjusted. |
| (2) |
Excludes mill tailings stacked on the heap leach pad during the period. |
| (3) |
Includes ore stockpiled during the period. |
In the second quarter of 2015, the Mulatos mine
(“Mulatos”) produced 33,000 ounces of gold, consistent with the second quarter of 2014. Open pit, heap leach operations at Mulatos continue to meet expectations and remain the driver of the operation, contributing strong production in the
second quarter.
5
Grades stacked on the leach pad in the quarter were 4% above the annual budget of 0.80 g/t Au, as the Company
continued to benefit from positive grade reconciliations in the Mulatos pit; however, not to the same extent as in the previous quarter.
Mill production
was below budget reflecting lower throughput and recoveries. Throughout the second quarter, the Company continued to process lower grade material at lower throughput rates until the vertical grinding mill was installed. The installation of the
vertical grinding mill was completed in July and is currently being commissioned. With the installation complete, the mill is achieving the grind size required to meet budgeted recoveries of 75%. Accordingly, the Company expects production from the
high-grade mill to improve in the second half of the year. At the end of June, the Company had stockpiles of approximately 45,000 tonnes of high grade ore from the San Carlos deposit at grades in excess of 7 grams per tonne of gold (“g/t
Au”).
Development of the San Carlos underground deposit continued to be a focus during the second quarter. The Company is currently mining from the
western zone of the deposit, and has focused development to the east of current mining activities to assess opportunities in the central zone of the deposit.
Total crusher throughput in the second quarter of 2015 averaged 18,100 tpd, above the annual budgeted rate of 17,850 tpd, despite lower mill throughput. The
Company expects mill throughput to ramp up in the second half of 2015 with the completion of mill commissioning.
The recovery ratio in the second quarter
was 70%. This was below the Company’s annual budget of 74% reflecting lower than budgeted recoveries from the high-grade mill.
Operating Costs
The following table compares costs per tonne for the three and six-month periods ended 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs per tonne summary (2) |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Mining cost per tonne of material (ore and waste) |
|
$ |
3.92 |
|
|
$ |
3.29 |
|
|
$ |
3.85 |
|
|
$ |
3.06 |
|
| Waste-to-ore ratio |
|
|
1.33 |
|
|
|
0.75 |
|
|
|
0.97 |
|
|
|
0.66 |
|
|
|
|
|
|
| Mining cost per tonne of ore |
|
$ |
9.14 |
|
|
$ |
5.75 |
|
|
$ |
7.57 |
|
|
$ |
5.07 |
|
| Crushing/conveying cost per tonne of ore |
|
$ |
1.84 |
|
|
$ |
2.46 |
|
|
$ |
1.99 |
|
|
$ |
2.50 |
|
| Processing cost per tonne of ore |
|
$ |
4.54 |
|
|
$ |
4.39 |
|
|
$ |
4.51 |
|
|
$ |
4.66 |
|
| Mine administration cost per tonne of ore |
|
$ |
2.68 |
|
|
$ |
2.46 |
|
|
$ |
2.80 |
|
|
$ |
2.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost per tonne of ore (1) |
|
$ |
18.20 |
|
|
$ |
15.06 |
|
|
$ |
16.87 |
|
|
$ |
14.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Cost per tonne reflects total costs related to crushed ore stacked on the leach pad and crushed ore milled on a blended basis. |
| (2) |
Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation of certain measures presented in this table. |
Total cost per tonne of ore in the second quarter of 2015 of $18.20 increased 21% compared to the same period of 2014 as a result of higher mining and
administration costs.
Mining cost per tonne of material was $3.92 in the second quarter of 2015, a 19% increase from $3.29 in the second quarter of 2014.
Mining costs includes both open pit and underground mining costs. Mining costs increased primarily as a result of increased underground mining throughput which has a higher cost per tonne, and longer haul distances at the open-pit operations.
Underground mining cost from the San Carlos deposit was $69 per tonne in the second quarter of 2015.
6
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Mining cost per tonne of ore, including underground, of $9.14 increased significantly from prior year due to
a 77% increase in the waste-to-ore ratio of 1.33:1 which was in line with the annual budget of 1.27:1.
Crushing and conveying cost per tonne of ore was
$1.84 in the second quarter of 2015, a decrease of 25% compared to 2014. Crushing and conveying costs decreased in 2015 due to a weaker Mexican peso which drove operating costs lower, as well as higher throughput which lowered the impact of fixed
costs on a per-tonne basis.
Processing costs per tonne of ore were $4.54 in the second quarter of 2015 compared to $4.39 in 2014, a 3% increase.
Processing costs were consistent in 2015 relative to 2014, as a result of lower cyanide input costs offset by gravity mill processing costs. The Company has benefited from lower cyanide costs on the leach pad in the first half of 2015 compared to
the prior year and 2015 annual guidance.
Mine administration costs per tonne of ore in the second quarter of 2015 were $2.68, higher than 2014 but in
line with the 2015 annual budget. The Company anticipates mine administration cost per tonne for the remainder of 2015 to be consistent with the second quarter.
Cash operating costs of $798 per ounce of gold sold in the second quarter of 2015 were in line with the Company’s annual guidance range of $800 per
ounce, but 34% higher than $595 per ounce reported in the second quarter of 2014. The increase relative to the prior year is attributable to lower grades stacked on the leach pad, a higher waste-to-ore ratio, and a higher cost per tonne of ore
mined. Cash operating costs were in line with budget given ore stacked on the leach pad and the waste-to-ore ratio were consistent with budget.
Cash
operating costs include total costs incurred in the period, in addition to inventory adjustments that recognize the allocation of costs to and from the Company’s in-process leach pad gold inventory in the period. The Company utilizes a gold
process flow inventory model that allocates total costs incurred to mill processing or to the recoverable ounces stacked on the leach pad in that period, and charges each ounce of gold produced on an average cost basis. Accordingly, cash operating
costs reflect not only the cash spent in a period, but also an adjustment to reflect the increase or decrease in the leach pad inventory.
A
reconciliation of total costs to cash operating costs is presented below:
|
|
|
|
|
|
|
|
|
| Cash operating cost reconciliation (1) |
|
Q2 2015 |
|
|
Q2 2014 |
|
| Total cost per tonne of ore |
|
$ |
18.20 |
|
|
$ |
15.06 |
|
| Ore stacked/milled (tonnes) |
|
|
1,651,900 |
|
|
|
1,587,000 |
|
|
|
|
|
|
|
|
|
|
| Total cost |
|
$ |
30,065,000 |
|
|
$ |
23,900,000 |
|
| Inventory adjustments to reflect ounces allocated to stockpile inventory |
|
|
(170,000 |
) |
|
|
(1,359,000 |
) |
| Inventory adjustments to reflect additional ounces produced from (allocated to) leach pad inventory and other period costs |
|
|
(576,000 |
) |
|
|
(2,285,000 |
) |
|
|
|
|
|
|
|
|
|
| Mining and processing costs allocated to ounces sold |
|
$ |
29,319,000 |
|
|
$ |
20,256,000 |
|
| Ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
|
|
|
|
|
|
|
| Cash operating cost per ounce sold |
|
$ |
798 |
|
|
$ |
595 |
|
|
|
|
|
|
|
|
|
|
| (1) |
Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation of certain measures presented in this table. |
In the second quarter of 2015, the number of ounces in leach pad inventory decreased slightly, as the number of estimated recoverable ounces stacked on the
leach pad was lower than ounces produced in
7
the quarter. Leach pad inventory, which incorporates both cash operating costs and amortization, decreased to $26.9 million at June 30, 2015 from $27.1 million at December 31, 2014,
reflecting lower ounces in inventory offset by higher cash cost per ounce in inventory.
Investments in Mineral Property, Plant and Equipment and
Acquisitions
A summary of the cash invested in operating capital and development activities for the period ended June 30, 2015 are presented
below:
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
YTD 2015 |
|
| |
|
($000) |
|
|
($000) |
|
| Sustaining Capital - Mulatos |
|
|
|
|
|
|
|
|
|
|
|
149 |
|
|
|
474 |
|
| Interlift liners, ponds, and leach pad |
|
|
1,237 |
|
|
|
2,428 |
|
| Agglomerators |
|
|
470 |
|
|
|
3,323 |
|
| Component changes |
|
|
1,062 |
|
|
|
1,765 |
|
| Other |
|
|
554 |
|
|
|
1,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,472 |
|
|
|
9,131 |
|
| Development - Mulatos |
|
|
|
|
|
|
|
|
| El Victor |
|
|
1,547 |
|
|
|
4,004 |
|
| San Carlos underground |
|
|
1,232 |
|
|
|
2,122 |
|
| Capitalized exploration (San Carlos, La Yaqui, Cerro Pelon) |
|
|
2,731 |
|
|
|
5,105 |
|
| Land acquisitions |
|
|
588 |
|
|
|
3,391 |
|
| Other |
|
|
2,711 |
|
|
|
4,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
8,809 |
|
|
|
19,156 |
|
| Development - Esperanza |
|
|
|
|
|
|
|
|
| Development, capitalized exploration, and equipment |
|
|
947 |
|
|
|
1,712 |
|
| Development - Turkey |
|
|
|
|
|
|
|
|
| Development, capitalized exploration, and equipment |
|
|
401 |
|
|
|
1,042 |
|
| Head office - Toronto |
|
|
|
|
|
|
|
|
| IT infrastructure, software and furniture |
|
|
51 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
| Cash invested in mineral property, plant and equipment and exploration and evaluation assets |
|
$ |
13,680 |
|
|
$ |
31,179 |
|
|
|
|
|
|
|
|
|
|
Sustaining Capital - Mexico
Sustaining capital in Mexico in the second quarter of 2015 totalled $3.5 million and included $1.2 million on leach pad interlift liners and maintenance of the
ponds, $1.1 million for component changes, and $0.5 million to complete the move and replacement of the agglomerators. Full year sustaining capital guidance remains $12.5 million.
Development - Mexico
Development activities in Mexico in
the second quarter of 2015 were focused on underground development of the San Carlos deposit and waste removal at El Victor. In addition, the Company continued exploration and permitting activities at La Yaqui and Cerro Pelon.
Capitalized exploration and development spending in second quarter of 2015 included $2.7 million in capitalized exploration at San Carlos, La Yaqui and Cerro
Pelon. In addition, the Company invested $0.9
8
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
million at the Esperanza Gold Project advancing the EIA baseline study work. Capital expenditures in Turkey and Toronto were minimal in the second quarter of 2015.
Remaining development spending at Mulatos in 2015 will be focused on further underground development of San Carlos and exploration and development of the
Cerro Pelon and La Yaqui satellite deposits. Development spending at Esperanza in 2015 will be focused on ongoing baseline work required for the resubmission of an EIA report and an internal feasibility study to further support development of the
project.
Development - Turkey
The Ağı
Dağı and Kirazlı gold projects are located on the Biga Peninsula of northwestern Turkey. Ağı Dağı is located approximately 50 km southeast of Çanakkale and Kirazlı is located approximately 25 km
northwest of Ağı Dağı. Çanakkale is the largest centre on the Biga Peninsula with a population of approximately 97,000. Infrastructure in close proximity to the project is excellent and well-serviced with paved roads,
transmission lines, and electricity generating facilities.
In June 2012, the Company published a preliminary feasibility study summary of the
Ağı Dağı and Kirazlı projects, with annual combined gold production expected to peak at 237,000 ounces, and averaging 166,000 ounces per year over the nine year combined mine life. For further information with respect to the
preliminary feasibility study, refer to the related technical report available at the Company’s website at www.alamosgold.com and on www.sedar.com under the Company’s profile. In conjunction with the preliminary feasibility
study, the Company reported an initial inferred mineral resource estimate at Çamyurt of 640,000 ounces. The potential inclusion of the Çamyurt resource in a combined development scenario is expected to significantly enhance the overall
economics of the Company’s Turkish projects.
In the six-months ended June 30, 2015, total development expenditures in Turkey of $1.0 million
were capitalized.
In April 2015, the Company received notice that the injunction order granted against the Turkish Ministry of the Environment and
Urbanization’s (the “Ministry”) approval of the Environmental Impact Assessment (“EIA”) for the Ağı Dağı gold project had been dismissed by the Çanakkale Administrative Court. The Ministry
previously signed and issued formal approval in the form of an EIA Positive Decision Certificate for Ağı Dağı in August 2014. In January 2015, the Çanakkale Administrative Court in Turkey granted an injunction order
against the Ministry’s approval of the EIA. The Ministry successfully appealed the ruling with the Çanakkale Administrative Court dismissing the injunction on the basis that the challenge against the EIA approval was registered after the
deadline for such challenges to be filed had expired. With this ruling, the Ministry’s approval of the EIA has been returned to good standing.
In
addition, in June 2015, the Turkish High Administrative Court overturned a Lower Court ruling that had previously cancelled EIA permits granted to Alamos by the Ministry. With this ruling, the EIA certificate for the Kirazli gold project has now
been reinstated. The Ministry previously signed and issued formal approval in the form of an EIA Positive Decision Certificate for Kirazli in August 2013. In January 2014, the Lower Court granted an injunction and subsequently cancelled the
Ministry’s approval of the EIA due to the lack of a cumulative impact assessment (“CIA”). The EIA for the Kirazli project was done to the highest standard and the Lower Court’s basis for the injunction did not relate to concerns
with any technical aspect of the project. The Ministry appealed the decision to the High Court and in parallel, the Company completed a CIA for Kirazli to address the concerns of the Lower Court. The CIA was
9
subsequently approved by the Ministry and submitted to the High Court. The High Court has now overturned the Lower Court’s ruling, reinstating the Ministry’s approval of the Kirazli
EIA.
Obtaining forestry and operating permits are the next steps in the permitting process. The Company remains confident that these permits will be
granted. A full development budget for Kirazlı and Ağı Dağı will be re-initiated once the required permits are received. The capital spending budget for these projects is not expected to differ materially from the June 2012
preliminary feasibility study. The Company is however in the process of evaluating the impact of updated capital costs, the recently approved new mining law, forestry fee changes, tax incentive availability changes and the devaluation of the Turkish
Lira on the operating costs and overall economics of its projects. The Company expects first gold production from Kirazlı within 18 months of receipt of the outstanding permits.
Exploration Summary
Total exploration expenditures in
the second quarter of 2015 were $5.3 million primarily focused at San Carlos, La Yaqui, Cerro Pelon, Esperanza and Quartz Mountain. Of this amount, $3.6 million at San Carlos, La Yaqui, Cerro Pelon and Esperanza was capitalized. An additional $1.7
million of spending at Quartz Mountain and administration costs were expensed.
Exploration - Mulatos
In the second quarter of 2015, exploration drilling was focused on the San Carlos, Cerro Pelon and La Yaqui deposits.
Cerro Pelon
A total of 5,911 metres (“m”) was drilled
at Cerro Pelon during the second quarter. Drilling was focused on testing continuity of mineralization to the north with the objective of increasing in-pit reserves.
La Yaqui
A total of 3,625m was drilled at La Yaqui during the
second quarter of 2015, including both condemnation drilling to test the proposed infrastructure and exploration drilling along strike from known mineralization.
San Carlos
The exploration program at San Carlos included
2,760m drilled during the second quarter, however, surface exploration efforts have transitioned to La Yaqui and Cerro Pelon.
El Victor
The first phase of an exploration program targeting higher-grade mineralization at El Victor (including El Victor North) commenced during the second quarter. A
total of 1,230m was completed and assay results are expected in the third quarter.
Exploration - Esperanza
The Company capitalized $0.9 million at the Esperanza Gold Project in the second quarter of 2015. These development costs were primarily related to the
collection of baseline study data to support resubmission of the EIA.
Exploration - Quartz Mountain
In the second quarter of 2015, the Company invested $0.8 million at the Quartz Mountain project, which was expensed. The initial 8,000m drill program was
completed during the quarter. The objective of the
10
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
program was validation of the existing resource and testing the new geological model. Results received to date have demonstrated strong correlation to the geological model.
Financial Highlights
A summary of the Company’s
financial results for the three and six-month periods ended June 30, 2015 and 2014 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Cash provided by operating activities before changes in non-cash working capital (000)
(1) (2) |
|
$ |
66 |
|
|
$ |
13,212 |
|
|
$ |
7,425 |
|
|
$ |
29,153 |
|
| Changes in non-cash working capital |
|
($ |
1,955 |
) |
|
($ |
3,514 |
) |
|
($ |
6,888 |
) |
|
($ |
12,189 |
) |
| Cash provided by (used for) operating activities (000) |
|
($ |
1,889 |
) |
|
$ |
9,698 |
|
|
$ |
537 |
|
|
$ |
16,964 |
|
| (Loss)/Earnings before income taxes (000) |
|
($ |
12,207 |
) |
|
$ |
4,490 |
|
|
($ |
7,215 |
) |
|
$ |
9,211 |
|
| (Loss)/Earnings (000) |
|
($ |
14,163 |
) |
|
$ |
733 |
|
|
($ |
11,948 |
) |
|
$ |
3,479 |
|
| (Loss)/Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
| - diluted |
|
($ |
0.11 |
) |
|
$ |
0.01 |
|
|
($ |
0.09 |
) |
|
$ |
0.03 |
|
| Comprehensive (loss)/income (000) |
|
($ |
18,475 |
) |
|
$ |
675 |
|
|
($ |
15,929 |
) |
|
$ |
2,922 |
|
| Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - basic |
|
|
127,371,000 |
|
|
|
127,357,000 |
|
|
|
127,364,000 |
|
|
|
127,420,000 |
|
| - diluted |
|
|
127,371,000 |
|
|
|
127,359,000 |
|
|
|
127,364,000 |
|
|
|
127,428,000 |
|
| Assets (000) (3) |
|
|
|
|
|
|
|
|
|
$ |
874,180 |
|
|
$ |
879,511 |
|
| (1) |
A non-GAAP measure calculated as cash provided by operating activities as presented on the consolidated statements of cash flows and adding back changes in non-cash working capital. |
| (2) |
Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation of this measure. |
| (3) |
Assets are shown as at June 30, 2015 and December 31, 2014. |
The Company’s operating margins in
the second quarter of 2015 were negatively impacted by a weaker gold price and higher total cash costs. The Company generated $0.1 million ($0.00 per share) cash from operating activities (before changes in non-cash working capital). Cash used for
operating activities of $1.9 million or $0.02 per share in the second quarter decreased 44% relative to the same period of 2014 as a result of higher cash operating costs and transaction costs incurred associated with the Merger.
Loss before income taxes was $12.2 million or $0.10 per share for the second quarter of 2015 compared to earnings of $4.5 million or $0.04 per share in the
same period of 2014. Loss for the second quarter of 2015 included approximately $8.2 million in transaction costs incurred in the period. On an after-tax basis, the Company recorded a loss in the second quarter 2015 of $14.2 million or $0.11 per
share compared to earnings of $0.7 million in the same period of 2014 as a result of lower gold prices, higher operating costs and transaction costs incurred in the period.
Gold Sales
Details of gold sales are presented below:
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Gold sales (ounces) |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
| Operating revenues (000) |
|
$ |
44,007 |
|
|
$ |
43,843 |
|
|
$ |
88,735 |
|
|
$ |
85,353 |
|
| Realized gold price per ounce |
|
$ |
1,198 |
|
|
$ |
1,288 |
|
|
$ |
1,211 |
|
|
$ |
1,289 |
|
| Average gold price for period (London PM Fix) |
|
$ |
1,192 |
|
|
$ |
1,288 |
|
|
$ |
1,206 |
|
|
$ |
1,291 |
|
Operating revenues in the second quarter of 2015 of $44.0 million were consistent with $43.8 million in the second quarter of
2014 as a result of a 8% increase in the number of ounces of gold sold offset by a 7% decline in the realized gold price per ounce.
The Company generally
enters into short-term forward sales contracts in order to match sales contracts with the next expected delivery date. The Company’s objective is to realize a gold sales price consistent with the average London PM Fix spot gold price. For the
second quarter of 2015, the Company achieved a realized gold price per ounce of $1,198, $6 above the average London PM Fix gold price for the quarter. The Company did not have any significant derivative activity outstanding related to gold, and has
not entered into any long-term hedges in 2015, therefore is leveraged to future changes in the price of gold.
Assessment of Gold Market
The market price of gold continues to exhibit significant volatility. The spot market gold price was approximately $1,100 per ounce on August 11, 2015. At
this gold price, the Company realizes a mine operating cash margin (before taxes and corporate and administrative costs) in excess of $235 per ounce.
12
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Operating Expenses and Operating Margins
Mine operating costs allocated to ounces sold are summarized in the following table for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Gold production (ounces) (1) |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
71,000 |
|
|
|
70,000 |
|
| Gold sales (ounces) |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
| Cash operating costs (000) (2) |
|
$ |
29,319 |
|
|
$ |
20,256 |
|
|
$ |
55,935 |
|
|
$ |
37,802 |
|
| - Per ounce sold |
|
$ |
798 |
|
|
$ |
595 |
|
|
$ |
763 |
|
|
$ |
571 |
|
|
|
|
|
|
| Royalties (000) (3) |
|
$ |
2,312 |
|
|
$ |
2,315 |
|
|
$ |
5,133 |
|
|
$ |
4,620 |
|
| Total cash costs (000) (2) |
|
$ |
31,631 |
|
|
$ |
22,571 |
|
|
$ |
61,068 |
|
|
$ |
42,422 |
|
| - Per ounce sold |
|
$ |
861 |
|
|
$ |
663 |
|
|
$ |
833 |
|
|
$ |
641 |
|
|
|
|
|
|
| Corporate and administrative, share-based compensation, exploration, reclamation costs, sustaining capital expenditures (000) |
|
$ |
10,764 |
|
|
$ |
13,082 |
|
|
$ |
22,092 |
|
|
$ |
22,434 |
|
| All-in sustaining cost (000) (4) |
|
$ |
42,395 |
|
|
$ |
35,653 |
|
|
$ |
83,160 |
|
|
$ |
64,856 |
|
| - Per ounce sold |
|
$ |
1,154 |
|
|
$ |
1,047 |
|
|
$ |
1,134 |
|
|
$ |
980 |
|
|
|
|
|
|
| - Realized gold price per ounce |
|
$ |
1,198 |
|
|
$ |
1,288 |
|
|
$ |
1,211 |
|
|
$ |
1,289 |
|
| - Operating cash margin per ounce (5) |
|
$ |
337 |
|
|
$ |
625 |
|
|
$ |
378 |
|
|
$ |
648 |
|
| (1) |
Reported gold production is subject to final refinery settlement. |
| (2) |
“Cash operating costs” and “Total cash costs” are non-GAAP measures. Refer to “Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a
description and calculation of these measures. |
| (3) |
Royalties are included as of April 1, 2006 at 5.5% of net precious metals revenues (as determined in accordance with the royalty agreement with Royal Gold of 5%, and the 0.5% Extraordinary Mining tax in Mexico).
|
| (4) |
“All-in sustaining cost” is a non-GAAP measure that reflects total mining and processing cost, corporate and administrative costs, exploration costs, sustaining capital, and other operating costs. Refer to
“Cautionary non-GAAP Measures and Additional GAAP Measures” disclosure at the end of this MD&A for a description and calculation of these measures. |
| (5) |
“Operating cash margin per ounce” is a non-GAAP measure that is calculated as the difference between the Company’s gold sales and mining and processing and royalty expenses (“total cash costs”)
as reported in the Company’s financial statements. |
Total cash costs for the second quarter of 2015 were $861 per ounce of gold sold.
Total cash costs for the first half of 2015 were $833 per ounce of gold sold, below the Company’s full year guidance of $865 per ounce. Total cash costs per ounce in the second quarter of 2015 were 30% higher than in the same period of 2014 due
to lower grades stacked on the leach pad, and higher mining and input costs.
All-in Sustaining Costs
In June 2013, the World Gold Council (“WGC”) published a guidance note on Non-GAAP metrics available to gold mining industry participants to use to
report their costs in an effort to encourage improved understanding of the total costs associated with mining an ounce of gold. The Company began reporting “All-in sustaining costs” or “AISC” in 2013.
13
All-in sustaining cost per ounce is reported for the Company’s producing mine, the Mulatos mine in Mexico.
Costs attributable to the Company’s development projects in Turkey, Mexico and the United States are not included within AISC.
AISC include total
cash costs, exploration, corporate and administrative, share based compensation, reclamation and sustaining capital costs, and were $1,154 per ounce of gold sold in the second quarter 2015. AISC for the quarter were above the Company’s annual
guidance of $1,100 due to lower production from the high-grade mill, as well as higher corporate and administrative costs, which had the impact of increasing AISC on a per ounce basis. AISC per ounce increased 10% in second quarter of 2015 relative
to 2014 due primarily to higher cash operating costs.
Royalty
Production from certain mining concessions within the Salamandra District is subject to a sliding scale production royalty with Royal Gold Inc. (the
“Royal Gold royalty”). At gold prices above $400 per ounce, this royalty is calculated at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs, and is included in royalty
expense. The Royal Gold royalty is calculated based on the daily average London PM Fix gold market prices, not actual prices realized by the Company. With the achievement of commercial production on April 1, 2006, production to a maximum of two
million ounces of gold is subject to the royalty. As at June 30, 2015, the royalty was paid or accrued on approximately 1.4 million ounces of applicable gold production. Royalty expense of $2.3 million was consistent with the expense in
the same period of 2014. In 2015, the 0.5% Extraordinary Mining Duty payable to the Mexican Government totaled $0.2 million for the quarter.
Amortization
Amortization expense of $235 per ounce in
the second quarter of 2015 was approximately 18% lower than in the same period of 2014 as a result of lower amortization associated with high grade production from the San Carlos deposit compared with amortization from the Escondida deposits in the
prior year. Amortization per ounce is expected to remain at the current level as the Company has now fully transitioned to mining from the San Carlos underground deposit.
Exploration
The Company’s accounting policy for
exploration costs provides that exploration expenditures be capitalized if management determines that probable future economic benefits will be generated as a result of the expenditures, as evidenced by a positive economic analysis of the project.
Exploration and evaluation expenditures on properties prior to the establishment of a positive economic analysis are charged to operations as incurred.
Total exploration spending in the second quarter of 2015 was $5.3 million, of which $3.6 million was capitalized and $1.7 million was expensed. Exploration
expenditures at San Carlos, La Yaqui, Cerro Pelon and Esperanza were capitalized while exploration costs at Quartz Mountain, other regional targets and administration costs were expensed.
14
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Corporate and Administrative
Corporate and administrative expenses of $3.9 million in the second quarter of 2015 were 11% lower than $4.4 million incurred in the second quarter of 2014.
Corporate and administration costs were lower than budget as a result of lower salary and other head office costs.
Share-based Compensation
Share-based compensation expense, related to stock options and cash-settled stock appreciation rights (“SARs”), restricted share units
(“RSUs”) and deferred share units (“DSUs”) was $1.2 million in the second quarter of 2015, a slight increase from $1.0 million in 2014 due to vesting of previous grants. The value of share-based compensation expense related to
stock options is added to the contributed surplus account within shareholders’ equity, resulting in no net effect on total shareholders’ equity. In 2013, the Company’s Board of Directors approved a cash-settled RSU plan available to
officers, employees and consultants, and a DSU plan available to its directors. SARs, RSUs, and DSUs are cash-settled liabilities, which are remeasured at each reporting date and at the settlement date. Any changes in the fair value of the liability
are recognized as an expense to share-based compensation in the Statements of Comprehensive Income. All outstanding stock options, SARs and RSUs grants are subject to vesting provisions. The vesting provisions result in the calculated market value
of stock option grants being charged to expense in accordance with the vesting terms of the option. DSUs are not subject to vesting terms, therefore the expense is recorded immediately.
Finance Income
Finance income in the second quarter of
2015 was $0.5 million, slightly below the same period of 2014 due to lower cash balances. Interest rates on deposit accounts and short-term investments remain near historically low levels.
Financing Expense
Financing expense includes accretion
of the Company’s decommissioning liability and property acquisition obligations. The expense for the current quarter was $0.4 million, consistent with the second quarter of 2014.
Foreign Exchange Loss
The Company recognized a $1.4
million foreign exchange loss in the second quarter of 2015, compared to a $0.4 million foreign exchange gain in 2014. Throughout the second quarter of 2015, the Mexican peso (“MXN”) and Turkish Lira (“TL”) continued to weaken
relative to the USD, while the Canadian dollar (“CAD”) remained relatively flat.
The foreign exchange loss was comprised of a $0.1 million gain
on the Company’s CAD-denominated net assets, a $1.4 million foreign exchange loss on revaluation of the Company’s MXN-denominated assets, and a $0.1 million foreign exchange loss on revaluation of the Company’s TL-denominated asset
position. The Company classifies the foreign exchange gain or loss on revaluation of its Mexican and
15
Turkish deferred tax liabilities within deferred tax expense rather than within foreign exchange gain or loss.
Income Taxes and Mexican Tax Reform
The Mexican
government approved a new Income Tax Law (“MITL”) effective January 1, 2014. The MITL increased the corporate income tax rate to 30%, created a 10% withholding tax on dividends paid to non-resident shareholders (subject to any
reduction by an Income Tax Treaty) and created an Extraordinary Mining Royalty equal to 0.5% of gross revenues from the sale of gold, silver, and platinum. In addition, the MITL requires taxpayers with mining concessions to pay a 7.5% Special
Mining Tax. The Special Mining Tax is generally applicable to earnings before income tax, depreciation, depletion, amortization, and interest. In calculating the Special Mining Tax there are no deductions related to development type costs but
exploration and prospecting costs are deductible when incurred. The Extraordinary Mining Royalty and Special Mining Tax are tax deductible for income tax purposes.
Tax expense in the second quarter of 2015 was $2.0 million compared to $3.8 million in the same period of 2014. The Company must calculate and provide for tax
installments on a monthly basis in Mexico. The Company satisfies its tax liability through periodic installment payments, as well as by offsetting refundable value-added tax owed from the Mexican government against its tax payable liability. During
the second quarter of 2015, the Company did not pay cash tax installments and offsetting of tax installment payments against its current income tax receivable balance was minimal. In addition, the Company has accrued amounts owing for the 7.5%
Special Mining Tax, which is paid annually. As at June 30, 2015, the Company had an income tax receivable of $15.8 million, carried over from the prior year, and is working diligently to collect this balance.
The statutory federal income tax rate in Mexico for 2015 is 30%. The 7.5% Special Mining Tax introduced under the MITL has increased the effective tax rate in
Mexico substantially. The effective tax rate for 2015 (calculated as a percentage of earnings before income tax) was 65%. The effective tax rate results from a number of factors, many of which are difficult to forecast. The effective tax rate was
impacted by a devaluation in the Mexican peso, as well as non-deductible expenses and expenses not tax benefitted in Canada and Turkey.
The Company
classifies the foreign exchange gain or loss on revaluation of its Mexican and Turkish deferred tax liabilities within deferred tax expense rather than within foreign exchange gain or loss. In the second quarter of 2015, the weakening of the Mexican
peso relative to the US dollar resulted in a $0.9 million foreign exchange loss that was recorded in deferred tax expense. The Company expects the effective tax rate to continue to fluctuate in periods of significant change to Mexican peso and/or
Turkish lira foreign exchange rates.
16
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Summary of Quarterly Results
The following table summarizes quarterly results for the past eight quarters. Quarterly gold production has been adjusted to reflect final settlements, where
applicable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q3 2013 |
|
|
Q4 2013 |
|
|
Q1 2014 |
|
|
Q2 2014 |
|
|
Q3 2014 |
|
|
Q4 2014 |
|
|
Q1 2015 |
|
|
Q2 2015 |
|
| Gold production (ounces) |
|
|
43,000 |
|
|
|
39,000 |
|
|
|
37,000 |
|
|
|
33,000 |
|
|
|
28,000 |
|
|
|
42,500 |
|
|
|
38,000 |
|
|
|
33,000 |
|
| Gold sales (ounces) |
|
|
48,000 |
|
|
|
42,198 |
|
|
|
32,161 |
|
|
|
34,039 |
|
|
|
30,000 |
|
|
|
38,400 |
|
|
|
36,556 |
|
|
|
36,748 |
|
| Operating revenues ($000) |
|
$ |
63,811 |
|
|
$ |
53,832 |
|
|
$ |
41,511 |
|
|
$ |
43,843 |
|
|
$ |
38,523 |
|
|
$ |
46,062 |
|
|
$ |
44,728 |
|
|
$ |
44,007 |
|
| Earnings (loss) from operations ($000) |
|
$ |
14,704 |
|
|
$ |
9,033 |
|
|
$ |
5,541 |
|
|
$ |
3,935 |
|
|
($ |
1,581 |
) |
|
$ |
1,853 |
|
|
$ |
49 |
|
|
($ |
2,990 |
) |
| Earnings (loss) ($000) |
|
$ |
9,249 |
|
|
($ |
5,274 |
) |
|
$ |
2,746 |
|
|
$ |
733 |
|
|
($ |
2,238 |
) |
|
($ |
3,367 |
) |
|
$ |
2,215 |
|
|
($ |
14,163 |
) |
|
|
|
|
|
|
|
|
|
| Earnings (loss) ($ per share) basic/diluted |
|
$ |
0.07 |
|
|
($ |
0.04 |
) |
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
($ |
0.02 |
) |
|
($ |
0.03 |
) |
|
$ |
0.02 |
|
|
($ |
0.11 |
) |
Operating revenues have trended lower over the past two years as a result of decreasing gold prices. Lower realized gold
prices and gold sales have resulted in generally weaker financial results. Gold production in the first and fourth quarters is generally higher than in the third quarter of the year, which can be adversely affected by weather-related production
issues. Seasonal conditions could continue to impact production and financial results in future periods if rainfall is significantly above or below seasonal averages. The reported loss for the fourth quarter of 2013 included a $9.8 million non-cash
deferred tax charge associated with the Mexican tax reform. The gain reported in the first quarter of 2015 included a $7.0 million gain ($4.6 million after tax) on the sale of the El Realito concession, while the loss in Q2 2015 included
approximately $8.2 million of transaction costs incurred in relation to the AuRico merger.
Financial and Other Instruments
The Company’s financial assets and liabilities consist of cash and cash equivalents, short-term investments, amounts receivable, available-for-sale and
held-for-trading securities, accounts payable and accrued liabilities and deferred tax liabilities, some of which are denominated in CAD, MXN and TL. The Company is exposed to financial gains or losses as a result of foreign exchange movements
against the USD.
The Company’s cash and cash equivalents may be invested in short-term liquid deposits or investments that provide a revised rate of
interest upon maturity. At June 30, 2015, the Company’s reported cash and cash equivalents of $249.1 were held in bank deposit accounts or 60-day to 90-day term deposits. The Company’s short-term investments are generally term
deposits with an initial term-to-maturity on acquisition of greater than 90 days.
The majority of the Company’s cash balances are held in USD;
however, the Company does maintain cash and cash equivalents denominated in CAD, MXN and TL. The Company may enter into derivative contracts in order to manage its exposures to fluctuations in foreign exchange rates to the CAD, MXN, or TL.
In connection with the Merger with AuRico, the Company subscribed for approximately 27.9 million common shares of AuRico on a private placement basis in
April 2015, which were classified as available-
17
for-sale securities as at June 30, 2015. The common shares held by the Company were cancelled upon closing of the transaction on July 2, 2015.
As at June 30, 2015, the Company had outstanding a contract to deliver $5 million CAD in exchange for a fixed amount of USD in July 2015, with a CAD:USD
rate of 1.25:1. The mark-to-market loss associated with this contract as at June 30, 2015 was nominal. The Company is exposed to monetary assets and liabilities denominated in CAD. The Company maintains CAD cash and investment balances, which
are not fully offset by CAD-denominated liabilities. The strengthening of the CAD in the second quarter of 2015 resulted in a foreign exchange gain of $0.1 million.
The Company also has exposure to monetary assets and liabilities denominated in MXN. Significant cash balances, outstanding amounts receivable, accounts
payable or tax liabilities denominated in MXN expose the Company to foreign exchange gains or losses. The Company maintains cash balances in MXN in order to partially mitigate its balance sheet exposure to changes in the MXN/USD exchange rate
resulting from its MXN-denominated taxes payable and deferred tax liability balances. In addition, in December 2015 the Company entered into foreign currency collar contracts to hedge a portion of its Mexican peso-demoninated operating costs in
2015. The Company has entered into contracts totaling $24 million as at June 30, 2015, with scheduled expiries monthly throughout the remainder of 2015, and represents approximately 60% of the Company’s operating and capital cost MXN
exposure. The mark-to-market loss associated with these contracts as at June 30, 2015 was $0.4 million. The weakening of the MXN in the second quarter of 2015 resulted in a $1.4 million foreign exchange loss.
At June 30, 2015 the Company’s TL-denominated net monetary assets mainly consisted of TL-denominated cash and short-term investments, in addition to
value-added tax (“VAT”) receivables. This exposure contributed to a $0.1 million foreign exchange loss due to the weakening of the TL compared to the USD during the quarter.
Liquidity and Capital Resources
At June 30, 2015,
the Company had $249.1 million in cash and cash equivalents and short-term investments compared to $358.1 million at December 31, 2014. In addition, the Company held approximately 27.9 million common shares of AuRico, which were classified
as available-for-sale securities as at June 30, 2015. The common shares held by the Company were cancelled upon closing of the transaction on July 2, 2015.
The decrease in total cash and cash equivalents and short-term investments to $249.1 million mainly reflects negative cash flows from operations of $1.9
million, the private placement for AuRico common shares of $83.2 million and $13.7 million in capital spending. The Company’s working capital surplus decreased to $381.7 million at June 30, 2015 from $411.5 million at December 31,
2014.
Despite substantially lower gold prices which are resulting in reduced profitability, cash flow and liquidity across the industry, the
Company’s balance sheet remains strong with $249.1 million in cash, $381.7 million of working capital and continued positive cash flow from operations.
During the second quarter, the Company declared and paid its 11th consecutive semi-annual dividend in the amount of US$0.03 per common share. Including the
current dividend, the Company has returned a total of $100 million to shareholders through dividends and share repurchases over the past five years. In addition, the Company implemented a dividend reinvestment and share purchase plan.
18
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Internal Control over Financial Reporting
Management is responsible for the design and operating effectiveness of internal controls over financial reporting to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the financial statements in accordance with IFRS. In making the assessment, management used the criteria set forth in Internal Control - Integrated Framework (2013), issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on a review of its internal control procedures at the end of the period covered by this MD&A, management believes its internal controls and procedures are appropriately
designed as at June 30, 2015.
Changes in Internal Control over Financial Reporting
There were no significant changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30,
2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Disclosure Controls
Management is also responsible for
the design and effectiveness of disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company’s certifying officers.
The Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the design of the Company’s disclosure controls and procedures as at June 30, 2015 and have concluded that these are appropriately designed and
operating effectively.
Limitations of Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that internal controls over financial reporting and
disclosure controls and procedures, no matter how well designed and operated, have inherent limitations. Therefore, even those systems determined to be properly designed and effective can provide only reasonable assurance that the objectives of the
control system are met.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Outstanding Share Data
The Company’s shares were
delisted from the TSX and NYSE on July 6, 2015 following the closing of the Merger with AuRico Gold Inc.
Outlook
In July, the Company completed the merger with AuRico to combine the companies by way of a Plan of Arrangement, creating a new, leading intermediate gold
producer. The Merger combined two top-quality,
19
highly-complementary asset portfolios, including AuRico’s Young-Davidson and El Chanate mines in Ontario, Canada and Sonora, Mexico, respectively, and Alamos’ Mulatos mine in Sonora,
Mexico.
With diversified North American-based gold production, a strong balance sheet, and a portfolio of low cost growth projects, all located in safe
political jurisdictions, Alamos is well positioned to deliver shareholder value.
Alamos is on track to achieve its full year production and cost
guidance. On a combined full year 2015 basis, the Company anticipates total production from the Young Davidson, Mulatos and El Chanate mines to be between 375,000 and 425,000 ounces of gold.
The Company continues to invest in its primary producing operations, including ramping up underground production at Young Davidson and development of the
Cerro Pelon and La Yaqui satellite deposits at Mulatos. This is expected to drive low cost production growth at both operations while substantially reducing costs. The Company’s balance sheet provides the financial flexibility to complete these
planned expansions in the current gold price environment.
The underground ramp up at Young Davidson remains well on track with average underground mining
rates of 5,150 TPD in the second quarter of 2015. The Company is well positioned to achieve year end targeted rates of 6,000 TPD, followed by the ultimate target of 8,000 TPD. Underground unit mining costs were significantly lower in the second
quarter at $33 per tonne reflecting ongoing productivity improvements and the weaker Canadian dollar. The ramp up in underground mining rates is expected to result in further decreases in unit costs along with supplying an increasing proportion of
mill feed, driving milled grades and gold production higher. Both are expected to drive total cash costs lower and combined with declining development capital requirements starting in 2017, and increase in free cash flow generation. The current
objective at the Young-Davidson mine is for cash flow from operations to finance the growth capital required to develop the lower mine over the next two years, while achieving targeted underground mining rates. Current gold prices have made this
objective a challenge, but the Company has the balance sheet strength to self-finance the underground ramp up and position the mine to generate strong free cash flow once the 8,000 TPD target has been met.
At Mulatos, the Company expects a significant increase in second half 2015 production reflecting stronger high grade mill production from the San Carlos
deposit. The high grade mill modifications are being commissioned and recoveries are expected to increase to 75% from current levels of approximately 60%. In addition, the Company will ramp up throughput to the mill, supplementing underground ore
production with existing high grade stockpiles. At the end of June, the Company had over 45,000 tonnes of high grade stockpiles, at grades in excess of 7 g/t Au. Production from high-grade ore at San Carlos has a lower total cash cost profile than
leach pad production, therefore, increased mill production is expected to result in lower total cash costs and stronger operating cash flow in the second half of the year. Looking beyond 2015, total cash costs are expected to improve as open pit
grades increase and the waste-to-ore ratio normalizes to life-of-mine levels. Mulatos will be further bolstered by the development of Cerro Pelon and La Yaqui. With Cerro Pelon and La Yaqui averaging double the 2015 budgeted heap leach grade, these
deposits are expected to both increase production and drive costs substantially lower.
The El Chanate mine exceeded expectations in the second quarter
achieving record production of 23,241 ounces of gold and positive free-cash flow in the first half of the year. This performance reflected higher
20
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
recoveries, and the operation remains well-positioned to achieve its full year production and cost guidance.
Management is focused on successfully integrating AuRico and Former Alamos, and is continuously seeking opportunities for cost savings and synergies. The
Company has committed to a minimum annual savings of $10 million from corporate G&A, tax and purchasing efficiencies, and believes there are opportunities to increase this further. With two producing operations in the state of Sonora, Mexico,
the Company is confident that purchasing efficiencies will be realized, and mine operating costs will be reduced accordingly.
The Company’s cash
position and balance sheet remain strong, which is a critical asset in the current economic environment. Young-Davidson and Mulatos are expected to self-finance the majority of their development spending over the next two years. Further, the recent
weakness in both the Canadian dollar and Mexican peso relative to the United States dollar have partially offset the impact of the lower gold price on free cash flow as both operating and capital costs have benefitted.
The Company’s long-term growth is further supported by a strong portfolio of low-cost, low capital intensity development projects, which are at various
stages of exploration, permitting and development. Development spending with respect to the Company’s project pipeline is largely discretionary. The Company is prioritizing its development spending and allocating resources to those projects
with the highest potential returns. At current gold prices, the Company’s advanced development projects are economic and are expected to generate strong returns.
Accounting Policies in effect January 1, 2015
There
are no new accounting policies adopted in 2015.
Future accounting policy changes not yet in effect
The following are new pronouncements approved by the IASB. The standards and interpretations are not yet effective and have not been applied in preparing these
financial statements; however, they may impact future periods.
(i) IFRS 9 Financial Instruments (Revised) was issued by the IASB in October 2010. It
incorporates revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement. The revised financial
liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss - in these cases, the portion of the change
in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. On July 24, 2014, the IASB issued the final version of IFRS 9 with an effective adoption date of
January 1, 2018, with early adoption permitted. The impact of IFRS 9 on the Company’s financial instruments has not yet been determined.
(ii)
IFRS 15 Revenue from Contracts with Customers (IFRS 15) was issued in May 2014, which covers principles for reporting about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. IFRS 15 is
effective for annual periods beginning on or after
21
January 1, 2018. The Company has commenced a review process to determine the impact of adopting this standard on its consolidated financial statements.
(iii) IAS 16 Property, Plant and Equipment (IAS 16) and IAS 38, Intangibles (IAS 38) was issued in May 2014 and prohibits the use of revenue-based
depreciation methods for property, plant and equipment and limits the use of revenue-based amortization for intangible assets. These amendments are effective for annual periods beginning on or after January 1, 2016 and are to be applied
prospectively. The Company does not expect that the adoption of these amendments will have a material impact on its consolidated financial statements.
Forward-Looking Statements
This MD&A contains
“forward-looking information”, as such term is defined in applicable Canadian securities legislation and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995,
concerning Alamos’s future financial or operating performance and other statements that express management’s expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as “expects”, “believes”, “anticipates”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“plans” and variations of such words and phrases, or by statements that certain actions, events or results “may”, “will”, “could”, “would” or “might”, “be taken”,
“occur” or “be achieved”. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Alamos operates, are inherently
subject to significant operational, economic and competitive uncertainties and contingencies. Alamos cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Alamos’s actual
results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to, gold and silver price volatility; fluctuations in foreign exchange rates and interest rates; the
impact of any hedging activities; discrepancies between actual and estimated production, between actual and estimated reserves and resources or between actual and estimated metallurgical recoveries; costs of production; capital expenditure
requirements; the costs, timing, technical and political risk of construction and development of new deposits; and the success of exploration and permitting activities. In addition, the factors described or referred to in the section entitled
“Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2014 which is available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this MD&A.
Although Alamos has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results,
performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management’s expectations or estimates of future developments, circumstances or
results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this MD&A is made as of the date of this interim report, and Alamos disclaims any intention or
obligation to update or revise such information, except as required by applicable law.
Cautionary non-GAAP Measures and Additional GAAP Measures
22
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain
non-GAAP and additional GAAP measures as indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.
Non-GAAP and additional GAAP measures do not have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies.
| (i) |
Cash flow from operating activities before changes in non-cash working capital |
“Cash flow from
operating activities before changes in non-cash working capital” is a non-GAAP performance measure that could provide an indication of the Company’s ability to generate cash flows from operations, and is calculated by adding back the
change in non-cash working capital to “Cash provided by (used in) operating activities” as presented on the Company’s consolidated statements of cash flows.
The following table reconciles the non-GAAP measure to the consolidated statements of cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Cash flow from operating activities - IFRS (000) |
|
($ |
1,889 |
) |
|
$ |
9,698 |
|
|
$ |
537 |
|
|
$ |
16,964 |
|
| Changes in non-cash working capital (000) |
|
|
1,955 |
|
|
|
3,514 |
|
|
|
6,888 |
|
|
|
12,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow from operating activities before changes in non-cash working capital (000) |
|
$ |
66 |
|
|
$ |
13,212 |
|
|
$ |
7,425 |
|
|
$ |
29,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (ii) |
Mining cost per tonne of ore |
“Mining cost per tonne of ore” and “Cost per tonne of
ore” are non-GAAP performance measures that could provide an indication of the mining and processing efficiency and effectiveness of the mine. These measures are calculated by dividing the relevant mining and processing costs and total costs by
the tonnes of ore processed in the period. “Cost per tonne of ore” is usually affected by operating efficiencies and waste-to-ore ratios in the period. The following table reconciles the non-GAAP measure to the consolidated statements of
comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Mining and processing costs - IFRS (000) |
|
$ |
29,319 |
|
|
$ |
20,256 |
|
|
$ |
55,935 |
|
|
$ |
37,802 |
|
| Inventory adjustments and period costs (000) |
|
|
746 |
|
|
|
3,644 |
|
|
|
(1,357 |
) |
|
|
7,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost (000) |
|
$ |
30,065 |
|
|
$ |
23,900 |
|
|
$ |
54,578 |
|
|
$ |
45,455 |
|
| Tonnes Ore stacked / milled (000) |
|
|
1,652 |
|
|
|
1,587 |
|
|
|
3,224 |
|
|
|
3,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost per tonne of ore |
|
$ |
18.20 |
|
|
$ |
15.06 |
|
|
$ |
16.87 |
|
|
$ |
14.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (iii) |
Cash operating costs per ounce and total cash costs per ounce |
“Cash operating costs per
ounce” and “total cash costs per ounce” as used in this analysis are non-GAAP terms typically used by gold mining companies to assess the level of gross margin available to the Company by subtracting these costs from the unit price
realized during the period. These non-GAAP terms are also used to assess the ability of a mining company to generate cash flow from operations. There may be some variation in the method of computation of “cash operating costs per ounce” as
determined by the Company compared with other mining companies. In this context, “cash operating
23
costs per ounce” reflects the cash operating costs allocated from in-process and dore inventory associated with ounces of gold sold in the period. “Cash operating costs per ounce”
may vary from one period to another due to operating efficiencies, waste-to-ore ratios, grade of ore processed and gold recovery rates in the period. “Total cash costs per ounce” includes “cash operating costs per ounce” plus
applicable royalties. Cash operating costs per ounce and total cash costs per ounce are exclusive of exploration costs.
The following table reconciles
these non-GAAP measure to the consolidated statements of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Mining and processing costs - IFRS (000) |
|
$ |
29,319 |
|
|
$ |
20,256 |
|
|
$ |
55,935 |
|
|
$ |
37,802 |
|
| Divided by: Gold ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Cash operating costs per ounce |
|
$ |
798 |
|
|
$ |
595 |
|
|
$ |
763 |
|
|
$ |
571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mining and processing costs - IFRS (000) |
|
$ |
29,319 |
|
|
$ |
20,256 |
|
|
$ |
55,935 |
|
|
$ |
37,802 |
|
| Royalties - IFRS (000) |
|
$ |
2,312 |
|
|
$ |
2,315 |
|
|
$ |
5,132 |
|
|
$ |
4,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Cash costs (000) |
|
$ |
31,631 |
|
|
$ |
22,571 |
|
|
$ |
61,067 |
|
|
$ |
42,422 |
|
| Divided by: Gold ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Cash costs per ounce |
|
$ |
861 |
|
|
$ |
663 |
|
|
$ |
833 |
|
|
$ |
641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (iv) |
All-in sustaining cost per ounce |
Effective 2013, in conjunction with a non-GAAP initiative being
undertaken by the gold mining industry, the Company adopted an “all-in sustaining cost per ounce” non-GAAP performance measure. The Company believes the measure more fully defines the total costs associated with producing gold; however,
this performance measure has no standardized meaning. Accordingly, there may be some variation in the method of computation of “all-in sustaining cost per ounce” as determined by the Company compared with other mining companies. In this
context, “all-in sustaining cost per ounce” reflects total mining and processing costs, corporate and administrative costs, exploration costs, sustaining capital, and other operating costs. Sustaining capital expenditures are expenditures
that do not increase annual gold ounce production at a mine site and excludes all expenditures at the Company’s development projects as well as certain expenditures at the Company’s operating sites that are deemed expansionary in nature.
24
MANAGEMENT’S DISCUSSION & ANALYSIS
(All amounts are expressed in United States dollars, unless otherwise stated)
The following table reconciles these non-GAAP measures to the consolidated statements of comprehensive
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| Mining and processing costs (000) |
|
$ |
29,319 |
|
|
$ |
20,256 |
|
|
$ |
55,935 |
|
|
$ |
37,802 |
|
| Royalties (000) |
|
|
2,312 |
|
|
|
2,315 |
|
|
|
5,132 |
|
|
|
4,620 |
|
| Corporate and administration (000) (1) |
|
|
3,338 |
|
|
|
3,750 |
|
|
|
6,120 |
|
|
|
7,284 |
|
| Share-based compensation (000) |
|
|
1,170 |
|
|
|
1,784 |
|
|
|
2,288 |
|
|
|
1,000 |
|
| Exploration costs (000) (2) |
|
|
2,419 |
|
|
|
3,201 |
|
|
|
3,833 |
|
|
|
6,174 |
|
| Reclamation cost accretion (000) |
|
|
365 |
|
|
|
349 |
|
|
|
724 |
|
|
|
690 |
|
| Sustaining capital expenditures (000) |
|
|
3,472 |
|
|
|
3,998 |
|
|
|
9,127 |
|
|
|
7,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,395 |
|
|
$ |
35,653 |
|
|
$ |
83,159 |
|
|
$ |
64,856 |
|
| Divided by: Gold ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in sustaining cost per ounce |
|
$ |
1,154 |
|
|
$ |
1,047 |
|
|
$ |
1,134 |
|
|
$ |
980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Excludes corporate and administration costs incurred at the Company’s development projects. |
| (2) |
Excludes exploration associated with the Company’s development projects. |
Effective 2013, in conjunction with a non-GAAP initiative being undertaken by the gold
mining industry, the Company is adopting an “all-in cost per ounce” non-GAAP performance measure; however, this performance measure has no standardized meaning. Accordingly, there may be some variation in the method of computation of
“all-in cost per ounce” as determined by the Company compared with other mining companies. In this context, “all-in cost per ounce” reflects total all-in sustaining cash costs, plus capital, operating, and exploration costs
associated with the Company’s development projects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Q2 2015 |
|
|
Q2 2014 |
|
|
YTD 2015 |
|
|
YTD 2014 |
|
| All-in sustaining cost (above) |
|
$ |
42,395 |
|
|
$ |
35,653 |
|
|
$ |
83,159 |
|
|
$ |
64,856 |
|
| Add: Development and expansion capital (000) |
|
|
7,395 |
|
|
|
7,539 |
|
|
|
17,746 |
|
|
|
12,460 |
|
| Add: Other development and exploration (000) |
|
|
1,904 |
|
|
|
1,591 |
|
|
|
3,714 |
|
|
|
2,770 |
|
| Add: Development project corporate and administration (000) |
|
|
549 |
|
|
|
600 |
|
|
|
1,205 |
|
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,243 |
|
|
|
45,383 |
|
|
|
105,824 |
|
|
|
81,236 |
|
| Divided by: Gold ounces sold |
|
|
36,748 |
|
|
|
34,039 |
|
|
|
73,304 |
|
|
|
66,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in cost per ounce |
|
$ |
1,422 |
|
|
$ |
1,333 |
|
|
$ |
1,444 |
|
|
$ |
1,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (vi) |
Other additional GAAP measures |
Additional GAAP measures that are presented on the face of the
Company’s consolidated statements of comprehensive income and are not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following
additional GAAP measures are used and are intended to provide an indication of the Company’s mine and operating performance:
| |
• |
|
Mine operating costs - represents the total of mining and processing, royalties, and amortization expense |
25
| |
• |
|
Earnings from mine operations - represents the amount of revenues in excess of mining and processing, royalties, and amortization expense |
| |
• |
|
Earnings from operations - represents the amount of earnings before net finance income/expense, foreign exchange gain/loss, other income/loss, and income tax expense |
26
Exhibit 99.4
(formerly AuRico Gold Inc.)
Condensed Interim Consolidated
Financial Statements
(in thousands of United States Dollars, unless otherwise stated)
June 30, 2015
(FORMERLY AURICO GOLD INC.)
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
| As at |
|
June 30
2015 |
|
|
December 31
2014 |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
129,725 |
|
|
$ |
89,031 |
|
| Receivables |
|
|
14,393 |
|
|
|
14,076 |
|
| Current income tax receivable |
|
|
4,124 |
|
|
|
5,166 |
|
| Inventories (Note 5) |
|
|
72,962 |
|
|
|
73,116 |
|
| Prepaids and deposits |
|
|
3,805 |
|
|
|
2,565 |
|
| Assets held for distribution (Note 6) |
|
|
164,016 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
389,025 |
|
|
|
183,954 |
|
|
|
|
| Non-current assets |
|
|
|
|
|
|
|
|
| Investments |
|
|
122 |
|
|
|
184 |
|
| Long-term inventories (Note 5) |
|
|
89,065 |
|
|
|
103,156 |
|
| Investments in associate and joint venture |
|
|
22,953 |
|
|
|
23,434 |
|
| Other long-term assets |
|
|
34,262 |
|
|
|
51,042 |
|
| Property, plant and equipment & mining interests (Note 7 and Note 9) |
|
|
1,406,442 |
|
|
|
1,638,730 |
|
| Intangible assets (Note 8 and Note 9) |
|
|
16,902 |
|
|
|
39,633 |
|
| Goodwill (Note 9) |
|
|
— |
|
|
|
241,693 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,958,771 |
|
|
$ |
2,281,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
| Trade payables and accrued liabilities |
|
$ |
65,270 |
|
|
$ |
42,046 |
|
| Distribution payable (Note 6) |
|
|
147,413 |
|
|
|
— |
|
| Current income tax liability |
|
|
209 |
|
|
|
407 |
|
| Derivative liabilities (Note 17) |
|
|
1,379 |
|
|
|
447 |
|
| Current portion of debt and equipment financing obligations (Note 10) |
|
|
6,185 |
|
|
|
6,308 |
|
| Current portion of obligation to renounce flow-through exploration expenditures (Note 11) |
|
|
3,226 |
|
|
|
857 |
|
| Current portion of provisions |
|
|
806 |
|
|
|
2,056 |
|
| Liabilities associated with assets held for distribution (Note 6) |
|
|
16,603 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
241,091 |
|
|
|
52,121 |
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
| Debt and equipment financing obligations (Note 10) |
|
|
309,329 |
|
|
|
308,064 |
|
| Obligation to renounce flow-through exploration expenditures (Note 11) |
|
|
1,083 |
|
|
|
— |
|
| Provisions |
|
|
13,654 |
|
|
|
29,529 |
|
| Deferred income tax liability |
|
|
232,132 |
|
|
|
260,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
797,289 |
|
|
|
650,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| Capital stock (Note 12) |
|
|
2,126,555 |
|
|
|
2,029,991 |
|
| Contributed surplus |
|
|
67,015 |
|
|
|
62,316 |
|
| Deficit |
|
|
(1,031,793 |
) |
|
|
(460,848 |
) |
| Accumulated other comprehensive loss from available-for-sale investments |
|
|
(295 |
) |
|
|
(249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
1,161,482 |
|
|
|
1,631,210 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,958,771 |
|
|
$ |
2,281,826 |
|
|
|
|
|
|
|
|
|
|
Events after the reporting period (Note 19)
See accompanying notes to the unaudited condensed interim consolidated financial statements
1
(FORMERLY AURICO GOLD INC.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands of United States dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014
Restated
(Note 3) |
|
|
June 30
2015 |
|
|
June 30
2014
Restated
(Note 3) |
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
72,139 |
|
|
$ |
75,530 |
|
|
$ |
137,498 |
|
|
$ |
146,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs (Note 5) |
|
|
49,313 |
|
|
|
48,691 |
|
|
|
87,025 |
|
|
|
96,584 |
|
| Refining costs |
|
|
147 |
|
|
|
155 |
|
|
|
337 |
|
|
|
295 |
|
| Amortization and depletion (Note 5) |
|
|
26,646 |
|
|
|
34,785 |
|
|
|
48,231 |
|
|
|
63,378 |
|
| Reclamation, care and maintenance costs |
|
|
1,593 |
|
|
|
2,270 |
|
|
|
1,625 |
|
|
|
3,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost of sales |
|
|
77,699 |
|
|
|
85,901 |
|
|
|
137,218 |
|
|
|
163,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative |
|
|
4,987 |
|
|
|
5,663 |
|
|
|
9,737 |
|
|
|
14,919 |
|
| Exploration and business development |
|
|
309 |
|
|
|
259 |
|
|
|
715 |
|
|
|
459 |
|
| Revaluation of assets held for distribution (Note 6) |
|
|
40,112 |
|
|
|
— |
|
|
|
40,112 |
|
|
|
— |
|
| Impairment charges (Note 9 and Note 13) |
|
|
366,041 |
|
|
|
— |
|
|
|
369,216 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations (Note 13) |
|
|
(417,009 |
) |
|
|
(16,293 |
) |
|
|
(419,500 |
) |
|
|
(32,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finance costs |
|
|
(5,462 |
) |
|
|
(5,901 |
) |
|
|
(11,278 |
) |
|
|
(7,918 |
) |
| Foreign exchange gain / (loss) |
|
|
220 |
|
|
|
1,012 |
|
|
|
(4,826 |
) |
|
|
(1,842 |
) |
| Other loss (Note 14) |
|
|
(13,672 |
) |
|
|
(3,878 |
) |
|
|
(6,699 |
) |
|
|
(15,360 |
) |
| Equity in loss of associate and joint venture |
|
|
(336 |
) |
|
|
— |
|
|
|
(481 |
) |
|
|
(92 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(436,259 |
) |
|
|
(25,060 |
) |
|
|
(442,784 |
) |
|
|
(57,569 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred income tax recovery |
|
|
(57,083 |
) |
|
|
(8,364 |
) |
|
|
(28,769 |
) |
|
|
(12,175 |
) |
| Current income tax expense |
|
|
366 |
|
|
|
80 |
|
|
|
785 |
|
|
|
273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,717 |
) |
|
|
(8,284 |
) |
|
|
(27,984 |
) |
|
|
(11,902 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(379,542 |
) |
|
$ |
(16,776 |
) |
|
$ |
(414,800 |
) |
|
$ |
(45,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss per share (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic loss per share |
|
$ |
(1.43 |
) |
|
$ |
(0.07 |
) |
|
$ |
(1.57 |
) |
|
$ |
(0.18 |
) |
| Diluted loss per share |
|
$ |
(1.43 |
) |
|
$ |
(0.07 |
) |
|
$ |
(1.57 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
| Weighted average shares outstanding (Note 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
264,939,446 |
|
|
|
248,495,726 |
|
|
|
263,453,673 |
|
|
|
248,343,301 |
|
| Diluted |
|
|
264,939,446 |
|
|
|
248,495,726 |
|
|
|
263,453,673 |
|
|
|
248,343,301 |
|
See accompanying notes to the unaudited condensed interim consolidated financial statements
2
(FORMERLY AURICO GOLD INC.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
(unaudited, in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
|
|
|
|
|
| Net loss |
|
$ |
(379,542 |
) |
|
$ |
(16,776 |
) |
|
$ |
(414,800 |
) |
|
$ |
(45,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Items that may be reclassified subsequently to net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized (loss) / gain on investments |
|
|
(54 |
) |
|
|
5 |
|
|
|
(46 |
) |
|
|
2,596 |
|
| Reclassification of accumulated (losses) / gains on investments to net loss |
|
|
— |
|
|
|
(233 |
) |
|
|
— |
|
|
|
2,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other comprehensive (loss) / income |
|
|
(54 |
) |
|
|
(228 |
) |
|
|
(46 |
) |
|
|
5,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
$ |
(379,596 |
) |
|
$ |
(17,004 |
) |
|
$ |
(414,846 |
) |
|
$ |
(40,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed interim consolidated financial statements
3
(FORMERLY AURICO GOLD INC.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited, in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(379,542 |
) |
|
$ |
(16,776 |
) |
|
$ |
(414,800 |
) |
|
$ |
(45,667 |
) |
| Payments to settle derivative liabilities (Note 17) |
|
|
(208 |
) |
|
|
— |
|
|
|
(690 |
) |
|
|
— |
|
| Payments to settle provisions |
|
|
(498 |
) |
|
|
(2,215 |
) |
|
|
(696 |
) |
|
|
(2,215 |
) |
| Non-cash adjustments to reconcile net loss to operating cash flows (Note 16) |
|
|
387,830 |
|
|
|
31,249 |
|
|
|
440,716 |
|
|
|
73,609 |
|
| Change in non-cash operating working capital (Note 16) |
|
|
13,219 |
|
|
|
(7,609 |
) |
|
|
10,303 |
|
|
|
3,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating cash flows |
|
|
20,801 |
|
|
|
4,649 |
|
|
|
34,833 |
|
|
|
29,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenditures on property, plant and equipment, mining interests and intangible assets |
|
|
(40,669 |
) |
|
|
(41,116 |
) |
|
|
(75,840 |
) |
|
|
(96,728 |
) |
| (Increase) / decrease in restricted cash |
|
|
(504 |
) |
|
|
179,633 |
|
|
|
(504 |
) |
|
|
5,877 |
|
| Sale of investments |
|
|
— |
|
|
|
9,298 |
|
|
|
— |
|
|
|
23,284 |
|
| Proceeds from retained interest royalty (Note 8) |
|
|
— |
|
|
|
2,463 |
|
|
|
— |
|
|
|
2,463 |
|
| Proceeds from termination of retained interest royalty (Note 8) |
|
|
— |
|
|
|
— |
|
|
|
16,725 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Investing cash flows |
|
|
(41,173 |
) |
|
|
150,278 |
|
|
|
(59,619 |
) |
|
|
(65,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Repayment of debt and equipment financing obligations |
|
|
(2,139 |
) |
|
|
(174,491 |
) |
|
|
(3,780 |
) |
|
|
(250,892 |
) |
| Proceeds from debt and equipment financing obligations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
305,314 |
|
| Payment of financing fees on debt |
|
|
— |
|
|
|
(1,620 |
) |
|
|
— |
|
|
|
(7,535 |
) |
| Payment of dividends (Note 12(c)) |
|
|
(2,818 |
) |
|
|
(4,338 |
) |
|
|
(8,005 |
) |
|
|
(13,003 |
) |
| Proceeds from exercise of stock options |
|
|
368 |
|
|
|
— |
|
|
|
659 |
|
|
|
2 |
|
| Proceeds from private placement (Note 12(b)) |
|
|
83,280 |
|
|
|
— |
|
|
|
83,280 |
|
|
|
— |
|
| Proceeds from issuance of flow-through shares (Note 11) |
|
|
— |
|
|
|
— |
|
|
|
15,312 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financing cash flows |
|
|
78,691 |
|
|
|
(180,449 |
) |
|
|
87,466 |
|
|
|
33,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reclassification of cash to assets held for distribution |
|
|
(20,000 |
) |
|
|
— |
|
|
|
(20,000 |
) |
|
|
— |
|
| Impact of foreign exchange on cash |
|
|
322 |
|
|
|
786 |
|
|
|
(1,986 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase / (decrease) in cash |
|
|
38,641 |
|
|
|
(24,736 |
) |
|
|
40,694 |
|
|
|
(2,078 |
) |
|
|
|
|
|
| Cash, beginning of period |
|
|
91,084 |
|
|
|
165,310 |
|
|
|
89,031 |
|
|
|
142,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash, end of period |
|
$ |
129,725 |
|
|
$ |
140,574 |
|
|
$ |
129,725 |
|
|
$ |
140,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed interim consolidated financial statements
4
(FORMERLY AURICO GOLD INC.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
(unaudited, in thousands of United States dollars)
|
|
|
|
|
|
|
|
|
| For the six months ended June 30 |
|
2015 |
|
|
2014 |
|
|
|
|
| Capital stock |
|
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
2,029,991 |
|
|
$ |
2,021,837 |
|
| Shares issued on redemption of performance share units |
|
|
175 |
|
|
|
— |
|
| Shares issued through dividend reinvestment plan |
|
|
670 |
|
|
|
1,871 |
|
| Shares issued on redemption of restricted share units |
|
|
93 |
|
|
|
— |
|
| Shares issued through employee share purchase plan |
|
|
1,269 |
|
|
|
1,077 |
|
| Shares issued on redemption of deferred share units |
|
|
— |
|
|
|
359 |
|
| Shares issued through private placement (Note 12(b)) |
|
|
83,280 |
|
|
|
— |
|
| Shares issued for cash pursuant to exercise of stock options |
|
|
659 |
|
|
|
2 |
|
| Fair value of share-based compensation on stock options exercised |
|
|
604 |
|
|
|
4 |
|
| Shares issued through flow-through financing (Note 11) |
|
|
9,814 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
$ |
2,126,555 |
|
|
$ |
2,025,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contributed surplus |
|
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
62,316 |
|
|
$ |
55,945 |
|
| Fair value of performance share units redeemed |
|
|
(175 |
) |
|
|
— |
|
| Fair value of restricted share units redeemed |
|
|
(93 |
) |
|
|
— |
|
| Fair value of deferred share units redeemed |
|
|
— |
|
|
|
(359 |
) |
| Fair value of share-based compensation on stock options exercised |
|
|
(604 |
) |
|
|
(4 |
) |
| Share-based compensation |
|
|
5,571 |
|
|
|
3,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
$ |
67,015 |
|
|
$ |
59,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
(460,848 |
) |
|
$ |
(284,632 |
) |
| Dividends and distribution declared (Note 6 and Note 12(c)) |
|
|
(156,145 |
) |
|
|
(5,069 |
) |
| Net loss |
|
|
(414,800 |
) |
|
|
(45,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
$ |
(1,031,793 |
) |
|
$ |
(335,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated other comprehensive loss from available-for-sale investments |
|
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
(249 |
) |
|
$ |
(5,268 |
) |
| Other comprehensive (loss) / income |
|
|
(46 |
) |
|
|
5,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
$ |
(295 |
) |
|
$ |
(165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity |
|
$ |
1,161,482 |
|
|
$ |
1,749,007 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited condensed interim consolidated financial statements
5
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
As discussed in note 19, pursuant to a plan of arrangement, AuRico Gold Inc.
(“AuRico” or the “Company”) and Alamos Gold Inc. (“Former Alamos”) amalgamated on July 2, 2015 and continued as one company, Alamos Gold Inc. (“Alamos”). Alamos is engaged in the acquisition, exploration,
development and extraction of precious metals. Alamos is a publicly traded company with common shares listed on the Toronto Stock Exchange (TSX: AGI) and the New York Stock Exchange (NYSE: AGI). Alamos is incorporated and domiciled in Canada and its
head office and registered office is located at 130 Adelaide Street West, Suite 2200, Toronto, Ontario, M5H 3P5.
The condensed interim consolidated
financial statements of the Company and its subsidiaries were authorized for issue in accordance with a resolution of the Board of Directors dated August 11, 2015.
| 2. |
Basis of preparation and statement of compliance |
These condensed interim consolidated financial
statements are prepared in accordance with IAS 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). These statements were prepared using the same accounting
policies and methods of computation as the Company’s consolidated financial statements for the year ended December 31, 2014, except as disclosed below in note 4(a).
These condensed interim consolidated financial statements do not include all disclosures required by International Financial Reporting Standards
(“IFRS”) for annual consolidated financial statements and accordingly should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2014 prepared in accordance with
IFRS as issued by the IASB.
| 3. |
Change in accounting policy and retrospective restatement |
The condensed interim consolidated financial
statements reflect the retrospective application of a voluntary change in accounting policy adopted in 2014 to classify, in the Condensed Interim Consolidated Statements of Operations, foreign exchange gains and losses arising on the translation of
deferred income tax assets and liabilities within deferred income tax recovery instead of within foreign exchange gains / (losses), as previously reported. The change in accounting policy was adopted in accordance with IAS 12, Income Taxes,
which provides a policy choice to classify exchange differences arising from translation of deferred income tax assets and liabilities within deferred income tax expense / (recovery). The Company considers the classification of these exchange
differences within deferred income tax recovery in the Condensed Interim Consolidated Statements of Operations to be the most useful to financial statement users and, consequently, that this presentation results in reliable and more relevant
information.
The following table outlines the effect of this accounting policy change for the three and six months ended June 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended June 30, 2014: |
|
Reported |
|
|
Restatement |
|
|
Restated |
|
|
|
|
|
| Foreign exchange (losses) / gains |
|
$ |
(6,984 |
) |
|
$ |
7,996 |
|
|
$ |
1,012 |
|
| Deferred income tax recovery |
|
|
16,360 |
|
|
|
(7,996 |
) |
|
|
8,364 |
|
| Net loss |
|
|
(16,776 |
) |
|
|
— |
|
|
|
(16,776 |
) |
| For the six months ended June 30, 2014: |
|
Reported |
|
|
Restatement |
|
|
Restated |
|
|
|
|
|
| Foreign exchange losses |
|
$ |
(1,460 |
) |
|
$ |
(382 |
) |
|
$ |
(1,842 |
) |
| Deferred income tax recovery |
|
|
11,793 |
|
|
|
382 |
|
|
|
12,175 |
|
| Net loss |
|
|
(45,667 |
) |
|
|
— |
|
|
|
(45,667 |
) |
6
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 4. |
Accounting changes and recent pronouncements |
| (a) |
Adoption of new accounting standards |
The Company adopted the following accounting standards and
amendments to accounting standards, effective January 1, 2015:
Amendments to IAS 19, Employee Benefits, clarify requirements in relation to
contributions by employees and third parties. In addition, these amendments permit contributions that are independent of the number of years of service to be recognized as a reduction in the service cost in the period in which the service is
rendered, instead of allocating the contributions to periods of service. There was no impact on the Company’s condensed interim consolidated financial statements upon the adoption of these amendments.
| (b) |
Standards issued but not yet adopted |
For the purposes of preparing and presenting the Company’s
condensed interim consolidated financial statements, the Company has adopted all applicable standards and interpretations issued other than those discussed below. These standards have not been adopted because they are not effective for the Company
until subsequent to December 31, 2015. Standards and interpretations issued, but not yet adopted include:
|
|
|
| |
|
Effective for the Company |
| Amendments to IAS 1, Presentation of Financial Statements |
|
January 1, 2016 |
| Amendments to IAS 16, Property, Plant and Equipment |
|
January 1, 2016 |
| Amendments to IAS 28, Investments in Associates and Joint Ventures |
|
January 1, 2016 |
| Amendments to IAS 38, Intangibles |
|
January 1, 2016 |
| Amendments to IFRS 10, Consolidated Financial Statements |
|
January 1, 2016 |
| Amendments to IFRS 11, Joint Arrangements |
|
January 1, 2016 |
| IFRS 15, Revenue from Contracts with Customers |
|
January 1, 2018 |
| IFRS 9, Financial Instruments |
|
January 1, 2018 |
In December 2014, the IASB issued amendments to IAS 1, Presentation of Financial Statements. These amendments clarify
materiality guidance, aggregation and disaggregation of items in the statement of financial position, aggregation of an entity’s share of other comprehensive income of equity-accounted associates and joint ventures, and guidance on ordering of
financial statement notes. These amendments are effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.
In May 2014, the IASB issued amendments to IAS 16, Property, Plant and Equipment and IAS 38, Intangibles. These amendments prohibit the use of
revenue-based depreciation methods for property, plant and equipment and limit the use of revenue-based amortization for intangible assets. These amendments are effective for annual periods beginning on or after January 1, 2016 and are to be
applied prospectively. These amendments are not anticipated to impact the Company’s consolidated financial statements as revenue-based depreciation or amortization methods are not used.
In September 2014, the IASB issued amendments to IAS 28, Investments in Associates and Joint Ventures, and IFRS 10, Consolidated Financial
Statements. These amendments address a conflict between IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture the extent of gain or loss recognition depends on whether the assets sold or contributed
constitute a business. These amendments are effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.
In May 2014, the IAS issued amendments to IFRS 11, Joint Arrangements. The amendments clarify the accounting for acquisitions of an interest in a joint
operation when the operation constitutes a business. The amendments are effective for annual periods beginning on or after January 1, 2016, with earlier application being permitted. The Company is currently evaluating the impact of these
amendments on its consolidated financial statements.
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. The standard
replaces IAS 11, Construction Contracts; IAS 18, Revenue; IFRIC 13, Customer Loyalty Programmes; IFRIC 15, Agreements for the Construction of Real Estate; IFRIC 18, Transfer of Assets from Customers; and SIC
31, Revenue – Barter Transactions Involving Advertising Services. This standard establishes principles for reporting the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contract with
customers. This standard is effective for annual periods beginning on or after January 1, 2018. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
7
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
In July 2014, the IASB issued IFRS 9, Financial Instruments, which will replace IAS 39, Financial
Instruments: Recognition and Measurement. The replacement standard provides a new model for the classification and measurement of financial instruments. The IASB has determined the revised effective date for IFRS 9 will be for annual periods
beginning on or after January 1, 2018. The Company will evaluate the impact of the change to the consolidated financial statements based on the characteristics of financial instruments outstanding at the time of adoption.
|
|
|
|
|
|
|
|
|
| |
|
June 30
2015 |
|
|
December 31
2014 |
|
| Supplies |
|
$ |
20,324 |
|
|
$ |
20,286 |
|
| Ore stockpiles |
|
|
14,312 |
|
|
|
22,025 |
|
| Ore in process |
|
|
127,811 |
|
|
|
132,035 |
|
| Finished goods |
|
|
4,974 |
|
|
|
1,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
167,421 |
|
|
|
176,272 |
|
| Less: Reclassification of supplies inventories to assets held for distribution (Note 6) |
|
|
(5,394 |
) |
|
|
— |
|
| Less: Long-term inventories |
|
|
(89,065 |
) |
|
|
(103,156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
72,962 |
|
|
$ |
73,116 |
|
|
|
|
|
|
|
|
|
|
As at June 30, 2015, the carrying values of the El Chanate ore in process heap leach inventory and the Young-Davidson low
grade stockpile inventory exceeded their net realizable values. As a result, the Company recognized net realizable value adjustments, which impacted production costs and amortization and depletion. Ore stockpile and ore in process inventories
include mining and processing costs, along with amortization and depletion related to mining and processing operations. The net realizable value adjustments totaling $11,739 for the three and six months ended June 30, 2015 (three and six months
ended June 30, 2014 - $nil) have been allocated on a pro-rata basis between production costs and amortization and depletion based on their relative values at June 30, 2015.
The impact on production costs and amortization and depletion is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Operating production costs |
|
$ |
40,744 |
|
|
$ |
48,691 |
|
|
$ |
78,456 |
|
|
$ |
96,584 |
|
| Net realizable value adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| El Chanate |
|
|
5,560 |
|
|
|
— |
|
|
|
5,560 |
|
|
|
— |
|
| Young-Davidson |
|
|
3,009 |
|
|
|
— |
|
|
|
3,009 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs |
|
$ |
49,313 |
|
|
$ |
48,691 |
|
|
$ |
87,025 |
|
|
$ |
96,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating amortization and depletion |
|
$ |
23,476 |
|
|
$ |
34,785 |
|
|
$ |
45,061 |
|
|
$ |
63,378 |
|
| Net realizable value adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| El Chanate |
|
|
1,393 |
|
|
|
— |
|
|
|
1,393 |
|
|
|
— |
|
| Young-Davidson |
|
|
1,777 |
|
|
|
— |
|
|
|
1,777 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization and depletion |
|
$ |
26,646 |
|
|
$ |
34,785 |
|
|
$ |
48,231 |
|
|
$ |
63,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore inventories carried at net realizable value totalled $136,145 at June 30, 2015 (December 31, 2014 - $141,038).
| 6. |
Assets and liabilities held for distribution |
As part of the plan of arrangement (note 1 and note 19), a
new company AuRico Metals Inc. (“AuRico Metals”), a public company listed on the TSX, was created to hold the Company’s Kemess project (“Kemess”), a new 1.5% net smelter return royalty on the Young-Davidson mine, the 2% and
1% net smelter return royalties from the Fosterville and Stawell mines (the “Australian royalties”, see note 8), and $20 million in cash. On July 2, 2015, 95.1% of the common shares of AuRico Metals were distributed to holders of
AuRico common shares and holders of Former Alamos common shares. Subsequent to completion of the plan of arrangement, Alamos owns 4.9% of the issued and outstanding common shares of AuRico Metals.
8
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| (a) |
Measurement of assets and liabilities held for distribution |
In accordance with IFRS 5, Non-current
assets held for sale and discontinued operations, the Company has classified the assets and liabilities to be transferred to AuRico Metals as assets or liabilities held for distribution on the Condensed Interim Consolidated Balance Sheet as at
June 30, 2015. Assets held for distribution are recognized at the lower of their carrying amount and fair value less costs to distribute.
The
Company determined the fair value of royalty assets held for distribution at June 30, 2015 using a valuation model based on the discounted future cash flows expected to be generated. The valuations of the Young-Davidson and Australian royalties
were completed assuming future gold prices between $1,100 and $1,250, and using discount rates of 6% and 12.5%, respectively. The future production from these mines was estimated based on the mine plans and reported reserves. The fair value of the
Australian royalties exceeded that of the carrying value and, therefore, no adjustment was required.
The allocated cost of the Young-Davidson royalty was
estimated at $37,000, which has been deducted from the Young-Davidson mineral property (refer to note 7).
The Company determined the fair value of the
Kemess assets, excluding mineral resources, using a discounted cash flow methodology taking into account the assumptions that would be made by market participants. Management projects cash flows over the life of the Kemess mine using forecasted
production and costs per the Company’s life of mine plan and the forecasted price of gold and copper to project future revenues.
The key assumptions
used in determining the fair value of Kemess were as follows:
| |
• |
|
Long-term gold price of $1,250 per ounce; |
| |
• |
|
Long-term copper price of $3.00 per pound; |
| |
• |
|
Long-term US dollar to Canadian dollar exchange rate of $0.85 to $1.00; |
| |
• |
|
Production, operating costs and capital expenditures based on the expected life of mine plan developed from technical reports; |
| |
• |
|
A discount rate of 8%; and |
| |
• |
|
A net asset value (“NAV”) multiple of 0.3, which is discussed in more detail below. |
Gold and other
mining companies can trade at a market capitalization greater, or less, than their estimated discounted cash flows. This NAV multiple represents the multiple applied to the estimated discounted cash flows to arrive at the trading price. This NAV
multiple, in this case, would take into account a variety of additional factors such as the availability of financing, risks associated with permitting, government and other approvals, exploration potential, namely the ability to find more metal
than what is included in the life of mine plan, and the benefit of gold and copper price optionality.
Mineral resources at the Kemess property were
valued by referencing comparable transaction multiples and comparable company trading multiples to arrive at an implied value per unit of metal.
At
June 30, 2015, the fair value of the Kemess assets and liabilities held for distribution was $60,145, compared with a carrying amount of $90,145. As a result, a $40,112 revaluation loss (net of a tax recovery of $10,112) was recorded in the
Condensed Interim Consolidated Statement of Operations for the three and six months ended June 30, 2015.
9
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| (b) |
Classes of assets and liabilities held for distribution |
After adjusting for the revaluation adjustment
noted above, the major classes of assets and liabilities held for distribution at June 30, 2015 were as follows:
|
|
|
|
|
| Cash |
|
$ |
20,000 |
|
| Receivables |
|
|
728 |
|
| Inventories |
|
|
5,394 |
|
| Prepaids and deposits |
|
|
1,281 |
|
| Restricted cash |
|
|
14,913 |
|
| Property, plant and equipment & mining interests |
|
|
76,151 |
|
| Intangible assets |
|
|
45,549 |
|
|
|
|
|
|
|
|
| Assets held for distribution |
|
$ |
164,016 |
|
|
|
|
|
|
|
|
| Trade payables and accrued liabilities |
|
$ |
1,811 |
|
| Income tax payable |
|
|
209 |
|
| Reclamation provision |
|
|
14,583 |
|
|
|
|
|
|
|
|
| Liabilities associated with assets held for distribution |
|
$ |
16,603 |
|
|
|
|
|
|
Upon receiving Ontario Superior Court approval of the Arrangement on
June 26, 2015, following shareholder approval on June 24, 2015, management determined that completion of the plan of arrangement and distribution of assets and liabilities to AuRico Metals, as described above, was appropriately authorized
and no longer at the discretion of the Company. Therefore, in accordance with IFRIC 17, Distribution of non-cash assets to owners, the Company recorded a distribution payable of $147,413. After adjusting for the revaluation loss noted above,
the current carrying values of assets and liabilities approximate fair value at June 30, 2015.
10
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 7. |
Property, plant and equipment & mining interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Mining interests |
|
|
|
|
|
|
|
| |
|
Plant
and
equipment |
|
|
Depletable |
|
|
Non-
depletable |
|
|
Exploration
and
evaluation |
|
|
Total |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2014 |
|
$ |
717,736 |
|
|
$ |
1,210,573 |
|
|
$ |
19,351 |
|
|
$ |
92,899 |
|
|
$ |
2,040,559 |
|
|
|
|
|
|
|
| Additions |
|
|
32,392 |
|
|
|
29,544 |
|
|
|
15,241 |
|
|
|
13,468 |
|
|
|
90,645 |
|
| Reclassification of assets held for distribution (a) |
|
|
(26,407 |
) |
|
|
(37,000 |
) |
|
|
— |
|
|
|
(89,856 |
) |
|
|
(153,263 |
) |
| Disposals |
|
|
(3,029 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,029 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At June 30, 2015 |
|
$ |
720,692 |
|
|
$ |
1,203,117 |
|
|
$ |
34,592 |
|
|
$ |
16,511 |
|
|
$ |
1,974,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated amortization and depletion and impairment charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2014 |
|
$ |
(107,240 |
) |
|
$ |
(288,393 |
) |
|
$ |
(5,580 |
) |
|
$ |
(616 |
) |
|
$ |
(401,829 |
) |
|
|
|
|
|
|
| Amortization and depletion |
|
|
(15,188 |
) |
|
|
(26,300 |
) |
|
|
— |
|
|
|
— |
|
|
|
(41,488 |
) |
| Revaluation of assets held for distribution |
|
|
(9,111 |
) |
|
|
— |
|
|
|
— |
|
|
|
(31,001 |
) |
|
|
(40,112 |
) |
| Reclassification of assets held for distribution (a) |
|
|
9,111 |
|
|
|
— |
|
|
|
— |
|
|
|
31,001 |
|
|
|
40,112 |
|
| Impairment charges |
|
|
(35,659 |
) |
|
|
(85,272 |
) |
|
|
(1,863 |
) |
|
|
(3,175 |
) |
|
|
(125,969 |
) |
| Disposals |
|
|
816 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At June 30, 2015 |
|
$ |
(157,271 |
) |
|
$ |
(399,965 |
) |
|
$ |
(7,443 |
) |
|
$ |
(3,791 |
) |
|
$ |
(568,470 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2014 |
|
$ |
610,496 |
|
|
$ |
922,180 |
|
|
$ |
13,771 |
|
|
$ |
92,283 |
|
|
$ |
1,638,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At June 30, 2015 |
|
$ |
563,421 |
|
|
$ |
803,152 |
|
|
$ |
27,149 |
|
|
$ |
12,720 |
|
|
$ |
1,406,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying values by segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Mining interests |
|
|
|
|
|
|
|
| |
|
Plant
and
equipment |
|
|
Depletable |
|
|
Non-
depletable |
|
|
Exploration
and
evaluation |
|
|
Total |
|
| El Chanate |
|
$ |
4,742 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,742 |
|
| Young-Davidson |
|
|
558,417 |
|
|
|
803,152 |
|
|
|
27,149 |
|
|
|
— |
|
|
|
1,388,718 |
|
| Corporate and other |
|
|
262 |
|
|
|
— |
|
|
|
— |
|
|
|
12,720 |
|
|
|
12,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At June 30, 2015 |
|
$ |
563,421 |
|
|
$ |
803,152 |
|
|
$ |
27,149 |
|
|
$ |
12,720 |
|
|
$ |
1,406,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| El Chanate |
|
$ |
9,400 |
|
|
$ |
29,173 |
|
|
$ |
1,304 |
|
|
$ |
— |
|
|
$ |
39,877 |
|
| Young-Davidson |
|
|
573,488 |
|
|
|
893,007 |
|
|
|
12,467 |
|
|
|
— |
|
|
|
1,478,962 |
|
| Corporate and other |
|
|
27,608 |
|
|
|
— |
|
|
|
— |
|
|
|
92,283 |
|
|
|
119,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2014 |
|
$ |
610,496 |
|
|
$ |
922,180 |
|
|
$ |
13,771 |
|
|
$ |
92,283 |
|
|
$ |
1,638,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) |
Reclassification of assets held for distribution |
As discussed in note 6, in accordance with the plan of
arrangement, AuRico Metals will receive a 1.5% net smelter return royalty on the Young-Davidson mine. The allocated carrying amount of this royalty of $37,000 has been reclassified in the table above from depletable mining interests to assets held
for distribution. In addition, the Company will transfer the net assets of Kemess to AuRico Metals. As a result, carrying amounts of $17,296 and $58,855 have been transferred from property, plant and equipment and exploration and evaluation
property, respectively, to assets held for distribution.
11
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
The carrying value of construction in progress at June 30, 2015 was $60,575 (December 31,
2014 - $57,057).
The Company has made non-cancellable commitments to acquire property, plant and equipment totaling $10,518 at June 30, 2015
(December 31, 2014 - $9,189).
As part of the consideration received from the sale of the Fosterville and Stawell
mines on May 4, 2012 to Crocodile Gold Corporation (“Crocodile Gold”), the Company received a retained interest royalty. Per the agreement, once the cumulative free cash flow generated by the mines subsequent to closing reached $60
million Canadian dollars (“CAD”), the Company would receive 100% of the next CAD $30 million of cumulative free cash flow in excess of CAD $60 million, and 50% of the next CAD $30 million of cumulative free cash flow in excess of CAD $90
million. In addition, the Company would receive 20% of any cumulative free cash flow in excess of CAD $120 million.
On January 14, 2015, following
receipt of regulatory approval, the Company and Crocodile Gold terminated the retained interest royalty. As consideration for the termination of the retained interest royalty, the Company received cash proceeds of $16,725 (CAD $20,000) upon closing
and was granted a net smelter return royalty of 2% from the Fosterville mine and 1% from the Stawell mine. The net smelter return royalties were recognized as intangible assets at their estimated fair values of $9,207 in aggregate at the date of
acquisition, and a gain of $5,215, resulting from the termination of the retained interest royalty, was recognized in other loss in the six months ended June 30, 2015 (note 14).
The Company depletes these assets using the unit-of-production method. Income from these arrangements is recognized when related ounces are shipped. The
Fosterville royalty commenced upon closing of the agreement, and the Stawell mine royalty will commence on the earlier of January 1, 2016 or the date immediately following the production of 10,000 ounces from the Big Hill Project.
During the three and six months ended June 30, 2015, the Company recognized income of $696 and $1,320, respectively, and depletion expense of $349 and
$659, respectively, on the net smelter return royalties.
As discussed in note 6, in accordance with the plan of arrangement, these royalties were
transferred to AuRico Metals on July 2, 2015 and have been reclassified as assets held for distribution at June 30, 2015, measured at the lower of carrying value and fair value less costs to distribute.
In accordance with the Company’s accounting policy and applicable IFRS, goodwill is
tested for impairment each year at December 31 and also when there is an indicator of impairment. Non-financial assets and cash generating units (“CGUs”) are tested for impairment or a reversal of impairment whenever there are
indicators that an impairment has occurred or should be reversed. The fair value of these non-financial assets are based on unobservable inputs (level 3 of fair value hierarchy, refer to note 17).
Indicators of impairment
At June 30,2015,
management identified certain facts and circumstances indicating possible impairments including: (a) changes in the economic assumptions based on the continued depressed long term gold price outlook and a reduction of net asset value
(“NAV”) multiples applied to mining properties, (b) the market capitalization of the Company continued to be significantly below the carrying value of the net assets at period end, (c) results of operations to date in 2015, and
(d) the results of an independent third party review of the cost estimates included in the Young-Davidson life of mine (“LOM”) plan. As a result, an impairment assessment in accordance with IAS 36 was performed for the Young-Davidson
and El Chanate CGUs.
As a result of this assessment, the Company determined that the carrying value exceeded the recoverable amount for both CGUs. The
recoverable amount was determined by assessing the fair value less costs of disposal (“FVLCD”) on the estimated discounted cash flows of the mining interests.
Consequently, an impairment charge of $326,000 was recorded relating to the Young-Davidson CGU, consisting of a reduction in goodwill allocated to the CGU of
$241,693, reducing the goodwill allocated to the CGU to $nil, and a reduction in property, plant and equipment and mining interests, and intangible assets of $84,307. In addition, an impairment charge of $40,041 was recorded relating to the El
Chanate CGU, consisting of a reduction in property, plant and equipment and mining interests, and intangible assets of $40,041.
12
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
Key assumptions
The FVLCD at Young-Davidson was negatively impacted by the increase in operating and capital cost assumptions used in the LOM plan to reflect the current and
updated future estimated performance, the decrease in the long-term gold price assumption by $50 per ounce and a reduction in the NAV multiple by 0.05 to 1.00. In addition, based on operating and capital costs experienced in 2015 relative to budget,
the Company has increased the discount rate from 5.50% to 6.00%.
As at June 30, 2015, the key macro-economic assumptions and estimates used in
determining the FVLCD were related to gold prices, discount rates, foreign exchange rates and NAV multiples. The key assumptions used in the Young-Davidson CGU impairment test in the second quarter of 2015 were summarized in the table below:
|
|
|
|
|
|
|
|
|
| Young-Davidson |
|
June 30
2015 |
|
|
December 31
2014 |
|
| Long-term gold price per ounce |
|
$ |
1,250 |
|
|
$ |
1,300 |
|
| Discount rate |
|
|
6.00 |
% |
|
|
5.50 |
% |
| NAV multiple |
|
|
1.00 |
|
|
|
1.05 |
|
| Foreign exchange rate (C$1 / US$) |
|
$ |
0.85 |
|
|
$ |
0.85 |
|
Operating cost and capital expenditure estimates are based on LOM plans and are management’s best estimate. As a result
of performance to-date in 2015 and an independent third party review of the costs completed during the year, operating costs and capital expenditures in the LOM plan have increased from December 31, 2014 to June 30, 2015.
The FVLCD at El Chanate was negatively impacted by the decrease in the long-term gold price assumption by $50 per ounce and increased estimates of future
processing costs.
The key macro-economic assumptions used in the El Chanate impairment test in second quarter of 2015 are summarized in the table below:
|
|
|
|
|
|
|
|
|
| El Chanate |
|
June 30
2015 |
|
|
December 31
2014 |
|
| Long-term gold price per ounce |
|
$ |
1,250 |
|
|
$ |
1,300 |
|
| Discount rate |
|
|
6.75 |
% |
|
|
6.75 |
% |
| NAV multiple |
|
|
1.00 |
|
|
|
1.00 |
|
| Foreign exchange rate (US$1 / MXN Peso) |
|
$ |
14.0 |
|
|
$ |
14.0 |
|
Sensitivities
As
the Company has written Young-Davidson and El Chanate down to its recoverable amount at June 30, 2015, any further changes in the key assumptions could give rise to an increase or decrease in the recoverable amount of the property, plant and
equipment and mining interests.
13
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
Management has performed sensitivity analyses on the key assumptions in the model and noted that a 10% change
for the assumption, while holding all other assumptions constant, would have the following impact on the recoverable amount (a sensitivity analysis to reduce the NAV multiple has not been performed as the multiple has already been reduced to 1.00 in
the June 30, 2015 assumptions):
|
|
|
|
|
| Young-Davidson |
|
Impact of 10% change on
recoverable amount |
|
| Long-term gold price per ounce |
|
$ |
240,000 |
|
| Foreign exchange rate |
|
|
231,000 |
|
| Discount rate |
|
|
59,000 |
|
| Operating costs |
|
|
96,000 |
|
| Capital expenditures |
|
|
36,000 |
|
|
|
|
|
|
| El Chanate |
|
Impact of 10% change on
recoverable amount |
|
| Long-term gold price per ounce |
|
$ |
27,000 |
|
| Discount rate |
|
|
2,000 |
|
| Operating costs |
|
|
18,000 |
|
| Capital expenditures |
|
|
2,000 |
|
| 10. |
Debt and equipment financing obligations |
On March 27, 2014, the Company completed an offering of $315,000 senior
secured notes (the “secured notes”), secured by a second-ranking lien on all present and future assets, property and undertaking of the Company. These secured notes were sold at 96.524% of par, resulting in total proceeds of $304,051. The
secured notes pay interest in semi-annual installments on April 1 and October 1 of each year, commencing on October 1, 2014, at a rate of 7.75% per annum, and mature on April 1, 2020. The Company incurred transaction costs
of $7,838, which have been offset against the carrying amount of the secured notes and are amortized using the effective interest rate method. These notes contain transaction-based restrictive covenants that limit the Company’s ability to incur
additional indebtedness in certain circumstances. There are no covenants that are based on the Company’s historical financial performance.
The
senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded
derivatives, and are outlined below:
| |
• |
|
Subsequent to April 1, 2017, the secured notes may be repurchased at 103.875% of par value |
| |
• |
|
Subsequent to April 1, 2018, the secured notes may be repurchased at 101.938% of par value |
| |
• |
|
Subsequent to April 1, 2019, the secured notes may be repurchased at 100% of par value |
The fair value of
the prepayment option embedded derivative was $9.3 million at June 30, 2015, and was offset against the carrying amount of the secured notes (see note 17(a)).
| (b) |
Equipment Financing Obligations |
The Company has entered into financing obligations and capital leases
for equipment, which expire at various dates between 2015 and 2020. Interest payable on the various obligations ranges from fixed rates of 2.71% to 5.77%. During the three and six months ended June 30, 2015, the Company entered into capital
leases with a total initial value of $1,763 and $5,667, respectively.
14
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
In March 2015, the Company completed flow-through financings for gross proceeds of
$15,312 (CAD $19,473). As a result, the Company issued 3,292,922 common shares. In September 2014, the Company completed a flow-through financing for gross proceeds of $4,566 (CAD $5,000). As a result, the Company issued 833,334 common shares.
Pursuant to the terms of the Company’s previous September 2014 flow-through share agreement, and the March 2015 flow-through share agreement, the Company
is required to incur and renounce CAD $5,000 and CAD $19,473, respectively, in qualifying Canadian Exploration Expenses to subscribers by December 31, 2015 and December 31, 2016, respectively. As at June 30, 2015, CAD $15,838 in
exploration expenses were remaining to be incurred.
Of the $15,312 in proceeds received under the March 2015 flow-through share agreement, $9,814 was
recorded as share capital and $5,498 was recorded as an obligation to renounce flow-through exploration expenditures on the Condensed Interim Consolidated Balance Sheets. The following is a continuity schedule of the liability portion of the
flow-through share issuance:
|
|
|
|
|
| Balance at December 31, 2014 |
|
$ |
857 |
|
| Increase to obligation arising from March 2015 issuance |
|
|
5,498 |
|
| Reduction of obligation upon incurring expenditures |
|
|
(2,046 |
) |
|
|
|
|
|
| Balance at June 30, 2015 |
|
$ |
4,309 |
|
|
|
|
|
|
Authorized:
Unlimited number of common shares.
The Company’s shares
have no par value.
Issued and outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2015 |
|
|
June 30, 2014 |
|
| |
|
Number of
common
shares |
|
|
Ascribed
value |
|
|
Number of
common
shares |
|
|
Ascribed
value |
|
| Balance, beginning of period |
|
|
249,648,617 |
|
|
$ |
2,029,991 |
|
|
|
247,569,811 |
|
|
$ |
2,021,837 |
|
| Shares issued on redemption of performance share units |
|
|
34,722 |
|
|
|
175 |
|
|
|
— |
|
|
|
— |
|
| Shares issued through dividend reinvestment plan |
|
|
244,564 |
|
|
|
670 |
|
|
|
474,832 |
|
|
|
1,871 |
|
| Shares issued through employee share purchase plan |
|
|
422,349 |
|
|
|
1,269 |
|
|
|
276,144 |
|
|
|
1,077 |
|
| Shares issued on redemption of restricted share units |
|
|
23,038 |
|
|
|
93 |
|
|
|
— |
|
|
|
— |
|
| Shares issued on redemption of deferred share units |
|
|
— |
|
|
|
— |
|
|
|
52,065 |
|
|
|
359 |
|
| Shares issued on exercise of stock options |
|
|
215,610 |
|
|
|
659 |
|
|
|
548 |
|
|
|
2 |
|
| Shares issued through private placement (b) |
|
|
27,852,769 |
|
|
|
83,280 |
|
|
|
— |
|
|
|
— |
|
| Fair value of share-based compensation on stock options exercised |
|
|
— |
|
|
|
604 |
|
|
|
— |
|
|
|
4 |
|
| Shares issued through flow-through financing (Note 11) |
|
|
3,292,922 |
|
|
|
9,814 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, end of period |
|
|
281,734,591 |
|
|
$ |
2,126,555 |
|
|
|
248,373,400 |
|
|
$ |
2,025,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the merger with Former Alamos, Former Alamos subscribed for
approximately 27.9 million common shares of the Company on a private placement basis, representing 9.9% of AuRico’s outstanding common shares, after giving effect to the private placement. The common shares were issued at a price of $2.99
per share, equal to the closing price on the New York Stock Exchange on April 10, 2015. The gross proceeds of $83,280 were received on April 20, 2015.
15
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
On February 19, 2015, the Company’s Board of Directors approved a dividend of
$0.023 per share, payable to shareholders of record on March 2, 2015, and paid on March 16, 2015.
On May 6, 2015, the Company’s Board
of Directors approved a dividend of $0.01 per share, payable to shareholders of record on May 19, 2015, and paid on June 2, 2015.
| (d) |
Stock options (in Canadian dollars) |
The Company has a long-term incentive plan under which share-based
compensation, including stock options, deferred share units, performance share units, and restricted share units may be granted to directors, officers, employees, and consultants of the Company. The maximum number of common shares that may be
reserved and set aside for issuance under the plan is 6.5% of the common shares outstanding at the time of granting the award (on a non-diluted basis). Stock options are generally exercisable for a maximum period of five to seven years from the
grant date, and have vesting periods of three to four years or as determined by the Company’s Board of Directors.
Stock option disclosures are in
Canadian dollars as the Canadian dollar is the source currency of the Company’s stock option grants.
No stock options were granted during the six
months ended June 30, 2015. The fair value of the options granted during the six months ended June 30, 2014 were calculated using the Black-Scholes option-pricing model with the following weighted average assumptions:
|
|
|
|
|
| |
|
June 30
2014 |
|
| Dividend yield |
|
|
2.30 |
% |
| Expected volatility |
|
|
56.79 |
% |
| Risk free interest rate |
|
|
1.22 |
% |
| Expected life |
|
|
2.5 years |
|
| Exercise price |
|
$ |
3.80 |
|
| Share price |
|
$ |
4.09 |
|
| Grant date fair value |
|
$ |
1.36 |
|
Expected volatility was determined based on historical share price volatility over the expected life of the option granted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2015 |
|
|
June 30, 2014 |
|
| |
|
Options |
|
|
Weighted
average price |
|
|
Options |
|
|
Weighted
average price |
|
| Outstanding, beginning of period |
|
|
13,773,685 |
|
|
$ |
6.38 |
|
|
|
11,313,300 |
|
|
$ |
7.29 |
|
| Granted |
|
|
— |
|
|
$ |
— |
|
|
|
20,000 |
|
|
$ |
3.80 |
|
| Forfeited |
|
|
(16,667 |
) |
|
$ |
4.03 |
|
|
|
(65,000 |
) |
|
$ |
5.26 |
|
| Expired |
|
|
(1,232,686 |
) |
|
$ |
7.46 |
|
|
|
(420,445 |
) |
|
$ |
10.08 |
|
| Exercised |
|
|
(215,610 |
) |
|
$ |
3.73 |
|
|
|
(548 |
) |
|
$ |
2.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding, end of period |
|
|
12,308,722 |
|
|
$ |
6.33 |
|
|
|
10,847,307 |
|
|
$ |
7.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Options exercisable, end of period |
|
|
6,332,768 |
|
|
$ |
7.67 |
|
|
|
5,764,841 |
|
|
$ |
8.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2015, employees, consultants, officers and directors of the Company exercised
215,610 options (six months ended June 30, 2014 - 548) for total proceeds of $803 (six months ended June 30, 2014 - $2). The weighted average share price at the date of exercise for stock options exercised during the six months ended
June 30, 2015 was $4.49 (six months ended June 30, 2014 - $5.05).
16
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
Set forth below is a summary of the outstanding options to purchase common shares as at June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Options outstanding |
|
|
Options exercisable |
|
| Option Price |
|
|
Number
outstanding |
|
|
Weighted average
exercise price |
|
|
Average life
(yrs) |
|
|
Number
exercisable |
|
|
Weighted average
exercise price |
|
| $ |
2.51 - 4.00 |
|
|
|
272,576 |
|
|
$ |
3.05 |
|
|
|
1.07 |
|
|
|
239,242 |
|
|
$ |
2.92 |
|
| $ |
4.01 - 6.00 |
|
|
|
5,272,031 |
|
|
$ |
4.04 |
|
|
|
4.06 |
|
|
|
638,348 |
|
|
$ |
4.10 |
|
| $ |
6.01 - 7.00 |
|
|
|
1,286,500 |
|
|
$ |
6.72 |
|
|
|
2.10 |
|
|
|
1,054,000 |
|
|
$ |
6.72 |
|
| $ |
7.01 - 7.50 |
|
|
|
797,390 |
|
|
$ |
7.15 |
|
|
|
2.51 |
|
|
|
591,510 |
|
|
$ |
7.18 |
|
| $ |
7.51 - 9.00 |
|
|
|
2,762,932 |
|
|
$ |
8.10 |
|
|
|
2.79 |
|
|
|
2,140,017 |
|
|
$ |
8.09 |
|
| $ |
9.01 - 9.50 |
|
|
|
672,500 |
|
|
$ |
9.29 |
|
|
|
3.45 |
|
|
|
511,875 |
|
|
$ |
9.29 |
|
| $ |
9.51 - 10.00 |
|
|
|
668,793 |
|
|
$ |
9.71 |
|
|
|
1.89 |
|
|
|
646,776 |
|
|
$ |
9.71 |
|
| $ |
10.01 - 10.50 |
|
|
|
150,000 |
|
|
$ |
10.09 |
|
|
|
2.80 |
|
|
|
150,000 |
|
|
$ |
10.09 |
|
| $ |
10.51 - 11.00 |
|
|
|
250,000 |
|
|
$ |
10.95 |
|
|
|
3.38 |
|
|
|
187,500 |
|
|
$ |
10.95 |
|
| $ |
11.01 - 12.50 |
|
|
|
176,000 |
|
|
$ |
11.44 |
|
|
|
1.64 |
|
|
|
173,500 |
|
|
$ |
11.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total |
|
|
|
12,308,722 |
|
|
|
|
|
|
|
|
|
|
|
6,332,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with IFRS 2, Share-based payments, the Company has modified service conditions of stock option awards
belonging to employees who will not be continuing with the Company following completion of the plan of arrangement. As a result, expensing of these awards has been accelerated and the Company has recognized $2,255 in compensation expense related to
these awards for the three months ended June 30, 2015.
On July 2, 2015, 3,254,410 stock option awards outstanding at June 30, 2015 became
fully vested upon completion of the plan of arrangement.
| (e) |
Employee share purchase plan |
The Company has an Employee Share Purchase Plan which enables employees to
purchase Company shares through payroll deduction. Employees can contribute up to 10% of their annual base salary, and the Company will match 75% of the employees’ contributions. The common shares are purchased based on the volume weighted
average closing price of the last five days prior to the end of the quarter. During the three and six months ended June 30, 2015, the Company recognized $326 and $595, respectively, as an expense (three and six months ended June 30, 2014 -
$293 and $498, respectively) related to this plan. At June 30, 2015, $322 of the expense for the six months ended June 30, 2015 was payable by the Company (December 31, 2014 - $278).
17
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
The following is a summary of the Deferred Share Units (“DSUs”), Performance Share Units
(“PSUs”), and share-settled Restricted Share Units (“RSUs”) outstanding during the six months ended June 30, 2015 and 2014:
|
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
| Deferred Share Units (f) |
|
|
|
|
|
|
|
|
| Granted |
|
|
66,776 |
|
|
|
45,495 |
|
| Grant date fair value |
|
$ |
198 |
|
|
$ |
200 |
|
| Dividend-equivalent units granted |
|
|
3,154 |
|
|
|
3,704 |
|
| Dividend-equivalent units grant date fair value |
|
$ |
20 |
|
|
$ |
26 |
|
| Redeemed |
|
|
— |
|
|
|
52,066 |
|
|
|
|
| Performance Share Units (g) |
|
|
|
|
|
|
|
|
| Granted |
|
|
— |
|
|
|
80,000 |
|
| Grant date fair value |
|
$ |
— |
|
|
$ |
298 |
|
| Dividend-equivalent units granted |
|
|
6,574 |
|
|
|
6,451 |
|
| Dividend-equivalent units grant date fair value |
|
$ |
18 |
|
|
$ |
26 |
|
| Expense |
|
$ |
223 |
|
|
$ |
111 |
|
| Redeemed |
|
|
60,007 |
|
|
|
— |
|
|
|
|
| Restricted Share Units (h) |
|
|
|
|
|
|
|
|
| Granted |
|
|
144,242 |
|
|
|
97,189 |
|
| Grant date fair value |
|
$ |
428 |
|
|
$ |
428 |
|
| Dividend-equivalent units granted |
|
|
7,669 |
|
|
|
5,899 |
|
| Dividend-equivalent units grant date fair value |
|
$ |
22 |
|
|
$ |
26 |
|
| Expense |
|
$ |
1,258 |
|
|
$ |
583 |
|
| Redeemed |
|
|
23,038 |
|
|
|
— |
|
| (f) |
Deferred share unit plan |
The Company awards Deferred Share Units as an alternative form of compensation
for employees, officers, consultants, and members of the Company’s Board of Directors. Each unit entitles the participant to receive one common share of the Company from treasury upon redemption. DSUs are measured on the grant date using the
volume weighed average closing share price of the last five days prior to that date. At June 30, 2015, 323,140 DSUs were vested and outstanding (December 31, 2014 - 253,210).
| (g) |
Performance share unit plan |
The Company awards Performance Share Units as an alternative form of
compensation for employees, officers, consultants, and members of the Company’s Board of Directors. Each unit entitles the participant to receive a cash payment equal to the market price of one share as of the PSU vesting date, one share, or
any combination of cash and shares equal to the market price of one share as of the PSU vesting date, assuming certain performance conditions are met. PSUs are measured using the volume weighted average closing share price of the last five days
prior to granting of the units. At June 30, 2015, 522,262 PSUs were outstanding (December 31, 2014 - 625,223). At June 30, 2015, none of the outstanding PSUs were vested (December 31, 2014 - nil). The Company recognized $248 in share-based
compensation expense for the three months ended June 30, 2015 as a result of accelerated expensing, as discussed previously. On July 2, 2015, 350,773 PSU awards outstanding at June 30, 2015 became fully vested upon completion of the
plan of arrangement.
| (h) |
Restricted share unit plan |
The Company awards Restricted Share Units as an alternative form of
compensation for employees, officers, consultants, and members of the Company’s Board of Directors. Each unit entitles the participant to receive a cash payment equal to the market price of one share as of the RSU vesting date, one share, or
any combination of cash and shares equal to the market price of one share as of the RSU vesting date. The Company records RSUs that will be cash-settled as liabilities and RSUs that will be share-settled within shareholders’ equity. RSUs are
measured using the volume weighted average closing share
18
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
price of the last five days prior to granting of the units. At June 30, 2015, 749,356 share-settled RSUs were outstanding (December 31, 2014 - 636,769). At June 30, 2015, 172,049
of the outstanding share-settled RSUs had vested (December 31, 2014 - 82,395). The Company recognized $835 in share-based compensation expense for the three months ended June 30, 2015 as a result of accelerated expensing, as discussed
previously. On July 2, 2015, 257,602 RSU awards outstanding at June 30, 2015 became fully vested upon completion of the plan of arrangement.
The Company’s loss from operations includes the following expenses presented
by function:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Cost of sales |
|
$ |
443,740 |
|
|
$ |
85,901 |
|
|
$ |
503,259 |
|
|
$ |
163,462 |
|
| General and administrative |
|
|
4,987 |
|
|
|
5,663 |
|
|
|
9,737 |
|
|
|
14,919 |
|
| Exploration and business development |
|
|
40,421 |
|
|
|
259 |
|
|
|
44,002 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
489,148 |
|
|
$ |
91,823 |
|
|
$ |
556,998 |
|
|
$ |
178,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales for the three and six months ended June 30, 2015 includes impairment charges of $326,000 relating to the
Young-Davidson mine and impairment charges of $40,041 relating to the El Chanate mine. These impairment charges are discussed further in note 9.
Included
in general and administrative expense for the three and six months ended June 30, 2015 is $4,289 and $5,571 of share-based compensation expense (three and six months ended June 30, 2014 - $1,446 and $3,808).
Exploration and business development expense for the six months ended June 30, 2015 includes impairment charges of $3,175 relating to exploration
properties, and a $40,112 loss on the revaluation of assets held for distribution.
19
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Gain on termination of retained interest royalty (Note 8) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5,215 |
|
|
$ |
— |
|
| Fair value adjustment on prepayment option embedded derivative (Note 17) |
|
|
(1,197 |
) |
|
|
— |
|
|
|
2,552 |
|
|
|
— |
|
| Realized and unrealized gains / (losses) on derivative assets and liabilities (Note 17) |
|
|
1,236 |
|
|
|
— |
|
|
|
(1,623 |
) |
|
|
— |
|
| Income from royalties (Note 8) |
|
|
696 |
|
|
|
2,463 |
|
|
|
1,320 |
|
|
|
2,463 |
|
| Amortization expense from royalties (Note 8) |
|
|
(349 |
) |
|
|
(7,278 |
) |
|
|
(659 |
) |
|
|
(7,278 |
) |
| Reduction of obligation to renounce flow-through exploration expenditures (Note 11) |
|
|
1,934 |
|
|
|
— |
|
|
|
2,046 |
|
|
|
— |
|
| Interest income |
|
|
120 |
|
|
|
180 |
|
|
|
229 |
|
|
|
769 |
|
| Unrealized and realized gains on investments |
|
|
— |
|
|
|
779 |
|
|
|
— |
|
|
|
6,589 |
|
| Loss on modification of convertible notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,645 |
) |
| Reclassification of accumulated gains / (losses) on available-for-sale investments |
|
|
— |
|
|
|
233 |
|
|
|
— |
|
|
|
(2,507 |
) |
| Fair value adjustment on option component of convertible senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
413 |
|
| Restructuring costs |
|
|
(10,260 |
) |
|
|
— |
|
|
|
(10,260 |
) |
|
|
— |
|
| Transaction costs (Note 19) |
|
|
(6,012 |
) |
|
|
— |
|
|
|
(6,012 |
) |
|
|
— |
|
| Other |
|
|
160 |
|
|
|
(255 |
) |
|
|
493 |
|
|
|
(164 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(13,672 |
) |
|
$ |
(3,878 |
) |
|
$ |
(6,699 |
) |
|
$ |
(15,360 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share is calculated based on the weighted average number of common shares
and common share equivalents outstanding during the three and six months ended June 30, 2015 of 264,939,446 and 263,453,673 (three and six months ended June 30, 2014 - 248,495,726 and 248,343,301). For the three and six months ended
June 30, 2015 and 2014, net loss and basic weighted average shares outstanding are equal to diluted loss and diluted weighted average shares outstanding, as the impact of all potential common shares was anti-dilutive.
The following items were excluded from the computation of diluted weighted average shares outstanding for the three and six months ended June 30, 2015
and 2014 because their effect would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Stock options |
|
|
12,308,722 |
|
|
|
10,847,307 |
|
|
|
12,308,722 |
|
|
|
10,847,307 |
|
| Convertible senior notes |
|
|
61,870 |
|
|
|
60,974 |
|
|
|
61,870 |
|
|
|
60,974 |
|
| Restricted share units |
|
|
577,306 |
|
|
|
351,304 |
|
|
|
577,306 |
|
|
|
351,304 |
|
| Performance share units |
|
|
522,262 |
|
|
|
434,485 |
|
|
|
522,262 |
|
|
|
434,485 |
|
20
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 16. |
Supplemental cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014
Restated
(Note 3) |
|
|
June 30
2015 |
|
|
June 30
2014
Restated
(Note 3) |
|
| Non-cash adjustments to reconcile net loss to operating cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization and depletion |
|
$ |
26,646 |
|
|
$ |
34,785 |
|
|
$ |
48,231 |
|
|
$ |
63,378 |
|
| Deferred income tax recovery |
|
|
(57,083 |
) |
|
|
(8,364 |
) |
|
|
(28,769 |
) |
|
|
(12,175 |
) |
| Gain on termination of retained interest royalty |
|
|
— |
|
|
|
— |
|
|
|
(5,215 |
) |
|
|
— |
|
| Unrealized foreign exchange (gain) / loss |
|
|
(79 |
) |
|
|
(413 |
) |
|
|
3,799 |
|
|
|
2,017 |
|
| Fair value adjustment on prepayment option embedded derivative |
|
|
1,197 |
|
|
|
— |
|
|
|
(2,552 |
) |
|
|
— |
|
| Revaluation of assets held for distribution |
|
|
40,112 |
|
|
|
— |
|
|
|
40,112 |
|
|
|
— |
|
| Impairment charges |
|
|
366,041 |
|
|
|
— |
|
|
|
369,216 |
|
|
|
— |
|
| Unrealized (gains) / losses on derivative assets and liabilities |
|
|
(1,444 |
) |
|
|
— |
|
|
|
933 |
|
|
|
— |
|
| Share-based compensation, net of forfeitures |
|
|
4,289 |
|
|
|
1,446 |
|
|
|
5,571 |
|
|
|
3,808 |
|
| Income from retained interest royalty |
|
|
— |
|
|
|
(2,463 |
) |
|
|
— |
|
|
|
(2,463 |
) |
| Amortization of royalties |
|
|
349 |
|
|
|
7,278 |
|
|
|
659 |
|
|
|
7,278 |
|
| Equity in loss of associate and joint venture |
|
|
336 |
|
|
|
— |
|
|
|
481 |
|
|
|
92 |
|
| Reduction of obligation to renounce flow-through exploration expenditures |
|
|
(1,934 |
) |
|
|
— |
|
|
|
(2,046 |
) |
|
|
— |
|
| Unrealized and realized gains on investments |
|
|
— |
|
|
|
(779 |
) |
|
|
— |
|
|
|
(6,589 |
) |
| Loss on modification of convertible notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,645 |
|
| Reclassification of accumulated losses on available-for-sale investments |
|
|
— |
|
|
|
(233 |
) |
|
|
— |
|
|
|
2,507 |
|
| Fair value adjustment on option component of convertible senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(413 |
) |
| Net realizable value adjustments |
|
|
8,569 |
|
|
|
— |
|
|
|
8,569 |
|
|
|
— |
|
| Other non-cash items |
|
|
831 |
|
|
|
(8 |
) |
|
|
1,727 |
|
|
|
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
387,830 |
|
|
$ |
31,249 |
|
|
$ |
440,716 |
|
|
$ |
73,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in non-cash operating working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Receivables |
|
$ |
(1,130 |
) |
|
$ |
4,708 |
|
|
$ |
(2,365 |
) |
|
$ |
1,634 |
|
| Current income tax receivable |
|
|
821 |
|
|
|
— |
|
|
|
821 |
|
|
|
21,733 |
|
| Prepaids and deposits |
|
|
(2,699 |
) |
|
|
191 |
|
|
|
(1,869 |
) |
|
|
992 |
|
| Inventories |
|
|
(2,902 |
) |
|
|
(7,755 |
) |
|
|
(5,542 |
) |
|
|
(13,864 |
) |
| Trade payables and accrued liabilities |
|
|
19,163 |
|
|
|
(4,738 |
) |
|
|
19,047 |
|
|
|
(6,812 |
) |
| Current income tax liability |
|
|
(34 |
) |
|
|
(15 |
) |
|
|
211 |
|
|
|
(270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,219 |
|
|
$ |
(7,609 |
) |
|
$ |
10,303 |
|
|
$ |
3,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest paid |
|
$ |
193 |
|
|
$ |
202 |
|
|
$ |
12,575 |
|
|
$ |
4,203 |
|
| Interest received |
|
$ |
74 |
|
|
$ |
152 |
|
|
$ |
131 |
|
|
$ |
697 |
|
| Income taxes paid |
|
$ |
198 |
|
|
$ |
60 |
|
|
$ |
371 |
|
|
$ |
1,112 |
|
|
|
|
|
|
| Non-cash transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization of discount and financing fees on debt |
|
$ |
— |
|
|
$ |
182 |
|
|
$ |
— |
|
|
$ |
500 |
|
| capitalized to mining interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest payable capitalized to mining interests |
|
$ |
— |
|
|
$ |
1,770 |
|
|
$ |
— |
|
|
$ |
1,770 |
|
| Acquisition of assets under capital lease |
|
$ |
1,763 |
|
|
$ |
— |
|
|
$ |
5,667 |
|
|
$ |
— |
|
21
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 17. |
Financial instruments and risk management |
Fair values of financial instruments
The following table sets forth the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the
fair value hierarchy. The Company does not have any non-recurring fair value measurements. Levels 1 to 3 are defined based on the degree to which fair value inputs are observable or unobservable, as follows:
| |
• |
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| |
• |
|
Level 2 inputs are based on inputs which have a significant effect on fair value that are observable, either directly or indirectly from market data; and |
| |
• |
|
Level 3 inputs are unobservable (supported by little or no market activity). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2015 |
|
|
December 31, 2014 |
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 1 |
|
|
Level 2 |
|
| Cash |
|
$ |
129,725 |
|
|
$ |
— |
|
|
$ |
89,031 |
|
|
$ |
— |
|
| Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Prepayment option embedded derivative (a) |
|
|
— |
|
|
|
9,293 |
|
|
|
— |
|
|
|
6,741 |
|
| Available-for-sale financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity investments (b) |
|
|
122 |
|
|
|
— |
|
|
|
184 |
|
|
|
— |
|
| Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Currency options (c) |
|
|
— |
|
|
|
(1,379 |
) |
|
|
— |
|
|
|
(447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
129,847 |
|
|
$ |
7,914 |
|
|
$ |
89,215 |
|
|
$ |
6,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The methods of measuring each of these financial assets and liabilities have not changed during 2015. The Company does not
have any financial assets or liabilities measured at fair value based on unobservable inputs (Level 3).
The fair values of financial instruments measured
at amortized cost, except for the senior secured notes, as discussed below, approximate their carrying amounts at June 30, 2015. The fair value of the senior secured notes was $316,575 at June 30, 2015 (December 31, 2014 - $289,800)
compared to a carrying value of $294,967 (December 31, 2014 - $296,755), which includes the value of the prepayment option embedded derivative included in the table above. The fair value of the senior secured notes was determined using a market
approach with reference to observable market prices for identical assets traded in an active market.
| (a) |
Prepayment option embedded derivative |
On March 27, 2014, the Company completed an offering of
$315,000 senior secured notes (the “secured notes”). The senior secured notes indenture grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period.
These prepayment options have been accounted for as embedded derivatives that require bifurcation from the host contract, and are outlined below:
| |
• |
|
Subsequent to April 1, 2017, the secured notes may be repurchased at 103.875% of par value |
| |
• |
|
Subsequent to April 1, 2018, the secured notes may be repurchased at 101.938% of par value |
| |
• |
|
Subsequent to April 1, 2019, the secured notes may be repurchased at 100% of par value |
The prepayment
options are measured at fair value and offset against the carrying value of the secured notes on the Condensed Interim Consolidated Balance Sheets, with changes in the fair value recognized as unrealized gains / (losses) in other loss on the
Condensed Interim Consolidated Statements of Operations (note 14).
The Company measures the fair value of the prepayment option embedded derivative using
the Black-Karasinski model of interest rate uncertainty within a FinCAD callable / puttable bond model. Because the valuation is dependent on inputs derived from observable market data, the embedded derivative component of the secured notes is
classified within Level 2 of the fair value hierarchy. The fair value was calculated using the following assumptions:
|
|
|
|
|
|
|
|
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
| Volatility |
|
|
40 |
% |
|
|
32 |
% |
| Credit spreads |
|
|
5.14 |
% |
|
|
5.54 |
% |
22
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
Changes in these assumptions would have the following impact on net loss for the three months ended
June 30, 2015:
|
|
|
|
|
|
|
|
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
| 2% increase in volatility |
|
$ |
1,323 |
|
|
$ |
567 |
|
| 2% decrease in volatility |
|
$ |
(1,355 |
) |
|
$ |
(567 |
) |
| 0.5% increase in credit spreads |
|
$ |
(1,103 |
) |
|
$ |
(756 |
) |
| 0.5% decrease in credit spreads |
|
$ |
1,260 |
|
|
$ |
851 |
|
The Company’s available-for-sale equity investments are valued using quoted
market prices in active markets and, as such, are classified within Level 1 of the fair value hierarchy. The fair value of investment securities is calculated as the closing market price of the investment equity security multiplied by the quantity
of shares held by the Company.
The fair value of option contracts is determined using a market approach with
reference to observable market prices for identical assets traded in an active market, and as such, option contracts are classified within Level 2 of the fair value hierarchy. The use of reasonably possible alternative assumptions would not
significantly affect the Company’s results.
As at June 30, 2015, the Company held option contracts to protect against the risk of an increase
in the value of the Canadian dollar and Mexican peso versus the US dollar. The details of these option contracts for the purchase of local currencies and the sale of US dollars, which settle on a monthly basis, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period covered |
|
Contract |
|
|
Local
Currency |
|
|
Local currency
per month |
|
|
Local currency
total |
|
|
Call option
per USD |
|
|
Put option
per USD |
|
| 1-Jul-15 31-Dec-15 |
|
|
Collar |
|
|
|
CAD |
|
|
|
7,500 |
|
|
|
45,000 |
|
|
|
1.1111 |
|
|
|
1.2246 |
|
| 1-Jul-15 31-Dec-15 |
|
|
Collar |
|
|
|
MXN |
|
|
|
30,000 |
|
|
|
180,000 |
|
|
|
14.00 |
|
|
|
15.71 |
|
The fair value of these contracts was a liability of $1,379 at June 30, 2015 (December 31, 2014 – liability of
$447). During the three and six months ended June 30, 2015, the Company made payments of $208 and $690 on option contracts settled during the period, and recognized unrealized gains and losses of $1,444 and $933, respectively, on option
contracts outstanding at June 30, 2015 in other loss within the Condensed Interim Consolidated Statements of Operations (note 14).
23
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 18. |
Segmented information |
The Company’s reportable segments are consistent with the Company’s
operating segments and consist of the geographical regions in which the Company operates. In determining the Company’s segment structure, the Company considered the basis on which management, including the chief operating decision maker,
reviews the financial and operational performance of the Company, and whether any of the Company’s mining operations share similar economic, operational and regulatory characteristics. The Company has two reportable segments, as follows:
| |
• |
|
Mexico: El Chanate mine |
| |
• |
|
Canada: Young-Davidson mine |
Corporate and other consists of the Company’s corporate offices and
exploration properties.
The following are the operating results by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended June 30, 2015 |
|
| |
|
Mexico |
|
|
Canada |
|
|
Corporate
and other |
|
|
Total |
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
27,081 |
|
|
$ |
45,058 |
|
|
$ |
— |
|
|
$ |
72,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs |
|
|
19,927 |
|
|
|
29,386 |
|
|
|
— |
|
|
|
49,313 |
|
| Refining costs |
|
|
106 |
|
|
|
41 |
|
|
|
— |
|
|
|
147 |
|
| Amortization and depletion |
|
|
6,956 |
|
|
|
19,652 |
|
|
|
38 |
|
|
|
26,646 |
|
| Reclamation, care and maintenance costs |
|
|
— |
|
|
|
— |
|
|
|
1,593 |
|
|
|
1,593 |
|
| General and administrative |
|
|
234 |
|
|
|
16 |
|
|
|
4,737 |
|
|
|
4,987 |
|
| Exploration and business development |
|
|
— |
|
|
|
— |
|
|
|
309 |
|
|
|
309 |
|
| Revaluation of assets held for distribution |
|
|
— |
|
|
|
— |
|
|
|
40,112 |
|
|
|
40,112 |
|
| Impairment charges |
|
|
40,041 |
|
|
|
326,000 |
|
|
|
— |
|
|
|
366,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,264 |
|
|
|
375,095 |
|
|
|
46,789 |
|
|
|
489,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
$ |
(40,183 |
) |
|
$ |
(330,037 |
) |
|
$ |
(46,789 |
) |
|
$ |
(417,009 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenditures on property, plant and equipment, mining interests & intangible assets |
|
$ |
5,317 |
|
|
$ |
27,134 |
|
|
$ |
8,218 |
|
|
$ |
40,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended June 30, 2014 |
|
| |
|
Mexico |
|
|
Canada |
|
|
Corporate
and other |
|
|
Total |
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
21,484 |
|
|
$ |
54,046 |
|
|
$ |
— |
|
|
$ |
75,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs |
|
|
10,835 |
|
|
|
37,856 |
|
|
|
— |
|
|
|
48,691 |
|
| Refining costs |
|
|
107 |
|
|
|
48 |
|
|
|
— |
|
|
|
155 |
|
| Amortization and depletion |
|
|
4,163 |
|
|
|
30,524 |
|
|
|
98 |
|
|
|
34,785 |
|
| Reclamation, care and maintenance costs |
|
|
— |
|
|
|
— |
|
|
|
2,270 |
|
|
|
2,270 |
|
| General and administrative |
|
|
216 |
|
|
|
— |
|
|
|
5,447 |
|
|
|
5,663 |
|
| Exploration and business development |
|
|
— |
|
|
|
— |
|
|
|
259 |
|
|
|
259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,321 |
|
|
|
68,428 |
|
|
|
8,074 |
|
|
|
91,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings / (loss) from operations |
|
$ |
6,163 |
|
|
$ |
(14,382 |
) |
|
$ |
(8,074 |
) |
|
$ |
(16,293 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenditures on property, plant and equipment, mining interests & intangible assets |
|
$ |
5,660 |
|
|
$ |
31,481 |
|
|
$ |
3,975 |
|
|
$ |
41,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six months ended June 30, 2015 |
|
| |
|
Mexico |
|
|
Canada |
|
|
Corporate
and other |
|
|
Total |
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
47,258 |
|
|
$ |
90,240 |
|
|
$ |
— |
|
|
$ |
137,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs |
|
|
29,929 |
|
|
|
57,096 |
|
|
|
— |
|
|
|
87,025 |
|
| Refining costs |
|
|
250 |
|
|
|
87 |
|
|
|
— |
|
|
|
337 |
|
| Amortization and depletion |
|
|
11,113 |
|
|
|
37,026 |
|
|
|
92 |
|
|
|
48,231 |
|
| Reclamation, care and maintenance costs |
|
|
— |
|
|
|
— |
|
|
|
1,625 |
|
|
|
1,625 |
|
| General and administrative |
|
|
460 |
|
|
|
80 |
|
|
|
9,197 |
|
|
|
9,737 |
|
| Exploration and business development |
|
|
— |
|
|
|
— |
|
|
|
715 |
|
|
|
715 |
|
| Revaluation of assets held for distribution |
|
|
— |
|
|
|
— |
|
|
|
40,112 |
|
|
|
40,112 |
|
| Impairment charges |
|
|
40,041 |
|
|
|
326,000 |
|
|
|
3,175 |
|
|
|
369,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,793 |
|
|
|
420,289 |
|
|
|
54,916 |
|
|
|
556,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
$ |
(34,535 |
) |
|
$ |
(330,049 |
) |
|
$ |
(54,916 |
) |
|
$ |
(419,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenditures on property, plant and equipment, mining interests & intangible assets |
|
$ |
12,527 |
|
|
$ |
50,972 |
|
|
$ |
12,341 |
|
|
$ |
75,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six months ended June 30, 2014 |
|
| |
|
Mexico |
|
|
Canada |
|
|
Corporate
and other |
|
|
Total |
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
45,421 |
|
|
$ |
101,062 |
|
|
$ |
— |
|
|
$ |
146,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production costs |
|
|
22,054 |
|
|
|
74,530 |
|
|
|
— |
|
|
|
96,584 |
|
| Refining costs |
|
|
214 |
|
|
|
81 |
|
|
|
— |
|
|
|
295 |
|
| Amortization and depletion |
|
|
8,648 |
|
|
|
54,496 |
|
|
|
234 |
|
|
|
63,378 |
|
| Reclamation, care and maintenance costs |
|
|
— |
|
|
|
— |
|
|
|
3,205 |
|
|
|
3,205 |
|
| General and administrative |
|
|
520 |
|
|
|
— |
|
|
|
14,399 |
|
|
|
14,919 |
|
| Exploration and business development |
|
|
— |
|
|
|
— |
|
|
|
459 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,436 |
|
|
|
129,107 |
|
|
|
18,297 |
|
|
|
178,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings / (loss) from operations |
|
$ |
13,985 |
|
|
$ |
(28,045 |
) |
|
$ |
(18,297 |
) |
|
$ |
(32,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expenditures on property, plant and equipment, mining interests & intangible assets |
|
$ |
13,917 |
|
|
$ |
76,845 |
|
|
$ |
5,966 |
|
|
$ |
96,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following are total assets by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Mexico |
|
|
Canada |
|
|
Corporate
and other |
|
|
Total |
|
|
|
|
|
|
| Total assets at June 30, 2015 |
|
$ |
148,869 |
|
|
$ |
1,519,332 |
|
|
$ |
290,570 |
|
|
$ |
1,958,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets at December 31, 2014 |
|
$ |
183,075 |
|
|
$ |
1,833,404 |
|
|
$ |
265,347 |
|
|
$ |
2,281,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s revenue is derived from the sale of gold and silver in Mexico and Canada, as disclosed in the tables above.
The Company sells all gold and silver produced to two customers. The Company is not economically dependent on these customers for the sale of its product because gold and silver can be sold through numerous commodity market traders worldwide.
25
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
| 19. |
Events after the reporting period |
| (a) |
Merger with Former Alamos |
On July 2, 2015, the Company completed the merger with Former Alamos
pursuant to which the Company and Former Alamos combined by way of a statutory arrangement under the Business Corporations Act (Ontario) (the “Arrangement”) to form a company operating under the name Alamos Gold Inc. Former Alamos is an
established Canadian-based gold producer that owns and operates the Mulatos Mine in Sonora, Mexico, and has exploration and development activities in Mexico, Turkey and the United States.
The Arrangement included the following:
| |
(a) |
The exchange of common shares of Former Alamos for AuRico common shares based on an exchange ratio of 1.9818 and cash of $0.0001; |
| |
(b) |
The amalgamation of Former Alamos and AuRico, forming the resulting company, Alamos; |
| |
(c) |
The formation of AuRico Metals to hold certain assets (note 6); |
| |
(d) |
The reorganization of the capital of Alamos into Class A common shares (note 19(d)), and the distribution of common shares of AuRico Metals to holders of AuRico common shares and holders of Former Alamos common
shares (note 19(c)). |
Upon completion of the Arrangement, holders of AuRico’s common shares had received 0.5046 Class A common
shares of Alamos for each AuRico common share held and holders of Former Alamos common shares had received 1 Class A common share of Alamos and $0.0001 in cash for each share held.
Under the Arrangement, all Former Alamos options and stock appreciation rights were replaced and converted to awards of Alamos, Former Alamos warrants,
restricted share units and deferred share units were exchanged for awards of Alamos, and all AuRico options, performance share units, restricted share units and deferred share units were converted to awards of Alamos, and all such awards were
amended to provide that on exercise or redemption, Class A common shares of Alamos will be issued, to the extent not redeemed for cash consideration (note 19(d)).
In connection with the Merger, as described in note 11(b), on April 10, 2015, Former Alamos subscribed for approximately 27.9 million common shares
of AuRico on a private placement basis. The common shares held by Former Alamos are included in the identified assets acquired by AuRico, and were subsequently repurchased and cancelled upon closing of the transaction on July 2, 2015.
The Company determined that the Merger was a business combination in accordance with the definition in IFRS 3, Business combinations, and as such has
accounted for it in accordance with this standard, with AuRico being the accounting acquirer on the acquisition date of July 2, 2015.
26
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
The following table summarizes the fair value of the total consideration transferred to Former Alamos
shareholders and the fair value of identified assets acquired and liabilities assumed, based on preliminary estimates of fair value. Due to the recent timing of the acquisition, the fair value assigned to the identified assets and liabilities is
preliminary and may be revised by the Company as additional information becomes available. In particular, the Company is currently assessing the value of the mining interests and property, plant & equipment and deferred taxes acquired, in
order to support the value assigned to these assets upon acquisition. The Company expects to finalize the determination of the fair values of the assets and liabilities acquired within 12 months of the acquisition date, which could result in
material differences from the preliminary values presented in these financial statements. Transaction costs of $6,012 relating to the arrangement have been expensed in the period in accordance with IFRS 3, Business Combinations.
|
|
|
|
|
| Purchase Price |
|
|
|
|
| AuRico common shares issued |
|
$ |
722,074 |
|
| Cash |
|
|
13 |
|
| Share-based compensation |
|
|
4,173 |
|
| Warrants |
|
|
1,312 |
|
|
|
|
|
|
|
|
$ |
727,572 |
|
|
|
|
|
|
|
|
| Net Assets Acquired |
|
|
|
|
| Cash |
|
$ |
249,067 |
|
| Current assets, excluding cash |
|
|
174,882 |
|
| Other non-current assets |
|
|
6,809 |
|
| Property, plant and equipment & mining interests |
|
|
426,996 |
|
| Current liabilities |
|
|
(42,222 |
) |
| Reclamation provisions |
|
|
(22,646 |
) |
| Other liabilities |
|
|
(411 |
) |
| Deferred income tax liability |
|
|
(64,903 |
) |
|
|
|
|
|
|
|
$ |
727,572 |
|
|
|
|
|
|
| (b) |
Distribution of assets and liabilities to AuRico Metals Inc. |
As discussed in note 6, a new company
named AuRico Metals was created as part of the merger transaction to hold the Kemess project, a new 1.5% net smelter return royalty on the Young-Davidson mine, the Fosterville and Stawell net smelter return royalties, and $20 million in cash. The
distribution of assets and liabilities to AuRico Metals was completed on July 2, 2015.
Upon completion of the Arrangement, Alamos owned 4.9% of
AuRico Metals, and the remaining 95.1% of AuRico Metals shares was distributed by Alamos to holders of Class A common shares pro rata to their holdings of Class A common shares.
| (c) |
Share capital and share-based compensation of Alamos |
In connection with the Merger, adjustments were
made to capital stock, warrants and share-based compensation to reflect the Arrangement. Subsequent to the Arrangement and the reorganization of the capital of Alamos, the capital stock, warrants, and share-based compensation of Alamos was comprised
of the following:
Capital Stock:
Authorized:
Unlimited number of Class A common shares, with no par value
Issued and outstanding:
255,505,659
shares
Stock options:
10,299,681
options at an average exercise price of CAD$12.16
27
(FORMERLY AURICO GOLD INC.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited, in thousands of United States dollars unless otherwise stated)
Stock appreciation rights (“SARs”):
2,559,094 SARs at an average exercise price of CAD$11.85
Restricted share units:
1,634,233 units
Deferred share units:
334,906 units
Performance share units:
273,069
units
Warrants:
7,167,866 warrants
at an exercise price of CAD$28.46
| (d) |
Termination of dividend reinvestment and share purchase plan |
In connection with the completion of the
Arrangement, the boards of directors of Former Alamos and AuRico approved the termination of the existing dividend reinvestment and share purchase plans of Former Alamos and AuRico, respectively.
28
Exhibit 99.5
(formerly AuRico Gold Inc.)
Management’s Discussion and
Analysis
(in United States Dollars, unless otherwise stated)
For the three and six months ended June 30, 2015
(FORMERLY AURICO GOLD INC.)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2015
TABLE OF CONTENTS
|
|
|
|
|
| MERGER WITH ALAMOS GOLD INC. |
|
|
3 |
|
|
|
| OVERVIEW OF THE BUSINESS |
|
|
3 |
|
|
|
| HIGHLIGHTS |
|
|
4 |
|
|
|
| OUTLOOK AND STRATEGY |
|
|
5 |
|
|
|
| YOUNG-DAVIDSON |
|
|
6 |
|
|
|
| EL CHANATE |
|
|
8 |
|
|
|
| DISTRIBUTION TO AURICO METALS |
|
|
10 |
|
|
|
| SUMMARIZED FINANCIAL AND OPERATING RESULTS |
|
|
11 |
|
|
|
| CONSOLIDATED EXPENSES |
|
|
13 |
|
|
|
| CONSOLIDATED INCOME TAX EXPENSE |
|
|
14 |
|
|
|
| FINANCIAL CONDITION |
|
|
15 |
|
|
|
| LIQUIDITY AND CAPITAL RESOURCES |
|
|
16 |
|
|
|
| OUTSTANDING SHARE DATA |
|
|
17 |
|
|
|
| OFF-BALANCE SHEET ARRANGEMENTS |
|
|
17 |
|
|
|
| FINANCIAL INSTRUMENTS |
|
|
17 |
|
|
|
| TRANSACTIONS WITH RELATED PARTIES |
|
|
18 |
|
|
|
| EVENTS AFTER THE REPORTING PERIOD |
|
|
18 |
|
|
|
| NON-GAAP MEASURES |
|
|
20 |
|
|
|
| CRITICAL ACCOUNTING ESTIMATES, POLICIES AND CHANGES |
|
|
22 |
|
|
|
| CONTROLS AND PROCEDURES |
|
|
23 |
|
|
|
| SUMMARY OF QUARTERLY FINANCIAL AND OPERATING RESULTS |
|
|
24 |
|
|
|
| CAUTIONARY NOTE TO U.S. INVESTORS |
|
|
24 |
|
|
|
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
|
|
25 |
|
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”), dated August 11, 2015, relates to the financial condition and results of the
consolidated operations of Alamos Gold Inc., formerly AuRico Gold Inc. (“Alamos” or the “Company”), and should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31,
2014, unaudited condensed consolidated interim statements for the three and six months ended June 30, 2015, and notes thereto. On July 2, 2015, AuRico Gold Inc. (“AuRico”) completed the merger with Alamos Gold Inc. (“Former
Alamos”) whose financial condition and results of operations will be combined with those of the Company commencing in the third quarter of 2015. The consolidated financial statements for the years ended December 31, 2014 have been prepared
in accordance with International Financial Reporting Standards (“IFRS” or “GAAP”), and the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2015 have been prepared in
accordance with International Accounting Standard 34, Interim Financial Reporting. All results are presented in United States dollars (“US dollar” or “$”), unless otherwise stated.
The first, second, third and fourth quarters of the Company’s fiscal year are referred to as “Q1”, “Q2”, “Q3” and
“Q4”, respectively.
Statements are subject to the risks and uncertainties identified in the Risks and Uncertainties and Cautionary Note
Regarding Forward-Looking Statements sections of this document. U.S. investors are also advised to refer to the section entitled Cautionary Note to U.S. Investors on page 24.
MERGER WITH FORMER ALAMOS
On April 13, 2015, AuRico announced that it
had entered into a definitive agreement with Former Alamos to combine the respective companies (the “Merger”) by way of a Plan of Arrangement (the “Arrangement”), creating a new, leading intermediate gold producer. The Merger
combines two top-quality, highly-complementary asset portfolios, including two long-life, cash flow generating gold mines: AuRico’s Young-Davidson mine in Ontario, Canada and Former Alamos’ Mulatos mine in Sonora, Mexico.
The Arrangement was completed on July 2, 2015 and AuRico and Former Alamos amalgamated to form Alamos Gold Inc. Pursuant to the Arrangement, certain
assets of Former AuRico, including the Kemess project, a 1.5% net smelter return royalty on the Young-Davidson mine, AuRico’s Fosterville and Stawell royalties, and $20 million of cash, were transferred to a new company, AuRico Metals Inc.
(“AuRico Metals”). Approximately 95.1% of the common shares of AuRico Metals (“AuRico Metals Shares”) were distributed to Former Alamos and AuRico shareholders. Following completion of the Arrangement, the Company held an equity
interest of approximately 4.9% in AuRico Metals.
Under the terms of the Arrangement, each Former Alamos share held was ultimately exchanged for 1
Class A common share of Alamos (“Class A Shares”), $0.0001 in cash, and 0.4397 common shares of AuRico Metals, and each AuRico share held was exchanged for 0.5046 Class A Shares and 0.2219 AuRico Metals Shares. Upon closing,
Alamos had approximately 255,505,000 Class A Shares outstanding, with Former Alamos and AuRico shareholders each owning approximately 50%, and AuRico Metals had approximately 118,120,000 shares outstanding, with Former Alamos and AuRico
shareholders each owning approximately 50% of the shares not held by Alamos.
The Company commenced trading on the Toronto Stock Exchange and New York
Stock Exchange on July 6, 2015 under the symbol “AGI”. Former Alamos and AuRico shares were delisted on that same day.
OVERVIEW OF THE BUSINESS
The Company is a Canadian-based intermediate gold
producer with diversified production from three operating mines in North America following the Merger. This includes the Young-Davidson mine in northern Ontario, Canada and the Mulatos and El Chanate mines in Sonora State, Mexico. Additionally,
Alamos has a significant portfolio of exploration through advanced development stage projects in Mexico, Turkey, Canada and the United States. Alamos employs more than 1,300 people and is committed to the highest standards of sustainable
development.
The Company’s common shares are listed on the Toronto Stock Exchange (TSX: AGI) and the New York Stock Exchange (NYSE: AGI). Further
information about Alamos can be found in the Company’s regulatory filings, including the Joint Information Circular, dated May 22, 2015, available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov, and on the Company’s
website at www.alamosgold.com.
The Company’s performance is largely dependent on the price of gold, which directly affects the Company’s
profitability and cash flow. The price of gold is subject to volatile price movements during short periods of time and is affected by numerous factors, such as the strength of the US dollar, supply and demand, interest rates, and inflation rates,
all of which are beyond the Company’s control. During Q2 2015, the London PM Fix price of gold averaged $1,192 per ounce, a 7% decrease from the London PM Fix average of $1,288 during Q2 2014. During Q2 2015, daily London PM Fix prices ranged
between $1,165 and $1,225 per ounce.
|
|
|
|
|
|
3 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
At the Company’s mine sites, a significant portion of the operating costs and capital expenditures are
denominated in foreign currencies, including Mexican pesos and Canadian dollars. Therefore, fluctuations in these foreign currencies against the US dollar can significantly impact the Company’s costs and cash flow. The Mexican peso and Canadian
dollar averaged approximately 15.32 to 1.0 US dollar and 1.23 to 1.0 US dollar, respectively, in Q2 2015, compared to average rates of 13.0 to 1.0 US dollar and 1.09 to 1.0 US dollar, respectively, in Q2 2014.
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except ounces, all-in sustaining costs and total cash costs) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
|
|
|
|
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
Change |
|
|
Change |
|
| Total gold ounces produced |
|
|
62,606 |
|
|
|
56,198 |
|
|
|
6,408 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
72,139 |
|
|
$ |
75,530 |
|
|
$ |
(3,391 |
) |
|
|
-4 |
% |
| Loss from operations |
|
$ |
(417,009 |
) |
|
$ |
(16,293 |
) |
|
$ |
(400,716 |
) |
|
|
-2459 |
% |
| Net loss |
|
$ |
(379,542 |
) |
|
$ |
(16,776 |
) |
|
$ |
(362,766 |
) |
|
|
-2162 |
% |
| Operating cash flow |
|
$ |
20,801 |
|
|
$ |
4,649 |
|
|
$ |
16,152 |
|
|
|
347 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs per gold ounce, net of by-product revenues and NRV
adjustments(1) |
|
$ |
669 |
|
|
$ |
801 |
|
|
$ |
(132 |
) |
|
|
-16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in sustaining costs per gold ounce sold, net of by-product revenues and NRV
adjustments(1) |
|
$ |
1,043 |
|
|
$ |
1,191 |
|
|
$ |
(148 |
) |
|
|
-12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See the Non-GAAP Measures section on page 20. |
|
|
|
|
|
|
4 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
OUTLOOK AND STRATEGY
With diversified North American-based gold
production, a strong balance sheet, and a portfolio of low cost growth projects, all located in safe political jurisdictions, Alamos is well positioned to deliver shareholder value.
Alamos is on track to achieve its full year production and cost guidance. On a combined full year 2015 basis, the Company anticipates total production from
the Young-Davidson, Mulatos and El Chanate mines to be between 375,000 and 425,000 ounces of gold.
The Company continues to invest in its primary
producing operations, including ramping up underground production at Young-Davidson and development of the Cerro Pelon and La Yaqui satellite deposits at Mulatos. This is expected to drive low cost production growth at both operations while
substantially reducing costs. The Company’s balance sheet provides the financial flexibility to complete these planned expansions in the current gold price environment.
The underground ramp up at Young-Davidson remains well on track with average underground mining rates of 5,149 tonnes per day (“TPD”) in the second
quarter of 2015. The Company is well positioned to achieve year end targeted rates of 6,000 TPD, followed by the ultimate target of 8,000 TPD. Underground unit mining costs were significantly lower in the second quarter at $33 per tonne reflecting
ongoing productivity improvements and the weaker Canadian dollar. The ramp up in underground mining rates is expected to result in further decreases in unit costs along with supplying an increasing proportion of mill feed, driving milled grades and
gold production higher. Both are expected to drive total cash costs lower and combined with declining development capital requirements starting in 2017, and increase in free cash flow generation. The current objective at the Young-Davidson mine is
for cash flow from operations to finance the growth capital required to develop the lower mine over the next two years, while achieving targeted underground mining rates. Current gold prices have made this objective a challenge, but the Company has
the balance sheet strength to self-finance the underground ramp up and position the mine to generate strong free cash flow once the 8,000 TPD target has been met.
At Mulatos, the Company expects a significant increase in second half 2015 production reflecting stronger high grade mill production from the San Carlos
deposit. The high grade mill modifications are being commissioned and recoveries are expected to increase to 75% from current levels of approximately 60%. In addition, the Company will ramp up throughput to the mill, supplementing underground ore
production with existing high grade stockpiles. At the end of June, the Company had over 45,000 tonnes of high grade stockpiles, at grades in excess of 7 grams per tonne of gold (“g/t Au”). Production from high-grade ore at San Carlos has
a lower total cash cost profile than leach pad production, therefore, increased mill production is expected to result in lower total cash costs and stronger operating cash flow in the second half of the year. Looking beyond 2015, total cash costs
are expected to improve as open pit grades increase and the waste-to-ore ratio normalizes to life-of-mine levels. Mulatos will be further bolstered by the development of Cerro Pelon and La Yaqui. With Cerro Pelon and La Yaqui averaging double the
2015 budgeted heap leach grade, these deposits are expected to both increase production and drive costs substantially lower.
The El Chanate mine exceeded
expectations in the second quarter achieving record production of 23,241 ounces of gold and positive net free cash flow (refer to page 20) in the first half of the year. This performance reflected higher recoveries, and the operation remains
well-positioned to achieve its full year production and cost guidance.
Management is focused on successfully integrating AuRico and Former Alamos, and is
continuously seeking opportunities for cost savings and synergies. The Company has committed to a minimum annual savings of $10 million from corporate G&A, tax and purchasing efficiencies, and believes there are opportunities to increase this
further. With two producing operations in the state of Sonora, Mexico, the Company is confident that purchasing efficiencies will be realized, and mine operating costs will be reduced accordingly.
The Company’s cash position and balance sheet remain strong, which is a critical asset in the current economic environment. Young-Davidson and Mulatos
are expected to self-finance the majority of their development spending over the next two years. Further, the recent weakness in both the Canadian dollar and Mexican peso relative to the United States dollar have partially offset the impact of the
lower gold price on free cash flow as both operating and capital costs have benefitted.
The Company’s long-term growth is further supported by a
strong portfolio of low-cost, low capital intensity development projects, which are at various stages of exploration, permitting and development. Development spending with respect to the Company’s project pipeline is largely discretionary. The
Company is prioritizing its development spending and allocating resources to those projects with the highest potential returns. At current gold prices, the Company’s advanced development projects are economic and are expected to generate strong
returns.
|
|
|
|
|
|
5 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
YOUNG-DAVIDSON
The Company owns the Young-Davidson mine, located
near the town of Matachewan in Northern Ontario, Canada. The property consists of contiguous mineral leases and claims totaling 4,733 hectares and is situated on the site of two past producing mines that produced one million ounces during the 1930s
– 1950s. The Young-Davidson open pit mine achieved commercial production on September 1, 2012, upon the completion of construction activities associated with surface infrastructure and the processing plant, and upon achieving sustained
targeted daily tonnage rates in both the open pit and mill. On October 31, 2013, the Company declared commercial production at the Young-Davidson underground mine following the commissioning of the shaft hoisting system.
YOUNG-DAVIDSON OPERATIONAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Underground Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore mined |
|
|
468,564 |
|
|
|
327,131 |
|
|
|
840,253 |
|
|
|
562,117 |
|
| Average grade of gold(1) |
|
|
2.64 |
|
|
|
3.29 |
|
|
|
2.78 |
|
|
|
3.09 |
|
| Metres developed |
|
|
3,789 |
|
|
|
3,545 |
|
|
|
7,198 |
|
|
|
7,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Open Pit Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes mined |
|
|
— |
|
|
|
1,012,465 |
|
|
|
— |
|
|
|
3,392,509 |
|
| Tonnes of ore mined |
|
|
— |
|
|
|
506,038 |
|
|
|
— |
|
|
|
1,343,083 |
|
| Average grade of gold(1) |
|
|
— |
|
|
|
0.94 |
|
|
|
— |
|
|
|
0.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes stockpiled ahead of the mill |
|
|
1,994,205 |
|
|
|
3,245,667 |
|
|
|
1,994,205 |
|
|
|
3,245,667 |
|
| Average grade of gold(1) |
|
|
0.76 |
|
|
|
0.77 |
|
|
|
0.76 |
|
|
|
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mill Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore processed |
|
|
698,644 |
|
|
|
748,967 |
|
|
|
1,345,393 |
|
|
|
1,393,657 |
|
| Average grade of gold(1) |
|
|
2.02 |
|
|
|
2.16 |
|
|
|
2.01 |
|
|
|
1.99 |
|
| Average gold recovery rate |
|
|
88 |
% |
|
|
88 |
% |
|
|
87 |
% |
|
|
88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total gold ounces produced |
|
|
39,365 |
|
|
|
40,166 |
|
|
|
77,463 |
|
|
|
75,270 |
|
| Total gold ounces sold |
|
|
37,573 |
|
|
|
42,134 |
|
|
|
74,525 |
|
|
|
78,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Grams per tonne of gold. |
The Company mined 468,564 ore tonnes, or 5,149 TPD, from the Young-Davidson
underground mine during Q2 2015, at a grade of 2.64 g/t Au. During the first six months of 2015, the Company mined 840,253 ore tonnes, or 4,642 TPD, at a grade of 2.78 g/t Au. Mining rates increased significantly from the 3,595 TPD and 3,106 TPD
realized during the three and six months ended June 30, 2014 due to planned productivity improvements, namely an increase in personnel and equipment, and increased development. Further productivity improvements in the current year are
anticipated to position the Company to achieve targets of 6,000 TPD by the end of 2015 and ultimate target of 8,000 TPD. Underground mine grades decreased in the first half of 2015 compared to the same period in 2014, due to stope sequencing.
The Young-Davidson open pit mine ceased operations in early June 2014 when it reached the end of its planned life. At the end of Q2 2015, the Company had
approximately 2 million tonnes of low grade open pit ore stockpiled ahead of the mill at an average grade of 0.76 g/t Au. Mill feed from the underground mine continues to be supplemented by the stockpiled open pit ore while underground mining
levels ramp up to mill capacity.
During Q2 2015, the Company processed 698,644, or 7,677 TPD, at the Young-Davidson mill facility, with grades averaging
2.02 g/t Au. During the six months ended June 30, 2015, the Company processed 1,345,393 tonnes, or 7,433 TPD, at the Young-Davidson mill facility at an average grade of 2.01 g/t Au, consistent with the 7,700 TPD processed at a grade of 1.99 g/t
Au during the first half of 2014.
Young-Davidson produced 39,365 ounces of gold during Q2 2015 consistent with the 40,166 ounces produced in Q2 2014.
During the six months ended June 30, 2015, Young-Davidson produced 77,463 gold ounces, a 3% increase over the same period in 2014.
|
|
|
|
|
|
6 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
YOUNG-DAVIDSON FINANCIAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except total cash costs) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Revenue from mining operations |
|
$ |
45,058 |
|
|
$ |
54,046 |
|
|
$ |
90,240 |
|
|
$ |
101,062 |
|
| Production costs |
|
$ |
29,386 |
|
|
$ |
37,856 |
|
|
$ |
57,096 |
|
|
$ |
74,530 |
|
| Refining costs |
|
$ |
41 |
|
|
$ |
48 |
|
|
$ |
87 |
|
|
$ |
81 |
|
| Amortization and depletion |
|
$ |
19,652 |
|
|
$ |
30,524 |
|
|
$ |
37,026 |
|
|
$ |
54,496 |
|
| Loss from operations |
|
$ |
(330,037 |
) |
|
$ |
(14,382 |
) |
|
$ |
(330,049 |
) |
|
$ |
(28,045 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow from operations |
|
$ |
17,348 |
|
|
$ |
3,711 |
|
|
$ |
39,528 |
|
|
$ |
15,846 |
|
| Capital expenditures |
|
$ |
(27,134 |
) |
|
$ |
(31,481 |
) |
|
$ |
(50,972 |
) |
|
$ |
(76,845 |
) |
| Net free cash flow(1) |
|
$ |
(9,786 |
) |
|
$ |
(27,770 |
) |
|
$ |
(11,444 |
) |
|
$ |
(60,999 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs per gold ounce, net of by-product revenues and NRV
adjustments(1)(2) |
|
$ |
697 |
|
|
$ |
871 |
|
|
$ |
721 |
|
|
$ |
935 |
|
| Total cash costs per gold ounce sold, net of by-product revenues(1)(2) |
|
$ |
777 |
|
|
$ |
871 |
|
|
$ |
761 |
|
|
$ |
935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See the Non-GAAP Measures section on page 20. |
| (2) |
Total cash costs per gold ounce are calculated based on ounces sold. |
During Q2 2015, Young-Davidson
recognized revenue of $45.1 million and a loss from operations of $330.0 million compared to revenue of $54.0 million and a loss from operations of $14.4 million in Q2 2014. Revenue decreased in Q2 2015 as a result of lower realized gold prices and
fewer gold ounces sold. Year-to-date, Young-Davidson recognized revenues of $90.2 million and a loss from operations of $330.0 million, compared to revenues of $101.1 million and a loss from operations $28.0 million in the same period in 2014.
Included in loss from operations in the three and six months ended June 30, 2015 was an impairment charge of $326.0 million. In the second quarter of
2015, management identified certain facts and circumstances indicating possible impairments including: (a) changes in the economic assumptions based on the continued depressed long term gold price outlook and a reduction of net asset value
(“NAV”) multiples applied to mining properties, (b) the market capitalization of the Company continued to be significantly below the carrying value of the net assets at period end, (c) results of operations to date in 2015, and
(d) the results of an independent third party review of the cost estimates included in the Young-Davidson life of mine (“LOM”) plan. As a result, an impairment assessment was performed which resulted in an impairment charge.
Q2 2015 production costs were $29.4 million compared to $37.9 million in the second quarter of 2014. Underground unit mining costs decreased to $33 per tonne
in the second quarter of 2015, a significant decrease from approximately $45 per tonne in the second quarter of 2014 and $39 per tonne in the first quarter of 2015 reflecting ongoing productivity improvements and the weaker Canadian dollar.
Loss from operations in Q2 2015 included a $4.8 million net realizable value (“NRV”) adjustment on long-term stockpile inventories at June 30,
2015, of which $3.0 million was recognized in production costs and $1.8 million was recognized in amortization and depletion. This NRV adjustment was caused by a decrease in estimated future gold prices and an increase in estimated future processing
costs.
Q2 2015 total cash costs per gold ounce, including the impact of NRV adjustments, were $777, representing an 11% decrease from the same period in
2014. Year-to-date, total cash costs per gold ounce, net of by-product revenues, were $761, representing a 19% decrease from the same period in 2014. Total cash costs per ounce were higher in the second quarter of 2015 due to a $4.8 million NRV
adjustment on stockpile ore inventories at June 30, 2015, of which $3.0 million was recognized in production costs and $1.8 million was recognized in amortization and depletion. This NRV adjustment was caused by a decrease in estimated future
gold prices on inventory stockpiled in previous periods, and had the impact of increasing total cash costs and all-in sustaining costs (“AISC”) per gold ounce in the current quarter by $80 per ounce of gold sold. Excluding the NRV
adjustment, total cash costs and AISC in the second quarter were $697 and $1,008, respectively. The decreased cost per ounce in Q2 2015 and on a year-to-date basis was due primarily to the increase in the underground contribution to overall
production, and the favourable weakening of the Canadian dollar in the current period as compared to the prior year. Total cash costs at Young-Davidson are expected to decrease in the future as throughput is ramped up, and grades mined from
underground return to reserve grade of 2.74 g/t Au.
Excluding the $326.0 million impairment charge discussed previously, net loss from operations for the
three and six months ended June 30, 2015 were $4.0 million and $4.0 million, respectively. The decrease in the loss from operations, as compared to the same periods in 2014, resulted from the lower production costs previously noted and a
decline in amortization and depletion expense. Amortization and depletion expense was higher in the first half of 2014 due to depletion of stripping costs previously capitalized as the open pit approached the end of its mine life.
|
|
|
|
|
|
7 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
Young-Davidson reported a $13.6 million increase in operating cash flow compared to Q2 2014, as operating
cash flow in Q2 2014 was negatively impacted by changes in net working capital. During Q2 2015, capital expenditures at Young-Davidson of $27.1 million exceeded operating cash flows of $17.3 million resulting in negative net free cash flow of $9.8
million. Capital expenditures in Q2 2015 included $11.0 million in site infrastructure, $16.0 million in underground development and $0.1 million in exploration costs. During the first six months of 2015, capital expenditures at Young-Davidson of
$51.0 million exceeded operating cash flows of $39.5 million resulting in negative net free cash flow of $11.4 million. Capital expenditures in the first half of 2015 included $17.4 million in site infrastructure, $30.9 million in underground
development, $0.6 in exploration costs, and $2.0 million in capitalized borrowing costs.
EL CHANATE
The Company owns the El Chanate mine, located 37
kilometres northeast of the town of Caborca in the state of Sonora, Mexico. El Chanate consists of an open pit mine with heap leach processing facilities.
EL CHANATE OPERATIONAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Open Pit Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes mined |
|
|
7,973,305 |
|
|
|
8,536,557 |
|
|
|
15,958,516 |
|
|
|
17,122,757 |
|
| Tonnes of ore mined |
|
|
1,813,274 |
|
|
|
2,517,914 |
|
|
|
3,670,927 |
|
|
|
4,832,120 |
|
| Capitalized stripping tonnes |
|
|
3,011,836 |
|
|
|
2,208,712 |
|
|
|
7,511,788 |
|
|
|
6,081,766 |
|
| Average grade of gold(1) |
|
|
0.72 |
|
|
|
0.39 |
|
|
|
0.69 |
|
|
|
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Crushing and Heap Leach Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of ore crushed and stacked on the heap leach pad |
|
|
1,541,221 |
|
|
|
1,782,144 |
|
|
|
3,108,266 |
|
|
|
3,555,563 |
|
| Average grade of gold processed(1) |
|
|
0.84 |
|
|
|
0.50 |
|
|
|
0.78 |
|
|
|
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tonnes of low grade ore stacked on the heap leach pad |
|
|
319,871 |
|
|
|
848,224 |
|
|
|
566,203 |
|
|
|
1,418,968 |
|
| Average grade of gold processed(1) |
|
|
0.19 |
|
|
|
0.20 |
|
|
|
0.19 |
|
|
|
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total tonnes of ore processed |
|
|
1,861,092 |
|
|
|
2,630,368 |
|
|
|
3,674,469 |
|
|
|
4,974,531 |
|
| Average grade of gold processed(1) |
|
|
0.73 |
|
|
|
0.40 |
|
|
|
0.69 |
|
|
|
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold ounces produced |
|
|
23,241 |
|
|
|
16,032 |
|
|
|
39,170 |
|
|
|
35,142 |
|
| Gold ounces sold |
|
|
22,152 |
|
|
|
16,143 |
|
|
|
38,295 |
|
|
|
33,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Grams per tonne of gold. |
During Q2 2015, the Company mined 7,973,305 tonnes at the El Chanate open
pit, including 1,813,274 ore tonnes, at an average grade of 0.72 g/t Au. During the first six months of 2015, the Company mined 15,958,516 tonnes, including 3,670,927 ore tonnes, at an average grade of 0.69 g/t Au. Ore tonnes mined in the three and
six months ended June 30, 2015 were 28% and 24% less than the same periods in 2014. The decrease in tonnage and increase in average grades during Q2 2015 and the first half of the year as compared to the prior year were due to mine sequencing.
Capitalized stripping activities totaled 3,011,836 and 7,511,788 tonnes mined during Q2 2015 and year-to-date 2015, respectively, compared to 2,208,712
and 6,081,766 tonnes during the same periods in 2014. Stripping activities at El Chanate represented a capital investment of $4.7 million during the second quarter of 2015, compared to an investment of $3.5 million in Q2 2014. Capital stripping
activities are expected to decrease in the second half of 2015.
The Company crushed and stacked 1,541,221 tonnes of open pit ore on the heap leach pad in
Q2 2015, at an average rate of 16,936 TPD, compared to the average rate during Q2 2014 of 19,584 TPD. During Q2 2015, the Company also stacked 319,871 tonnes of low grade run-of-mine material on the heap leach pad. Total tonnes processed in Q2 2015
of 1,861,092 tonnes, or 20,452 TPD, were lower than total tonnes processed in Q2 2014 of 2,630,368, due to a decrease in ore tonnes mined as discussed above. During the first six months of 2015, the Company crushed and stacked 3,108,266 tonnes of
ore at an average rate of 17,173 TPD, compared to the 19,644 TPD stacked in the first six months of 2014.
The grade of ore crushed and stacked averaged
0.84 g/t Au during Q2 2015 as compared to an average grade of 0.50 g/t Au in Q2 2014. Year-to-date grades crushed and stacked in 2015 averaged 0.78 g/t Au compared to an average grade of 0.52 g/t Au in 2014. The variances in grades in the current
year versus prior year were largely due to mine sequencing. During Q2 2015, the grade of all material processed, including run-of-mine material, averaged 0.73 g/t Au stacked as compared to 0.40 g/t Au stacked in Q2 2014.
|
|
|
|
|
|
8 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
During the second quarter, El Chanate produced a quarterly record 23,241 gold ounces, bringing production
year-to-date of 39,170 gold ounces compared to production of 16,032 and 35,142 gold ounces in the same periods of the prior year. These increases are primarily as a result of higher average grade crushed and stacked in the first half of 2015
compared to the same period in 2014, offset by a decrease in ore tonnes stacked on the leach pads.
EL CHANATE
FINANCIAL REVIEW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except total cash costs) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Revenue from mining operations |
|
$ |
27,081 |
|
|
$ |
21,484 |
|
|
$ |
47,258 |
|
|
$ |
45,421 |
|
| Production costs |
|
$ |
19,927 |
|
|
$ |
10,835 |
|
|
$ |
29,929 |
|
|
$ |
22,054 |
|
| Refining costs |
|
$ |
106 |
|
|
$ |
107 |
|
|
$ |
250 |
|
|
$ |
214 |
|
| Amortization and depletion |
|
$ |
6,956 |
|
|
$ |
4,163 |
|
|
$ |
11,113 |
|
|
$ |
8,648 |
|
| (Loss) / earnings from operations |
|
$ |
(40,183 |
) |
|
$ |
6,163 |
|
|
$ |
(34,535 |
) |
|
$ |
13,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow from operations |
|
$ |
13,876 |
|
|
$ |
6,775 |
|
|
$ |
20,271 |
|
|
$ |
10,675 |
|
| Capital expenditures |
|
$ |
(5,317 |
) |
|
$ |
(5,660 |
) |
|
$ |
(12,527 |
) |
|
$ |
(13,917 |
) |
| Net free cash flow(1) |
|
$ |
8,559 |
|
|
$ |
1,115 |
|
|
$ |
7,744 |
|
|
$ |
(3,242 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs per gold ounce, net of by-product revenues and NRV
adjustments(3) |
|
$ |
621 |
|
|
$ |
618 |
|
|
$ |
606 |
|
|
$ |
601 |
|
| Total cash costs per gold ounce sold, net of by-product revenues(1) |
|
$ |
838 |
|
|
$ |
618 |
|
|
$ |
731 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See the Non-GAAP Measures section on page 20. |
The Company recognized revenue at El Chanate of $27.1
million during Q2 2015, compared to revenue of $21.5 million in Q2 2014. During the first six months of 2015, the Company recognized revenue at El Chanate of $47.3 million, compared to revenue of $45.4 million in the first half of 2014. This
quarter-over-quarter and year-over-year increase in revenues was due to higher ounces sold in 2015, offset by a lower average realized gold price.
Included in loss from operations in the three and six months ended June 30, 2015 was an impairment charge of $40.0 million. The decline in gold prices
indicated a possible impairment. In addition, the Company began to increase cyanide application rates on the leach pad in an effort to increase recoveries. While this has helped accelerate the recovery of inventory during the quarter, resulting in
higher production at El Chanate, the result was also an increase in the estimated future processing cost assumption. As a result of these factors, an impairment assessment was performed which resulted in an impairment charge.
Production costs increased in the three and six months ended June 30, 2015 due to a $7.0 million NRV adjustment on leach pad inventories at June 30,
2015, of which $5.6 million was recognized in production costs and $1.4 million was recognized in amortization and depletion. This NRV adjustment was caused by a decrease in estimated future gold prices and an increase in estimated future processing
costs on leach pad inventory stacked in previous periods.
Total cash costs per gold ounce, net of by-product revenues, were $838 in Q2 2015, 36% higher
than Q2 2014. Year-to-date, total cash costs per gold ounce were $731, 21% higher than the same period in 2014. Total cash costs per ounce were higher in the second quarter of 2015 due to the NRV adjustments discussed above. This NRV adjustment had
the impact of increasing total cash costs and AISC in the second quarter by $217 per ounce of gold sold. Excluding the NRV adjustment, total cash costs and AISC per gold ounce in the second quarter were $621 and $878, respectively.
Excluding the $40.0 million impairment charge and $7.0 million NRV adjustment discussed previously, net earnings from operations for the three and six months
ended June 30, 2015 were $6.8 million and $12.4 million, respectively. Q2 2015 earnings were consistent with the prior year, as the decline in gold price was offset by higher production in the current year. The decline in year-to-date earnings
is primarily related to the decrease in realized gold price in 2015, partially offset by increased production.
The Company reported a $7.1 million
quarter-over-quarter increase in operating cash flow driven primarily by an increase in gold ounces sold and favourable changes in net working capital. During the quarter, operating cash flows of $13.9 million at El Chanate exceeded capital
expenditures of $5.3 million, resulting in net free cash flow of $8.6 million. Capital expenditures in Q2 2015 included $4.7 million in capitalized stripping activities, $0.3 million in other sustaining capital and optimization initiatives, and $0.3
million in exploration expenditures. Year-to-date, cash flow from operations of $20.3 million was $9.6 million higher than the first six months of 2014. The increase in 2015 is due primarily to positive changes in net working capital. During the
first six months of 2015, capital expenditures were $12.5 million and net free cash flow was positive $7.7 million. Year-to-date capital expenditures included $11.5 million in capitalized stripping activities, $0.6 million in other sustaining
capital and optimization initiatives, and $0.4 million in exploration expenditures.
|
|
|
|
|
|
9 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
DISTRIBUTION TO AURICO METALS
On July 2, 2015, pursuant to the
Arrangement and in accordance with the AuRico Metals Contribution Agreement, the following assets and liabilities were distributed to AuRico Metals:
| • |
|
The Kemess project, including all concessions, lands, mineral rights, mineral and surface leases, and assets for use or pertaining to the Kemess project; |
| • |
|
Reclamation obligations relating to the Kemess project, including cash collateral or deposits posted on account of the reclamation obligations; |
| • |
|
The $9.5 million Canadian dollar earn-in committed amount (the “Earn-In Committed Amount”); |
| • |
|
Cash in an amount equal to $20 million less the Earn-In Committed Amount; |
| • |
|
The Fosterville and Stawell net smelter return royalties of 2% and 1%, respectively; |
| • |
|
Certain working capital amounts related to the above-mentioned assets and liabilities; and |
| • |
|
The 1.5% net smelter return royalty on Young-Davidson. |
Subsequent to the distribution and amalgamation,
Alamos has retained a 4.9% ownership interest in AuRico Metals. In addition, Alamos has a right to earn up to a 30% interest in the Kemess East Project by spending a total of $20 million Canadian dollars, including the Earn-In Committed Amount, by
December 31, 2016.
The Arrangement was approved by shareholders on June 24, 2015 and final court approval was granted on June 26, 2015 by
the Ontario Superior Court of Justice. As a result, at June 30, 2015, the Company classified these assets and liabilities as Assets and Liabilities Held for Distribution on the Condensed Consolidated Balance Sheet, and recognized a Distribution
Payable, representing the total fair value of the assets and liabilities to be distributed.
Assets held for distribution are recognized at the lower of
carrying value and fair value less costs to distribute on the date of the reclassification. Upon conducting a fair value assessment, it was determined that the fair value of these assets was less than the carrying values. As a result, the Company
recorded a revaluation loss of $40.1 million on the Kemess project (net of a deferred tax recovery of $10.1 million) in its Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2015.
|
|
|
|
|
|
10 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
SUMMARIZED FINANCIAL AND OPERATING
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except ounces, per share amounts, average realized prices, all-in sustaining costs and total cash costs) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Gold ounces produced |
|
|
62,606 |
|
|
|
56,198 |
|
|
|
116,633 |
|
|
|
110,412 |
|
| Gold ounces sold |
|
|
59,725 |
|
|
|
58,277 |
|
|
|
112,820 |
|
|
|
112,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average realized gold price per ounce |
|
$ |
1,194 |
|
|
$ |
1,283 |
|
|
$ |
1,204 |
|
|
$ |
1,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs per gold ounce sold, net of by-product revenues and NRV
adjustments(1) |
|
$ |
669 |
|
|
$ |
801 |
|
|
$ |
682 |
|
|
$ |
834 |
|
| Total cash costs per gold ounce sold, net of by-product revenues(1) |
|
$ |
800 |
|
|
$ |
801 |
|
|
$ |
751 |
|
|
$ |
834 |
|
| All-in sustaining costs per gold ounce sold, net of by-product revenues and NRV
adjustments(1) |
|
$ |
1,043 |
|
|
$ |
1,191 |
|
|
$ |
1,067 |
|
|
$ |
1,287 |
|
| All-in sustaining costs per gold ounce sold, net of by-product
revenues(1) |
|
$ |
1,174 |
|
|
$ |
1,191 |
|
|
$ |
1,136 |
|
|
$ |
1,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
72,139 |
|
|
$ |
75,530 |
|
|
$ |
137,498 |
|
|
$ |
146,483 |
|
| Production costs(2) |
|
$ |
49,313 |
|
|
$ |
48,691 |
|
|
$ |
87,025 |
|
|
$ |
96,584 |
|
| Loss from operations |
|
$ |
(417,009 |
) |
|
$ |
(16,293 |
) |
|
$ |
(419,500 |
) |
|
$ |
(32,357 |
) |
| Net loss |
|
$ |
(379,542 |
) |
|
$ |
(16,776 |
) |
|
$ |
(414,800 |
) |
|
$ |
(45,667 |
) |
| Net loss per share, basic |
|
$ |
(1.43 |
) |
|
$ |
(0.07 |
) |
|
$ |
(1.57 |
) |
|
$ |
(0.18 |
) |
| Net loss per share, diluted |
|
$ |
(1.43 |
) |
|
$ |
(0.07 |
) |
|
$ |
(1.57 |
) |
|
$ |
(0.18 |
) |
| Earnings before interest, taxes, depreciation, and amortization(1) |
|
$ |
(403,802 |
) |
|
$ |
22,904 |
|
|
$ |
(382,616 |
) |
|
$ |
21,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating cash flow |
|
$ |
20,801 |
|
|
$ |
4,649 |
|
|
$ |
34,833 |
|
|
$ |
29,140 |
|
| Net free cash flow(1) |
|
$ |
(19,868 |
) |
|
$ |
(36,467 |
) |
|
$ |
(41,007 |
) |
|
$ |
(67,588 |
) |
| Total cash |
|
$ |
129,725 |
|
|
$ |
140,574 |
|
|
$ |
129,725 |
|
|
$ |
140,574 |
|
| Cash dividends per share, declared |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See the Non-GAAP Measures section on page 20. |
| (2) |
Production costs do not include amortization and depletion or refining costs. |
REVIEW
OF SECOND QUARTER FINANCIAL RESULTS
During the second quarter of 2015, the Company sold 59,725 gold ounces at the El Chanate and Young-Davidson mines, a 2% increase over 58,277 gold ounces sold
in Q2 2014. Revenue decreased from $75.5 million in Q2 2014 to $72.1 million in the second quarter of 2015. This $3.4 million decrease in revenue was due to lower realized gold prices during Q2 2015 as compared to Q2 2014, partially offset by the
increase in ounces sold.
Q2 2015 total cash costs per gold ounce, net of by-product revenues and NRV adjustments, were $669, a 16% decrease from Q2 2014.
This quarter-over-quarter improvement was primarily due to the higher underground contribution to overall site production at Young-Davidson and a weaker Canadian dollar as compared to the prior year.
The Company recognized a loss from operations of $417.0 million in the second quarter of 2015, compared to a loss from operations of $16.3 million in the same
period of 2014. During the quarter, as previously discussed on pages 7 and 9, the Company recorded impairment charges of $326.0 million and $40.0 million against the carrying values of the Young-Davidson and El Chanate mines, respectively. Also
contributing to the loss from operations was a $40.1 million loss on the revaluation of assets held for distribution to fair value. In addition, the Company recognized NRV adjustments on ore in process heap leach inventory at El Chanate and low
grade stockpile inventory at Young-Davidson of $7.0 million and $4.8 million, respectively (further discussion is provided on pages 7 and 9).
The Company
reported a net loss of $379.5 million in the second quarter of 2015, compared to a net loss of $16.8 million in Q2 2014. Net losses increased in the current quarter primarily due to the impairment charges, revaluation loss, NRV adjustments noted
above, and a $9.8 million decrease in other income, partially offset by a $48.4 million increase in income tax recoveries. The decrease in other loss during the current quarter was largely due to merger transaction costs and post-merger
restructuring costs accrued of $6.0 million and $10.3 million, respectively. Net losses in Q2 2015 include income tax recoveries of $39.3 million, $10.1 million, and $3.7 million on impairment charges, revaluation loss, and NRV adjustments,
respectively. Total net impairment charges and net revaluation loss in Q2 2015 were $326.7 million and $30.0 million, respectively.
|
|
|
|
|
|
11 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
In the second quarter of 2015, all-in sustaining costs per gold ounce, net of by-product revenues and NRV
adjustments, decreased by 12% to $1,043, as compared to all-in sustaining costs per gold ounce, net of by-product revenues and NRV adjustments, of $1,191 in Q2 2014. This decrease was primarily due to lower general and administrative expenses and
decreased total cash costs per ounce at Young-Davidson.
The Company reported operating cash flow of $20.8 million during the second quarter, an increase
of $16.2 million over operating cash flow of $4.6 million in Q2 2014. The increase in operating cash flow was primarily the result of paying down accounts payable at Young-Davidson during Q2 2014, resulting in a lower operating cash flow
contribution as compared to Q2 2015. After deducting capital expenditures of $40.7 million, the Company had negative net free cash flow of $19.9 million. Capital spending is expected to decrease in the second half of the year. The negative free cash
flow in the quarter reflects care and maintenance and exploration spending at the Kemess project which will not be incurred going forward, as well as transaction costs incurred related to the Merger.
REVIEW OF SIX MONTH FINANCIAL RESULTS
During 2015, the Company sold 112,820 gold ounces
at Young-Davidson and El Chanate, compared to sales of 112,347 gold ounces in 2014. Revenue during 2015 decreased to $137.5 million, as compared to $146.5 million in 2014. This $9.0 million decrease in revenue was due to lower realized gold prices
in 2015.
The Company recognized a loss from operations of $419.5 million in 2015, compared to a loss from operations of $32.4 million in 2014. This loss
was primarily as a result of the impairment charges, loss on revaluation and NRV adjustments discussed previously. Before impairment charges, the loss on revaluation and NRV adjustments, losses from operations were $15.4 million in 2015, compared to
a loss from operations of $32.4 million in the same period of 2014. The year-over-year decrease in loss from operations resulted primarily from decreased production costs, amortization expense, and general and administrative expenses in the current
year.
During 2015, consolidated total cash costs per gold ounce, net of by-product revenues and NRV adjustments, were $682, representing an 18% decrease
over total cash costs per gold ounce of $834 in 2014. This year-over-year decrease was primarily due to the higher underground contribution to overall site production at Young-Davidson and a weaker Canadian dollar as compared to the prior year.
The Company reported a net loss of $414.8 million in 2015, compared to a net loss of $45.7 million in 2014. Net loss increased in the current year primarily
due to the impairment charges, loss on revaluation, and NRV adjustments noted above. Included in net loss for 2015 was a $16.1 million increase in income tax recovery compared to 2014 and by an $8.7 million decrease in other losses. Other losses
decreased primarily due to the recognition of a $15.6 million loss on the modification of the Company’s convertible senior notes in Q1 2014, which resulted from the cash tender offer announced that quarter. Net losses in 2015 include income tax
recoveries of $40.0 million, $10.1 million, and $3.7 million on impairment charges, revaluation loss, and NRV adjustments, respectively. Total net impairment charges and net revaluation loss in Q2 2015 were $329.2 million and $30.0 million,
respectively.
During 2015, consolidated all-in sustaining costs per gold ounce, net of by-product revenues and NRV adjustments, were $1,067, representing
a 17% decrease over all-in sustaining costs per gold ounce, net of by-product revenues and NRV adjustments, of $1,287 in 2014. The decrease was due to decreased total cash costs per ounce at the Young-Davidson mine and a decline in general and
administrative expenses. The Company’s consolidated all-in sustaining costs per ounce were consistent with 2015 guidance.
The Company reported
operating cash flow of $34.8 million during 2015, an increase of $5.7 million from operating cash flow of $29.1 million in the same period in prior year. This increase in operating cash flow arose primarily as a result of an increase in operating
cash flow contributed from both Young-Davidson and El Chanate and paying down accounts payable at Young-Davidson during Q2 2014. After deducting capital expenditures of $75.8 million, the Company’s net free cash flow for 2015 was an outflow of
$41.0 million.
|
|
|
|
|
|
12 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
CONSOLIDATED EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six months ended |
|
|
Six months ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Reclamation, care and maintenance costs |
|
$ |
1,593 |
|
|
$ |
2,270 |
|
|
$ |
1,625 |
|
|
$ |
3,205 |
|
| General and administrative |
|
$ |
4,987 |
|
|
$ |
5,663 |
|
|
$ |
9,737 |
|
|
$ |
14,919 |
|
| Exploration and business development |
|
$ |
309 |
|
|
$ |
259 |
|
|
$ |
715 |
|
|
$ |
459 |
|
| Revaluation of assets held for distribution |
|
$ |
40,112 |
|
|
$ |
— |
|
|
$ |
40,112 |
|
|
$ |
— |
|
| Impairment charges |
|
$ |
366,041 |
|
|
$ |
— |
|
|
$ |
369,216 |
|
|
$ |
— |
|
| Finance costs |
|
$ |
5,462 |
|
|
$ |
5,901 |
|
|
$ |
11,278 |
|
|
$ |
7,918 |
|
| Foreign exchange (gain) / loss(1) |
|
$ |
(220 |
) |
|
$ |
(1,012 |
) |
|
$ |
4,826 |
|
|
$ |
1,842 |
|
| Other loss |
|
$ |
13,672 |
|
|
$ |
3,878 |
|
|
$ |
6,699 |
|
|
$ |
15,360 |
|
| Equity in loss of associate and jointly-controlled entity |
|
$ |
336 |
|
|
$ |
— |
|
|
$ |
481 |
|
|
$ |
92 |
|
| (1) |
Foreign exchange losses in 2014 have been restated as a result of the retrospective application of a voluntary change in accounting policy related to the presentation of foreign exchange gains and losses on deferred
tax assets and liabilities. For further details, refer to note 3 of the condensed consolidated financial statements for the three and six months ended June 30, 2015. |
Reclamation, care and maintenance costs in 2015 and 2014 were comprised of site overhead and other costs relating to activities at Kemess South, a mine on
care and maintenance. These costs decreased year-over-year as foreign exchange gains of $1.1 million related to the remeasurement of the reclamation provision, which are netted against reclamation, care and maintenance costs, were recorded in Q2
2015, as compared to foreign exchange gains of $0.1 million recorded in Q2 2014. These costs will not be incurred by the Company in the future as the Kemess project has been transferred to AuRico Metals effective July 2, 2015.
General and administrative costs include expenses relating to the overall management of the business that are not part of direct mine operating costs. These
costs are generally incurred at the corporate offices located in Canada, but also include share-based compensation costs for key employees at all locations. Share-based compensation costs included in general and administrative expenses for Q2 2015
were $2.8 million, compared to $3.8 million in Q2 2014. Overall, general and administrative costs for Q2 2015 decreased by $0.7 million over Q2 2014. Year-to-date, general and administrative costs decreased by $5.2 compared to the same period in
2014, primarily due to additional costs incurred in Q1 2014 related to a separate corporate restructuring.
Upon receiving shareholder and final court
approvals for the Merger, the Company classified the assets and liabilities to be distributed to AuRico Metals as Assets and Liabilities Held for Distribution, which must be recorded at the lower of fair value less costs to distribute and carrying
value. Upon conducting a fair value assessment, it was determined that the fair value of these assets was less than the carrying values. As a result, the Company recorded a revaluation loss of $40.1 million.
During the quarter, the Company recognized impairment charges of $326.0 million and $40.0 million on the Young-Davidson and El Chanate mines, respectively, as
previously discussed on pages 7 and 9.
Finance costs decreased by $0.4 million in Q2 2015 as compared to Q2 2014. Finance costs increased by $3.4 million
in 2015 due to additional interest incurred by the Company on the senior secured notes issued in March 2014.
During Q2 2015, foreign exchange gains were
consistent with the same quarter of the prior year, due to strengthening of local currencies versus the US dollar during the period. Year-to-date, foreign exchange losses increased by $3.0 million as compared to 2014, due to a more significant
weakening in the Canadian dollar and Mexican peso during first six months of the current year as compared to the first six months of 2014. The Company will continue to experience non-cash foreign currency gains or losses on monetary assets and
liabilities, primarily as a result of fluctuations between the US dollar, and both the Canadian dollar and Mexican peso.
During Q2 2015, the Company recorded other losses of $13.7 million compared to other losses of $3.9 million in Q2 2014. Other losses in Q2 2015 is primarily
comprised $6.0 million and $10.2 million of merger transaction costs and post-merger restructuring costs accrued, respectively. Additionally, a loss of $1.2 million on the fair value adjustment on the prepayment option embedded derivative was
recorded in the current quarter. These increases in other losses are partially offset by income of $1.9 million related to the renunciation of flow-through share obligations and realized and unrealized gains of $1.2 million on derivative
liabilities. Other losses in the prior year period were primarily due to a loss of $4.8 million on the retained interest royalty, as the amortization expense exceeded the related revenue. During the first half of 2015, other income exceeded the
prior year period by $8.7 million, due to a $5.2 million gain on the termination of the retained interest royalty in the first six months of 2015, and a $15.6 million loss on the modification of convertible senior notes, partially offset by gains of
$6.6 million on investments, in the first six months of 2014.
|
|
|
|
|
|
13 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
During 2015, the Company recognized its share of losses relating to the Company’s investment in Carlisle
Goldfields and the Orion exploration project, which are accounted for as an associate and jointly-controlled entity, respectively, using the equity method.
CONSOLIDATED INCOME TAX EXPENSE
The Company is subject to tax in various
jurisdictions, including Mexico and Canada. There are a number of factors that can significantly impact the Company’s effective tax rate including the geographic distribution of income, varying rates in different jurisdictions, the
non-recognition of tax assets, mining allowances, foreign currency exchange rate movements, changes in tax laws and the impact of specific transactions and assessments. Due to the number of factors that can potentially impact the effective tax
rate and the sensitivity of the tax provision to these factors, as discussed above, it is expected that the Company’s effective tax rate will fluctuate in future periods.
During Q2 2015, the Company recognized a current tax expense of $0.4 million and a deferred tax recovery of $57.1 million, compared to a current tax expense
of $0.1 million and a deferred tax recovery of $8.4 million in Q2 2014. The current quarter deferred tax recovery was primarily due to impairment charges and the revaluation of assets held for distribution recognized during the quarter. Also
contributing to the deferred tax recovery, to a lesser extent, was the strengthening of the Canadian dollar relative to the US dollar during the quarter, which caused a decline in taxable temporary differences. During the first six months of 2015,
the deferred tax recovery was primarily due to Q2 2015 impairment charges and the revaluation of assets held for distribution, partially offset by the weakening of the Canadian dollar relative to the US dollar during the period, which caused an
increase in taxable temporary differences.
|
|
|
|
|
|
14 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
| |
|
As at
June 30
2015 |
|
|
As at
December 31
2014 |
|
|
|
|
|
|
|
| Current assets |
|
$ |
389,025 |
|
|
$ |
183,954 |
|
|
Current assets increased during 2015, primarily due to a $40.6 million increase in cash and $165.2 million in assets reclassified as held for distribution at June 30, 2015. |
|
|
|
|
| Long-term assets |
|
|
1,569,746 |
|
|
|
2,097,872 |
|
|
Long-term assets declined due to the $326.0 million and $40.0 million impairment charges on the Young-Davidson and El Chanate mines, respectively, a revaluation loss of $40.1M relating to the Kemess assets, the $165.2 million
reclassification of assets held for distribution and a decrease in intangible assets due to the termination of the retained interest royalty, partially offset by capital expenditures during the period. |
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
1,958,771 |
|
|
$ |
2,281,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
$ |
241,091 |
|
|
$ |
52,121 |
|
|
Current liabilities increased primarily due to the distribution payable recognized relating to the distribution to AuRico Metals, and the reclassification of liabilities associated with assets held for distribution. |
|
|
|
|
| Long-term financial liabilities |
|
|
306,220 |
|
|
|
308,064 |
|
|
Long-term financial liabilities were consistent with December 31, 2014 balances. |
|
|
|
|
| Other long-term liabilities |
|
|
249,978 |
|
|
|
290,431 |
|
|
Other long-term liabilities decreased due to the reclassification of the Kemess reclamation provision to liabilities associated with assets held for distribution and deferred income tax recoveries recognized on the impairment
charges on the Young-Davidson and El Chanate mines. |
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
$ |
797,289 |
|
|
$ |
650,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders’ equity |
|
$ |
1,161,482 |
|
|
$ |
1,631,210 |
|
|
Shareholders’ equity decreased primarily as a result of the net loss recognized year-to-date, partially offset by increases due to the private placement and flow-through share issuances. |
|
|
|
|
|
|
15 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The Company’s strategy for managing liquidity is
based on achieving positive cash flows from operations to internally fund operating and capital requirements. Material increases or decreases in the Company’s liquidity and capital resources will be substantially determined by the success or
failure of the Company’s operations, exploration, and development programs, the ability to obtain equity or other sources of financing, the price of gold, and currency exchange rates. Refer to the Outlook and Strategy section on page 5 for near
term factors that could influence the Company’s cash balance. Management believes that the working capital at June 30, 2015, together with future cash flows from operations and the available credit facility, is sufficient to support the
Company’s planned and foreseeable commitments.
CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Cash flow from operating activities |
|
$ |
20,801 |
|
|
$ |
4,649 |
|
|
$ |
34,833 |
|
|
$ |
29,140 |
|
| Cash flow (used in) / from investing activities |
|
|
(41,173 |
) |
|
|
150,278 |
|
|
|
(59,619 |
) |
|
|
(65,104 |
) |
| Cash flow from / (used in) financing activities |
|
|
78,691 |
|
|
|
(180,449 |
) |
|
|
87,466 |
|
|
|
33,886 |
|
| Effect of foreign exchange rates on cash |
|
|
322 |
|
|
|
786 |
|
|
|
(1,986 |
) |
|
|
— |
|
| Reclassification of cash to assets held for distribution |
|
|
(20,000 |
) |
|
|
— |
|
|
|
(20,000 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase in cash |
|
|
38,641 |
|
|
|
(24,736 |
) |
|
|
40,694 |
|
|
|
(2,078 |
) |
| Total cash, beginning of period |
|
|
91,084 |
|
|
|
165,310 |
|
|
|
89,031 |
|
|
|
142,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash, end of period |
|
$ |
129,725 |
|
|
$ |
140,574 |
|
|
$ |
129,725 |
|
|
$ |
140,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Q2 2015, operating activities contributed cash flows of $20.8 million, as compared to Q2 2014 when operating activities
contributed cash of $4.6 million. Operating cash flow increased in Q2 2015 from Q2 2014 primarily due to higher gold sales at El Chanate and positive changes in working capital in 2015, and the negative impact of changes in working capital at
Young-Davidson in Q2 2014. For the six months ended June 30, 2015, operating cash flow increased to $34.8 million, due to the reasons previously mentioned, partially offset by increased interest payments made on the Company’s senior
secured notes in 2015.
In Q2 2015, investing activities used cash of $41.2 million compared to $150.3 million generated in Q2 2014. The cash generated
from investment activities in Q2 2014 is due to a $179.6 million decrease in restricted cash at June 30, 2014 due to the removal of a restriction on funds related to the redemption of all outstanding convertible senior notes. In addition,
during Q2 2014 there were inflows of $9.3 million due to the sale of investments during the period. Capital expenditures were consistent quarter-over-quarter.
For the six months ended June 30, 2015, investing activities used cash of $59.6 million compared to $65.1 million used in 2014. Capital expenditures
declined from $96.7 million in 2014 to $75.8 million in the current year, primarily due to construction and commissioning costs associated with the paste-backfill plant at Young-Davidson in Q1 2014. This decline in capital expenditures was offset by
$23.3 million in proceeds from the sale of investments that were received in the first six months of 2014. Additional items affecting investing cash flows in the current year include a $16.8 million inflow from the termination of the retained
interest royalty and a $0.5 million increase in restricted cash.
In Q2 2015, the Company raised $78.7 million from financing activities, which included
$83.3 million in proceeds from a private placement to Former Alamos partially offset by debt and dividend payments. In the first quarter of 2015, the Company also received $15.3 million in proceeds from the issuance of flow through shares. In Q2
2014, cash flow used by financing activities included $174.5 million in debt repayments, which consisted primarily of the redemption of 99.4% of the outstanding convertible senior notes. In the first six months of 2014, the Company received $304.1
million in proceeds from the senior secured notes offering, offset by $4.3 million in dividend payments and $174.5 million in repayments of long term debt and equipment financing leases, which included a $75.0 million repayment on the outstanding
credit facility and the redemption of convertible senior notes previously discussed.
FLOW-THROUGH SHARES
During Q1 2015, the Company completed flow-through financings for gross proceeds of $15.3 million (CAD $19.5 million). As a result, the Company issued
3,292,922 common shares. All proceeds will be used to fund exploration expenditures at the Kemess and Lynn Lake properties. Pursuant to the terms of the flow-through share subscription agreement, the Company is required to incur and renounce these
expenditures to subscribers by December 31, 2016.
|
|
|
|
|
|
16 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
SENIOR SECURED NOTES
On March 27, 2014, the Company completed an offering of $315.0 million senior secured notes (the “secured notes”), secured against the assets of
the Company. Proceeds from this offering were used to repay $166.4 million of the Company’s outstanding convertible senior notes, to repay $75.0 million drawn under the Company’s credit facility and for general corporate purposes. These
secured notes were sold at 96.524% of par, resulting in total proceeds of $304.1 million. The secured notes pay interest in semi-annual installments on April 1 and October 1 of each year, commencing on October 1, 2014, at a rate of
7.75% per annum, and mature on April 1, 2020. No principal payments are due until the maturity date. These notes contain transaction-based restrictive covenants that limit the Company’s ability to incur additional indebtedness in
certain circumstances. There are no covenants that are based on the Company’s historical financial performance.
The senior secured notes indenture
grants the Company the option to prepay the notes prior to the maturity of the instruments, and specifies a premium during each applicable time period. These prepayment options have been accounted for as embedded derivatives, and are outlined below:
| |
• |
|
Subsequent to April 1, 2017, the secured notes may be repurchased at 103.875% of par value |
| |
• |
|
Subsequent to April 1, 2018, the secured notes may be repurchased at 101.938% of par value |
| |
• |
|
Subsequent to April 1, 2019, the secured notes may be repurchased at 100% of par value |
The fair value of
the prepayment option embedded derivative was $9.3 million at June 30, 2015, and was offset against the carrying amount of the secured notes.
CREDIT FACILITY
The
Company has access to a $150.0 million revolving credit facility, which carries an interest rate of LIBOR plus 2.25% to 3.50%, depending on the net leverage ratio of the Company, and matures on April 25, 2016. No principal payments are due
until the maturity date, which may be extended upon mutual agreement by all parties. The Company had no amounts drawn under this revolving facility at June 30, 2015. The Company was in compliance with all loan covenants at June 30, 2015.
OUTSTANDING SHARE DATA
The following table sets out the common shares,
warrants, stock options, deferred share units, performance share units, and restricted share units of Alamos that are outstanding as at the date of this MD&A:
|
|
|
|
|
| |
|
August 11, 2015 |
|
| Common shares |
|
|
255,505,659 |
|
| Stock options |
|
|
10,299,681 |
|
| Stock appreciation rights |
|
|
2,559,094 |
|
| Warrants |
|
|
7,167,866 |
|
| Deferred share units |
|
|
334,906 |
|
| Performance share units |
|
|
273,069 |
|
| Restricted share units |
|
|
1,634,233 |
|
|
|
|
|
|
|
|
|
277,774,508 |
|
|
|
|
|
|
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet
arrangements.
FINANCIAL INSTRUMENTS
The Company seeks to manage its exposure to
fluctuations in commodity prices, interest rates and foreign exchange rates by entering into derivative financial instruments from time to time.
As at
June 30, 2015, the Company held option contracts to protect against the risk of an increase in the value of the Canadian dollar and Mexican peso versus the US dollar. The details of these option contracts for the purchase of local currencies
and the sale of US dollars, which settle on a monthly basis, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period covered |
|
Contract |
|
|
Local
Currency |
|
|
Local currency
per month |
|
|
Local currency
total |
|
|
Call option
per USD |
|
|
Put option
per USD |
|
| 1-Jul-15 31-Dec-15 |
|
|
Collar |
|
|
|
CAD |
|
|
|
7,500 |
|
|
|
45,000 |
|
|
|
1.1111 |
|
|
|
1.2246 |
|
| 1-Jul-15 31-Dec-15 |
|
|
Collar |
|
|
|
MXN |
|
|
|
30,000 |
|
|
|
180,000 |
|
|
|
14.00 |
|
|
|
15.71 |
|
|
|
|
|
|
|
17 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
The fair value of these contracts was a liability of $1.4 million at June 30, 2015 (December 31, 2014
– liability of $0.5 million). During the six months ended June 30, 2015, the Company made payments of $0.2 million on option contracts settled during the period, and recognized unrealized gains of $1.4 million on option contracts
outstanding at June 30, 2015 in other income / (loss) within the Condensed Consolidated Statements of Operations for the three months ended June 30, 2015. Total realized and unrealized gains for the six months ended June 30, 2015
total $0.7 million and $1.0 million, respectively.
During July, the Company entered into additional option contracts to protect against the risk of an
increase in value of the Canadian dollar and Mexican peso versus the US dollar. The details of these option contracts for the purchase of local currencies and the sale of US dollars, which settle on a monthly basis, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period covered |
|
Contract |
|
|
Local
Currency |
|
|
Local currency
per month |
|
|
Local currency
total |
|
|
Call option
per USD |
|
|
Put option
per USD |
|
| 1-Jan-16 31-Mar-16 |
|
|
Collar |
|
|
|
CAD |
|
|
|
7,500 |
|
|
|
22,500 |
|
|
|
1.2195 |
|
|
|
1.3686 |
|
| 1-Jan-16 31-Mar-16 |
|
|
Collar |
|
|
|
MXN |
|
|
|
50,000 |
|
|
|
150,000 |
|
|
|
15.00 |
|
|
|
17.75 |
|
TRANSACTIONS WITH RELATED PARTIES
The Company utilizes a Mexican corporation, Caborca
Industrial S.A. de C.V. (“Caborca Industrial”), for mining support services at the El Chanate mine, including the payment of mining salaries and related costs. Caborca Industrial is 100% owned by the Company’s Chief Executive Officer
and Chief Operating Officer, and is consolidated in accordance with IFRS 10, Consolidated Financial Statements. The Company’s Chief Executive Officer and Chief Operating Officer receive no financial benefits as a result of their
ownership of this entity.
Other than as discussed in the paragraph above, no director, senior officer, principal holder of securities or any associate or
affiliate thereof of the Company has any interest, directly or indirectly, in material transactions with the Company or any of its direct or indirect wholly-owned subsidiaries.
The Company has a joint venture interest in the Orion exploration project, located in Nayarit, Mexico. Nayarit Gold de Mexico, S.A. de C.V., a company with
ownership of this project, is 50% owned by the Company and 50% owned by Minera Frisco, S.A.B. de C.V., and is accounted for as a jointly-controlled entity. The Company provides management services and may, from time to time, contribute cash or other
assets to the jointly-controlled entity. At June 30, 2015, the Company had a receivable from the jointly-controlled entity of $2.2 million (December 31, 2014 - $2.1 million).
In 2014, the Company completed a private placement with Carlisle Goldfields Limited (“Carlisle”) in which the Company invested CAD $5.6 million in
exchange for 19.9% of the outstanding common shares of Carlisle. In conjunction with the private placement, the Company entered into an agreement on November 11, 2014 with respect to Carlisle’s Lynn Lake Gold Camp. Under the agreement, the
Company has acquired a 25% interest in the Lynn Lake Project and can earn up to a 60% interest by funding CAD $20.0 million on the project over a three-year period and delivering a feasibility study within that time period. The
Company is managing exploration and technical work related to a future feasibility study on the Lynn Lake Project. At June 30, 2015, the Company has included an advance of $0.2 million (December 31, 2014 - $0.8 million) in other long-term
assets which relates to ongoing work on the Lynn Lake Project.
EVENTS AFTER THE REPORTING
PERIOD
| (a) |
Merger with Former Alamos |
On July 2, 2015, as discussed on page 3, the Company completed the
merger with Former Alamos pursuant to which the Company and Former Alamos combined by way of a statutory arrangement under the Business Corporations Act (Ontario) to form a company operating under the name Alamos Gold Inc.
As a result, effective July 2, 2015, the Company owns and operates the Mulatos mine located in the state of Sonora in northwest Mexico, the Esperanza
Gold Project in the state of Morelos, Mexico, the Ağı Dağı, Kirazlı and Çamyurt gold development projects, located in the Biga Peninsula of northwestern Turkey, and the Quartz Mountain Property in Oregon, U.S.A.
Mulatos (Mexico - producing)
The Mulatos mine is located within
the 28,773 hectare Salamandra group of concessions in the state of Sonora in northwest Mexico. The Mulatos mine achieved commercial production in 2006 as an open pit, heap leach mining operation and has produced approximately 1.4 million ounces
of gold to-date.
Based on December 31, 2014 proven and probable mineral reserves of 46.6 million tonnes grading 1.16 g/t Au for
1.7 million contained ounces of gold, the Mulatos mine has a remaining life of approximately seven years. In 2014, the Mulatos mine transitioned from open pit to both open pit and underground mining in order to access higher grade mineral
reserves.
|
|
|
|
|
|
18 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
In the second quarter of 2015, the Mulatos mine (“Mulatos”) produced 33,000 ounces of gold compared
to 33,000 ounces in the second quarter of 2014. Open pit, heap leach operations at Mulatos continue to meet expectations and remain the driver of the operation, contributing strong production in the second quarter of 2015.
Esperanza (Mexico - development stage)
The Esperanza Gold
Project has measured and indicated mineral resources (reported at a 0.4 g/t Au cut-off) at December 31, 2014 of 34.4 million tonnes grading 0.98 g/t Au and 8.1 g/t silver (“Ag”) for approximately 1.1 million ounces of gold
and 8.9 million ounces of silver.
In September 2011, the previous owners completed a Preliminary Economic Assessment (“PEA”) on the
Esperanza Gold Project outlining an initial six-year mine life with expected total production of 0.6 million ounces of gold at an average rate of 103,000 ounces per year at total cash operating costs of $499 per ounce (net of by-product
credits). Applying a gold price assumption of $1,150 per ounce, the September 2011 PEA indicated that the Esperanza Gold Project has an after-tax internal rate of return of 26% and an after-tax 5% net present value of $122 million.
Ağı Dağı, Kirazlı and Çamyurt (Turkey - development stage)
The Ağı Dağı and Kirazlı gold development projects are located on 8,317 hectares of concessions in North-western Turkey, and contain
established mineral resources and several highly prospective exploration targets. In June 2012, a positive preliminary feasibility study was published for the Ağı Dağı and Kirazlı projects, showing total life of mine
production of 1.5 million ounces of gold and 4.9 million ounces of silver, at an average rate of 166,000 ounces of gold per year and cash operating costs of $544 per ounce (net of by-product credits) over a nine-year mine life. In
addition, in 2011 the Çamyurt project was discovered, located approximately three kilometres (“km”) southeast of Ağı Dağı.
Measured and Indicated mineral resources at Ağı Dağı, Kirazlı and Çamyurt (reported at a 0.2 g/t Au cut-off) at
December 31, 2014 total 140.5 million tonnes grading 0.66 g/t Au and 5.36 g/t Ag for approximately 3.0 million ounces of gold and 24.5 million ounces of silver. Inferred mineral resources total an additional 25.2 million
tonnes grading 0.54 g/t Au and 4.55 g/t Ag, for 0.4 million contained ounces of gold and 3.7 million contained ounces of silver.
Quartz
Mountain (U.S.A. - exploration stage)
The Company owns the right to earn a 100% interest in the Quartz Mountain Property in Oregon as well as other assets
in Oregon and Nevada. The Quartz Mountain Property is located on the northern extension of the prolific Basin and Range Province of Nevada, and has an Inferred mineral resource (reported at a 0.21 g/t Au cut-off (oxide) and 0.58 g/t Au cut-off
(sulphide) at December 31, 2014 of 110.4 million tonnes grading 0.80 g/t Au for 2.85 million ounces of gold.
| (b) |
Distribution of assets and liabilities to AuRico Metals Inc. |
As discussed on page 3 a new company named
AuRico Metals was created as part of the merger transaction to hold the Kemess project, a new 1.5% net smelter return royalty on the Young-Davidson mine, the Fosterville and Stawell net smelter return royalties, and $20 million in cash. The
distribution of assets and liabilities to AuRico Metal was completed on July 2, 2015.
| (c) |
Termination of dividend reinvestment and share purchase plan |
In connection with the completion of the
Arrangement, the boards of directors of Former Alamos and AuRico approved the termination of the existing dividend reinvestment and share purchase plans of Former Alamos and AuRico, respectively.
|
|
|
|
|
|
19 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
NON-GAAP MEASURES
The Company has included various non-GAAP measures
throughout this document. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, management, analysts and investors use this information to evaluate the Company’s operating and economic performance.
However, these non-GAAP measures do not have any standardized meaning, and should not be considered in isolation from or as a substitute for performance measures prepared in accordance with GAAP. Other companies may calculate these measures
differently.
TOTAL CASH COST PER OUNCE CALCULATION
Total cash cost per ounce is a non-GAAP performance measure that management uses to better assess the Company’s performance for the current period and its
expected performance in the future. The Company believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this measure to evaluate the Company’s performance and cash generating capabilities.
This measure is calculated by adjusting production and refining costs as recorded in the Company’s consolidated financial statements for by-product revenues and NRV adjustments, production costs associated with acquisition-date fair value
adjustments, and production costs associated with NRV adjustments. The calculation of total cash costs per gold ounce measures the benefit of any by-product silver that is produced in conjunction with gold as a credit against the cost of producing
gold. A number of other gold producers present their costs net of the contribution from silver and other non-gold by-product sales. The Company believes that presenting this measure on this basis allows management, analysts and investors to better
assess performance against other gold producers, and to better understand the importance of non-gold revenue on the Company’s cost structure.
The
following provides a reconciliation of total cash cost per ounce to the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except ounces and total cash cost per gold ounce) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Production costs |
|
$ |
49,313 |
|
|
$ |
48,691 |
|
|
$ |
87,025 |
|
|
$ |
96,584 |
|
| Refining costs |
|
$ |
147 |
|
|
$ |
155 |
|
|
$ |
337 |
|
|
$ |
295 |
|
| Inventory and other adjustments(1) |
|
$ |
(844 |
) |
|
$ |
(1,365 |
) |
|
$ |
(980 |
) |
|
$ |
(1,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs |
|
$ |
48,616 |
|
|
$ |
47,481 |
|
|
$ |
86,382 |
|
|
$ |
95,329 |
|
| Divided by gold equivalent ounces sold(2) |
|
|
60,441 |
|
|
|
58,888 |
|
|
|
114,201 |
|
|
|
113,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold equivalent ounce sold |
|
$ |
804 |
|
|
$ |
806 |
|
|
$ |
756 |
|
|
$ |
839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs (per above) |
|
$ |
48,616 |
|
|
$ |
47,481 |
|
|
$ |
86,382 |
|
|
$ |
95,329 |
|
| By-product revenues(3) |
|
$ |
(855 |
) |
|
$ |
(783 |
) |
|
$ |
(1,664 |
) |
|
$ |
(1,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs, net of by-product revenues |
|
$ |
47,761 |
|
|
$ |
46,698 |
|
|
$ |
84,718 |
|
|
$ |
93,714 |
|
| Divided by gold ounces sold |
|
|
59,725 |
|
|
|
58,277 |
|
|
|
112,820 |
|
|
|
112,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold, net of by-product revenues |
|
$ |
800 |
|
|
$ |
801 |
|
|
$ |
751 |
|
|
$ |
834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs, net of by-product revenues |
|
$ |
47,761 |
|
|
$ |
46,698 |
|
|
$ |
84,718 |
|
|
$ |
93,714 |
|
| NRV adjustments(4) |
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs, net of by-product revenues and NRV adjustments |
|
$ |
39,960 |
|
|
$ |
46,698 |
|
|
$ |
76,917 |
|
|
$ |
93,714 |
|
| Divided by gold ounces |
|
|
59,725 |
|
|
|
58,277 |
|
|
|
112,820 |
|
|
|
112,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash cost per gold ounce sold, net of by-product revenues and NRV adjustments |
|
$ |
669 |
|
|
$ |
801 |
|
|
$ |
682 |
|
|
$ |
834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Inventory and other adjustments include amortization of the inventory fair value adjustments relating to the El Chanate purchase price allocations. |
| (2) |
Gold equivalent ounces include silver ounces produced / sold converted to gold equivalent based on the ratio of the realized sales prices of the commodities. |
| (3) |
By-product revenue is defined as the revenue from a secondary metal or mineral that is recovered during processing, and is included in revenue from mining operations in the Company’s financial statements. The
total by-product silver revenues adjustments for the three months ended March 31, 2015 and 2014 were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| El Chanate |
|
$ |
(636 |
) |
|
$ |
(671 |
) |
|
$ |
(1,210 |
) |
|
$ |
(1,370 |
) |
| Young-Davidson |
|
$ |
(219 |
) |
|
$ |
(112 |
) |
|
$ |
(454 |
) |
|
$ |
(245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(855 |
) |
|
$ |
(783 |
) |
|
$ |
(1,664 |
) |
|
$ |
(1,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4) |
The total NRV adjustments recognized during the three and six months ended June 30, 2015 and 2014 were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| El Chanate |
|
$ |
(4,792 |
) |
|
$ |
— |
|
|
$ |
(4,792 |
) |
|
$ |
— |
|
| Young-Davidson |
|
$ |
(3,009 |
) |
|
$ |
— |
|
|
$ |
(3,009 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
ALL-IN SUSTAINING COST PER
OUNCE CALCULATION
All-in sustaining cost per ounce is a non-GAAP performance measure developed by the World Gold Council
that reflects all of the expenditures that are required to produce an ounce of gold from current operations. The World Gold Council is a non-regulatory, non-profit, market development organization that was established in 1987 whose members include
global senior mining companies. The Company is not a member of the World Gold Council, and was not involved in the development of the all-in sustaining cost measure. However, the Company believes that this measure will be useful to external users in
assessing operating performance and the ability to generate free cash flow from current operations. This measure uses cash costs per ounce as its basis, and also includes sustaining capital expenditures, general and administrative expenses,
sustaining exploration and evaluation costs, and accretion and depletion of reclamation provisions at operating sites. As this measure seeks to reflect the full cost of producing gold at current operations, it excludes capital expenditures to
develop new operations and to materially enhance production or reserves at existing operations. Certain other cash expenditures, including tax payments, increases in inventory, dividends and other financing costs, are also excluded.
The following provides a reconciliation of all-in sustaining cost per ounce to the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except ounces and all-in sustaining cost per gold ounce) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Total cash costs, net of by-product revenues (see above) |
|
$ |
47,761 |
|
|
$ |
46,698 |
|
|
$ |
84,718 |
|
|
$ |
93,714 |
|
| General and administrative(1) |
|
$ |
4,987 |
|
|
$ |
5,663 |
|
|
$ |
9,737 |
|
|
$ |
14,919 |
|
| Sustaining capital expenditures(2) |
|
$ |
17,084 |
|
|
$ |
16,727 |
|
|
$ |
33,141 |
|
|
$ |
35,306 |
|
| Accretion and depletion of reclamation provisions |
|
$ |
267 |
|
|
$ |
304 |
|
|
$ |
538 |
|
|
$ |
603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total all-in sustaining costs, net of by-product revenues |
|
$ |
70,099 |
|
|
$ |
69,392 |
|
|
$ |
128,133 |
|
|
$ |
144,542 |
|
| Divided by gold ounces sold |
|
|
59,725 |
|
|
|
58,277 |
|
|
|
112,820 |
|
|
|
112,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in sustaining cost per gold ounce sold, net of by-product revenues |
|
$ |
1,174 |
|
|
$ |
1,191 |
|
|
$ |
1,136 |
|
|
$ |
1,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total all-in sustaining costs, net of by-product revenues (per above) |
|
$ |
70,099 |
|
|
$ |
69,392 |
|
|
$ |
128,133 |
|
|
$ |
144,542 |
|
| NRV adjustments |
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
$ |
(7,801 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total all-in sustaining costs, net of by-product revenues and NRV adjustments |
|
$ |
62,298 |
|
|
$ |
69,392 |
|
|
$ |
120,332 |
|
|
$ |
144,542 |
|
| Divided by gold ounces sold |
|
|
59,725 |
|
|
|
58,277 |
|
|
|
112,820 |
|
|
|
112,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in sustaining cost per gold ounce sold, net of by-product revenues and NRV adjustments |
|
$ |
1,043 |
|
|
$ |
1,191 |
|
|
$ |
1,067 |
|
|
$ |
1,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
General and administrative expenses include stock-based compensation for the three and six months ended June 30, 2015 and 2014. |
| (2) |
Sustaining capital expenditures are defined as those expenditures which do not increase annual gold ounce production at a mine site and exclude all expenditures at growth projects and certain expenditures at
operating sites which are deemed expansionary in nature. Total sustaining capital for the three and six months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2015 and 2014 is calculated as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures per cash flow statement |
|
$ |
40,669 |
|
|
$ |
41,116 |
|
|
$ |
75,840 |
|
|
$ |
96,728 |
|
| Less: Young-Davidson non-sustaining capital |
|
$ |
(15,609 |
) |
|
$ |
(20,127 |
) |
|
$ |
(30,696 |
) |
|
$ |
(54,549 |
) |
| Less: El Chanate non-sustaining capital |
|
$ |
— |
|
|
$ |
(297 |
) |
|
$ |
(176 |
) |
|
$ |
(969 |
) |
| Less: Corporate and other non-sustaining capital |
|
$ |
(7,976 |
) |
|
$ |
(3,965 |
) |
|
$ |
(11,827 |
) |
|
$ |
(5,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,084 |
|
|
$ |
16,727 |
|
|
$ |
33,141 |
|
|
$ |
35,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-sustaining capital expenditures include Young-Davidson mine development that is considered to be growth, expenditures
associated with sinking the MCM shaft, additional equipment and infrastructure as the Company continues to ramp up production at Young-Davidson, and exploration expenditures at El Chanate, Kemess, and Lynn Lake.
|
|
|
|
|
|
21 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
NET FREE CASH FLOW
Net free cash flow represents an indication of the Company’s continuing capacity to generate cash flow from operations, comprising cash flows from
operating activities net of total capital expenditures. It does not necessarily represent the cash flow in the period available for management to use at its discretion, which may be affected by other sources and non-discretionary uses of cash.
The following is a reconciliation of net free cash flow to the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
| |
|
Quarter Ended |
|
|
Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30
2015 |
|
|
June 30
2014 |
|
|
June 30
2015 |
|
|
June 30
2014 |
|
| Operating cash flow |
|
$ |
20,801 |
|
|
$ |
4,649 |
|
|
$ |
34,833 |
|
|
$ |
29,140 |
|
| Less: Capital expenditures |
|
$ |
(40,669 |
) |
|
$ |
(41,116 |
) |
|
$ |
(75,840 |
) |
|
$ |
(96,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net free cash flow |
|
$ |
(19,868 |
) |
|
$ |
(36,467 |
) |
|
$ |
(41,007 |
) |
|
$ |
(67,588 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRITICAL ACCOUNTING ESTIMATES, POLICIES AND
CHANGES
ACCOUNTING ESTIMATES
The
preparation of the Company’s consolidated financial statements in accordance with IFRS requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The
critical estimates and judgments applied in the preparation of the Company’s condensed consolidated financial statements for the six months ended June 30, 2015 are consistent with those applied and disclosed in the Company’s
Consolidated Financial Statements for the year ended December 31, 2014. For details of these estimates and judgments please refer to the Company’s Consolidated Financial Statements and Management’s Discussion and Analysis for the year
ended December 31, 2014, which are available on the Company’s website at www.auricogold.com, on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov.
ACCOUNTING POLICIES AND CHANGES
The accounting policies applied in the condensed consolidated financial statements for six months ended June 30, 2015 are consistent with those used in
the Company’s Consolidated Financial Statements for the year ended December 31, 2014, with the exception of the following accounting policy adopted on January 1, 2015:
Amendments to IAS 19, Employee Benefits, clarify requirements in relation to contributions by employees and third parties. In addition, these amendments
permit contributions that are independent of the number of years of service to be recognized as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to periods of service. These
amendments do not impact the Company’s condensed consolidated financial statements as there are no defined benefit obligations.
STANDARDS ISSUED BUT NOT YET ADOPTED
For the purposes of preparing and presenting the Company’s condensed consolidated interim financial statements, the Company has adopted all applicable
standards and interpretations issued other than those discussed below. These standards have not been adopted because they are not effective for the Company until subsequent to December 31, 2015. Standards and interpretations issued, but not yet
adopted include:
|
|
|
| |
|
Effective for the Company |
| Amendments to IAS 1, Presentation of Financial Statements |
|
January 1, 2016 |
| Amendments to IAS 16, Property, Plant and Equipment |
|
January 1, 2016 |
| Amendments to IAS 28, Investments in Associates and Joint Ventures |
|
January 1, 2016 |
| Amendments to IAS 38, Intangibles |
|
January 1, 2016 |
| Amendments to IFRS 10, Consolidated Financial Statements |
|
January 1, 2016 |
| Amendments to IFRS 11, Joint Arrangements |
|
January 1, 2016 |
| IFRS 15, Revenue from Contracts with Customers |
|
January 1, 2018 |
| IFRS 9, Financial Instruments |
|
January 1, 2018 |
In December 2014, the IASB issued amendments to IAS 1, Presentation of Financial Statements. These amendments clarify
materiality guidance, aggregation and disaggregation of items in the statement of financial position, aggregation of an entity’s share of other comprehensive income of equity-accounted associates and joint ventures, and guidance on ordering of
financial statement
|
|
|
|
|
|
22 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
notes. These amendments are effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of these amendments on its consolidated
financial statements.
In May 2014, the IASB issued amendments to IAS 16, Property, Plant and Equipment and IAS 38, Intangibles. These
amendments prohibit the use of revenue-based depreciation methods for property, plant and equipment and limit the use of revenue-based amortization for intangible assets. These amendments are effective for annual periods beginning on or after
January 1, 2016 and are to be applied prospectively. These amendments are not anticipated to impact the Company’s consolidated financial statements as revenue-based depreciation or amortization methods are not used.
In September 2014, the IASB issued amendments to IAS 28, Investments in Associates and Joint Ventures, and IFRS 10, Consolidated Financial
Statements. These amendments address a conflict between IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture the extent of gain or loss recognition depends on whether the assets sold or contributed
constitute a business. These amendments are effective for annual periods beginning on or after January 1, 2016. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.
In May 2014, the IAS issued amendments to IFRS 11, Joint Arrangements. The amendments clarify the accounting for acquisitions of an interest in a joint
operation when the operation constitutes a business. The amendments are effective for annual periods beginning on or after January 1, 2016, with earlier application being permitted. The Company is currently evaluating the impact of these
amendments on its consolidated financial statements.
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. The standard
replaces IAS 11, Construction Contracts; IAS 18, Revenue; IFRIC 13, Customer Loyalty Programmes; IFRIC 15, Agreements for the Construction of Real Estate; IFRIC 18, Transfer of Assets from Customers; and SIC 31,
Revenue – Barter Transactions Involving Advertising Services. This standard is effective for annual periods beginning on or after January 1, 2018. The Company is currently evaluating the impact of this standard on its consolidated
financial statements.
In July 2014, the IASB issued IFRS 9, Financial Instruments, which will replace IAS 39, Financial Instruments:
Recognition and Measurement. The replacement standard provides a new model for the classification and measurement of financial instruments. The IASB has determined the revised effective date for IFRS 9 will be for annual periods beginning on or
after January 1, 2018. The Company will evaluate the impact of the change to the consolidated financial statements based on the characteristics of financial instruments outstanding at the time of adoption.
CONTROLS AND PROCEDURES
At the end of the second quarter of 2015, an
evaluation was carried out under the supervision of and with participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the design of disclosure controls and procedures and internal controls
over financial reporting. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures and internal controls over financial reporting are effectively
designed as of June 30, 2015, the end of the period covered by this report.
There were no significant changes in the Company’s internal control
over financial reporting that occurred during the three months ended June 30, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
|
|
|
|
|
|
23 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
SUMMARY OF QUARTERLY FINANCIAL
AND OPERATING RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except ounces, per share amounts, average realized prices, all-in sustaining costs and cash costs) |
|
| |
|
Q2 2015 |
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
|
Q4 2013 |
|
|
Q3 2013 |
|
| Gold ounces produced |
|
|
62,606 |
|
|
|
54,027 |
|
|
|
56,583 |
|
|
|
57,037 |
|
|
|
56,198 |
|
|
|
54,214 |
|
|
|
46,017 |
|
|
|
38,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold ounces sold |
|
|
59,725 |
|
|
|
53,095 |
|
|
|
58,649 |
|
|
|
56,970 |
|
|
|
58,277 |
|
|
|
54,070 |
|
|
|
39,855 |
|
|
|
40,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average realized gold price |
|
$ |
1,194 |
|
|
$ |
1,216 |
|
|
$ |
1,202 |
|
|
$ |
1,280 |
|
|
$ |
1,283 |
|
|
$ |
1,297 |
|
|
$ |
1,257 |
|
|
$ |
1,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash costs per gold ounce, net of by-product revenues and NRV
adjustments(1)(3) |
|
$ |
669 |
|
|
$ |
696 |
|
|
$ |
746 |
|
|
$ |
706 |
|
|
$ |
801 |
|
|
$ |
870 |
|
|
$ |
771 |
|
|
$ |
628 |
|
| Total cash costs per gold ounce, net of by-product revenues(1)(3) |
|
$ |
800 |
|
|
$ |
696 |
|
|
$ |
935 |
|
|
$ |
784 |
|
|
$ |
801 |
|
|
$ |
870 |
|
|
$ |
1,284 |
|
|
$ |
497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All-in sustaining costs per gold ounce, sold, net of by-product revenues and NRV adjustments(1) |
|
$ |
1,043 |
|
|
$ |
1,093 |
|
|
$ |
1,129 |
|
|
$ |
1,101 |
|
|
$ |
1,191 |
|
|
$ |
1,390 |
|
|
$ |
1,232 |
|
|
$ |
1,210 |
|
| All-in sustaining costs per gold ounce, sold, net of by-product
revenues(1) |
|
$ |
1,174 |
|
|
$ |
1,093 |
|
|
$ |
1,317 |
|
|
$ |
1,179 |
|
|
$ |
1,191 |
|
|
$ |
1,390 |
|
|
$ |
1,807 |
|
|
$ |
1,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue from mining operations |
|
$ |
72,139 |
|
|
$ |
65,359 |
|
|
$ |
71,194 |
|
|
$ |
73,505 |
|
|
$ |
75,530 |
|
|
$ |
70,953 |
|
|
$ |
50,782 |
|
|
$ |
54,304 |
|
| Production costs(2) |
|
$ |
49,313 |
|
|
$ |
37,712 |
|
|
$ |
57,262 |
|
|
$ |
45,463 |
|
|
$ |
48,691 |
|
|
$ |
47,893 |
|
|
$ |
59,972 |
|
|
$ |
21,079 |
|
| (Loss) / earnings from operations |
|
$ |
(417,009 |
) |
|
$ |
(2,491 |
) |
|
$ |
(115,011 |
) |
|
$ |
(7,337 |
) |
|
$ |
(16,293 |
) |
|
$ |
(16,064 |
) |
|
$ |
(104,158 |
) |
|
$ |
12,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) / earnings |
|
$ |
(379,542 |
) |
|
$ |
(35,258 |
) |
|
$ |
(108,259 |
) |
|
$ |
(15,722 |
) |
|
$ |
(16,776 |
) |
|
$ |
(28,891 |
) |
|
$ |
(106,412 |
) |
|
$ |
14,859 |
|
| Net (loss) / earnings per share |
|
$ |
(1.43 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.43 |
) |
|
$ |
0.06 |
|
| Net (loss) / earnings per share, diluted |
|
$ |
(1.43 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.43 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.43 |
) |
|
$ |
0.04 |
|
| Earnings before interest, taxes, depreciation and amortization |
|
$ |
(403,802 |
) |
|
$ |
21,186 |
|
|
$ |
(87,309 |
) |
|
$ |
22,344 |
|
|
$ |
22,904 |
|
|
$ |
(1,899 |
) |
|
$ |
(80,069 |
) |
|
$ |
28,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating cash flow |
|
$ |
20,801 |
|
|
$ |
14,032 |
|
|
$ |
28,486 |
|
|
$ |
2,788 |
|
|
$ |
4,649 |
|
|
$ |
24,491 |
|
|
$ |
11,954 |
|
|
$ |
24,338 |
|
| Net free cash flow(1) |
|
$ |
(19,868 |
) |
|
$ |
(21,139 |
) |
|
$ |
(12,938 |
) |
|
$ |
(47,889 |
) |
|
$ |
(36,467 |
) |
|
$ |
(31,121 |
) |
|
$ |
(51,618 |
) |
|
$ |
(55,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See the Non-GAAP Measures section on page 20. |
| (2) |
Production costs do not include amortization and depletion or refining costs. |
| (3) |
Gold ounces includes ounces sold at the El Chanate mine. For the Young-Davidson mine, gold ounces includes ounces sold in 2015 and 2014, and ounces produced in 2013. |
CAUTIONARY NOTE TO U.S. INVESTORS
Cautionary Note to U.S. Investors Concerning
Measured, Indicated and Inferred Resources: The Company is required to prepare its resource estimates in accordance with standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument
43-101 (NI 43-101). These standards are materially different from the standards generally permitted in reports filed with the United States Securities and Exchange Commission. This MD&A uses the terms “measured”,
“indicated” or “inferred” resources which are not recognized by the United States Securities and Exchange Commission. The estimation of measured resources and indicated resources involve greater uncertainty as to their
existence and economic feasibility than the estimation of proven and probable reserves. U.S. investors are cautioned not to assume that any part of measured or indicated resources will ever be converted into economically or legally mineable proven
or probable reserves. The estimation of inferred resources may not form the basis of a feasibility or other economic studies and involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of
resources.
Cautionary Note to U.S. Investors Concerning International Financial Reporting Standards: The condensed consolidated financial
statements of the Company have been prepared by management in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (see note 2 to the unaudited condensed
consolidated financial statements for the six months ended June 30, 2015). These accounting principles differ in certain material respects from accounting principles generally accepted in the United States of America. The Company’s
reporting currency is the United States dollar unless otherwise noted.
|
|
|
|
|
|
24 |
2015 SECOND QUARTER MANAGEMENT’S
DISCUSSION AND ANALYSIS
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This MD&A 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. Words such as “expect”, “believe”, “anticipate”, “will”, “intend”, “estimate”,
“forecast”, “budget” and similar expressions identify forward-looking statements.
Forward-looking statements include information as
to strategy, plans or future financial or operating performance, such as the Company’s expansion plans, project timelines, production plans and expected sustainable productivity increases, expected increases in mining activities and
corresponding cost efficiencies, expected results of the merger integration of the Company and Former Alamos, expected drilling targets, expected sustaining costs, expected improvements in cashflows and margins, expectations of changes in capital
expenditures, forecasted cash shortfalls and the Company’s ability to fund them, cost estimates, projected exploration results, reserve and resource estimates, expected production rates and use of the stockpile inventory, expected recoveries,
sufficiency of working capital for future commitments and other statements that express management’s expectations or estimates of future performance.
Forward-looking statements are necessarily based upon 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, political 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 factors and assumptions underlying the forward-looking statements in this document include, but are not limited to:
changes to current estimates of mineral reserves and resources; changes to production estimates (which assume accuracy of projected ore grade, mining rates, recovery timing and recovery rate estimates and may be impacted by unscheduled maintenance,
labour and contractor availability and other operating or technical difficulties); fluctuations in the price of gold; changes in foreign exchange rates (particularly the Canadian dollar, Mexican peso, Turkish Lira and U.S. dollar); the impact of
inflation; changes in our credit rating; any decision to declare a quarterly dividend; employee relations; litigation; disruptions affecting operations; availability of and increased costs associated with mining inputs and labour; development delays
at the Young-Davidson mine; inherent risks associated with mining and mineral processing; the risk that the Young-Davidson, Mulatos and El Chanate mines may not perform as planned; uncertainty with the Company’s ability to secure additional
capital to execute its business plans; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits, including the necessary licenses, permits, authorizations and/or approvals from
the appropriate regulatory authorities for the Company’s development stage assets, including specifically its Turkish mineral properties, ; contests over title to properties; changes in national and local government legislation (including tax
legislation) in Canada, Mexico, Turkey, the United States and other jurisdictions in which the Company does or may carry on business in the future; risk of loss due to sabotage and civil disturbances; the impact of global liquidity and credit
availability and the values of assets and liabilities based on projected future cash flows; risks arising from holding derivative instruments; and business opportunities that may be pursued by the Company
Additional risk factors and details with respect to risk factors affecting the Company are set out in: (i) each of the Company and Former Alamos’
Annual Information Forms for the year ended December 31, 2014 under the headings “Risk Factors”; and, (ii) the joint management information circular of the Company and Former Alamos dated May 22, 2015, under the heading
“Risk Factors”, which is available on the SEDAR website at www.sedar.com. The foregoing should be reviewed in conjunction with the information found in this MD&A.
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.
|
|
|
|
|
|
25 |
Exhibit 99.6
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, John A.
McCluskey, the certifying officer and Chief Executive Officer of Alamos Gold Inc., certify the following:
1. Review:
I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Alamos Gold Inc. (as it were on June 30, 2015) (the “issuer”) for the interim period ended June 30,
2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the
interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together
with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at
the end of the period covered by the interim filings
| |
a. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| |
i. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| |
ii. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
| |
b. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying
officer and I used to design the issuer’s ICFR is COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.
5.2 ICFR
– material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
| Date: August 12, 2015 |
|
| /s/ John A. McCluskey |
| John A. McCluskey |
| Chief Executive Officer |
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, John A.
McCluskey, the certifying officer and Chief Executive Officer of Alamos Gold Inc., certify the following:
1. Review:
I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of AuRico Gold Inc. (now known as Alamos Gold Inc.) (the “issuer”) for the interim period ended June 30, 2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim
filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the
other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at
the end of the period covered by the interim filings
| |
a. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| |
i. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| |
ii. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
| |
b. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying
officer and I used to design the issuer’s ICFR is COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.
5.2 ICFR
– material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
| Date: August 12, 2015 |
|
| /s/ John A. McCluskey |
| John A. McCluskey |
| Chief Executive Officer |
Exhibit 99.7
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, James R.
Porter, the certifying officer and Chief Financial Officer of Alamos Gold Inc., certify the following:
1. Review: I
have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Alamos Gold Inc. (as it were on June 30, 2015) (the “issuer”) for the interim period ended June 30,
2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the
interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together
with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at
the end of the period covered by the interim filings
| |
a. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| |
i. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| |
ii. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
| |
b. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying
officer and I used to design the issuer’s ICFR is COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.
5.2 ICFR
– material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
| Date: August 12, 2015 |
|
| /s/ James R. Porter |
| James R. Porter |
| Chief Financial Officer |
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, James R.
Porter, the certifying officer and Chief Financial Officer of Alamos Gold Inc., certify the following:
1. Review: I
have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of AuRico Gold Inc. (now known as Alamos Gold Inc.) (the “issuer”) for the interim period ended June 30, 2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim
filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the
other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at
the end of the period covered by the interim filings
| |
a. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| |
i. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| |
ii. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
| |
b. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying
officer and I used to design the issuer’s ICFR is COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.
5.2 ICFR
– material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on April 1, 2015 and ended on June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
| Date: August 12, 2015 |
|
| /s/ James R. Porter |
| James R. Porter |
| Chief Financial Officer |
Alamos Gold (NYSE:AGI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Alamos Gold (NYSE:AGI)
Historical Stock Chart
From Jul 2023 to Jul 2024
