The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Marketwire

Osisko Reports Third Quarter 2011 Results Net Profit of $9.3 Million

Friday, November 11, 2011

Osisko Reports Third Quarter 2011 Results Net Profit of $9.3 Million09:35 EST Friday, November 11, 2011MONTREAL, QUEBEC--(Marketwire - Nov. 11, 2011) - Osisko Mining Corporation (the "Company" or "Osisko") (TSX:OSK)(FRANKFURT:EWX) is pleased to report its review of activities and financial results for the quarter ended September 30, 2011.Third Quarter HighlightsGold production of 73,814 ounces (YTD 120,419 ounces including pre-production period) Earnings from mine operations of $38.3 million (YTD $39.9 million) Net profit of $9.3 million Cash flow generated from operating activities of $49.5 million Commencement of construction of $32 million pre-crush circuit (currently 30 percent complete) Grade reconciliation to the resource block model is currently plus 3 percent. Sean Roosen, President and Chief Executive Officer, commenting on the third quarter results: "We are pleased with our financial results as we continue through the ramp up process at the Canadian Malartic Mine. We realized an average price of US$1,695 per ounce of gold sold in the past quarter, a cash margin of US$756 per ounce over our Q3 cash cost per ounce. Our operating performance continues to improve and with the completion of the pre-crushing circuit in the first quarter of 2012, we will be able to capture increasingly significant cash margins and generate solid cash flows in this strong gold market. Our flagship Canadian Malartic Mine will provide us with a strong financial base for our future growth as we seek opportunities to enhance shareholder value."Since commencement of commercial production on May 19, 2011 the mine has generated a cumulative profit of $39.9 million. The monthly financial performance continues to improve reflecting the normal modifications made during a ramp up period.The quarterly profit amounted to $9.3 million ($0.02 per share) compared to a loss of $10.2 million ($0.03 per share) in the corresponding period in 2010. The third quarter results include $13.2 million of non-cash items, including a write-off of $4.9 million on the Goldboro project and three other grassroots projects, stock option expense of $2.3 million, non-cash foreign exchange loss of $4.3 million and unrealized loss on investments of $4.0 million, partially offset by a gain on premium of flow-through shares in the amount of $2.3 million. The exclusion of these non-cash charges would result in an adjusted profit of $22.5 million ($0.06 per share) for the quarter. There were no mining operations prior to May 2011.For the year-to-date, the loss totaled $19.8 million ($0.05 per share) compared to a loss of $20.9 million ($0.06 per share) in the corresponding period in 2010. The exclusion of non-cash items of $31.1 million (write-off of property, plant and equipment of $16.3 million, stock option expense of $7.8 million, non-cash foreign exchange loss of $2.8 million and unrealized loss on investments of $8.5 million, partially offset by a gain on premium of flow-through shares in the amount of $4.3 million) would result in an adjusted profit of $11.3 million ($0.03 per share) for the year-to-date.Canadian Malartic MineThe Canadian Malartic Mine produced 73,814 ounces of gold in the third quarter from the treatment of 3.0 million tonnes of ore. Production statistics since commercial production are as follows:Q3 2011Q2 2011 (43 days)TotalOre Tonnes Mined (t)3,004,468829,4193,833,887Tonnes Milled (t)3,086,3241,470,7834,557,107Grade (g/t Au)0.850.650.79Recovery Au (%) Ounces Produced (oz)73,81427,100100,914Grade (g/t Ag)0.730.580.68Recovery Ag (%)56.760.357.7Silver Ounces Produced (oz)40,75116,43257,183Cash Cost per Ounce ($)9181,094965Cash Cost per Ounce (US$)9391,120987While costs have decreased $176 per ounce from the previous quarter, the presently high production costs are attributable to normal inefficiencies experienced in the ramp up of a new mine as well as the current lower than design throughput. The previously announced construction of a pre-crushing plant is expected to resolve this operating condition and operating costs are anticipated to be significantly reduced as throughput increases by approximately 50% to reach the design capacity of 55,000 tonnes per day. To date, $11.1 million has been spent on the total direct project cost of $32.0 million.The mine generated an operating profit of $38.3 million from the sale of 72,100 ounces of gold at a realized price of US$1,695 per ounce ($1,681 per ounce) compared to an average market price of US$1,702; and 49,800 ounces of silver at a realized price of US$34 per ounce ($34 per ounce) compared to an average market price of US$39 per ounce. The remaining ounces are categorized in inventory. The mine operating statement for the production period is as follows:Q3 2011 ($000)YTD 2011(1) ($000)Gold sales (ounces)72,10080,400Silver sales (ounces)49,80049,800Revenues122,879135,308Operating Costs66,91393,773Stockpile Costs9973,403Total67,91097,176Royalties and Refining1,9272,537Depreciation12,48817,448Total Production Costs82,325117,161Inventory variation2,262(21,779)Total Costs84,58795,382Net Mining Profit38,29239,9261.YTD 2011 represents the period since commercial production (starting May 19, 2011)Mining activities were affected by the noise levels of mining operations due to the necessity of having additional smaller mobile mining units working on the pre-strip (which is approaching completion) and availability of loading units (since rectified). Open pit operations mined on average 130,000 tonnes per day during the third quarter (stripping, ore and waste) and throughput to the mill averaged 36,742 tonnes per operating day, 67% of design capacity on a per operating day basis. Daily mill throughput in the quarter was affected by two planned shut-downs for liner changes/modifications in the SAG mill.Tonnes milled during the quarter were 3,086,324 at an average grade of 0.85 g/t, with recovery of 87 percent for a gold output of 73,814 ounces. Grade reconciliation to the resource block model is currently plus 3 percent.The operating statistics are as follows:TotalAvailable HoursOperatingHours%Tonnage(t)Tonnes/HourTonnes/per Operating DayQ22,1841,793822,481,1961,38429,894Q32,2081,890863,086,3241,63336,742* In Q3 8 days of shutdown were required for SAG mill liner change and maintenance and in Q2 8 days of shutdown were required for ramp-up testing and adjustments.A new daily throughput record of 50,159 tonnes processed was established on August 15, 2011.Mining in higher grade areas will continue to progress in the fourth quarter of 2011 and the first quarter of 2012 as pre-strip operations open up these areas to pit development. Crushing and grinding optimisation work continues. Osisko has completed engineering work and is in the process of construction of the pre-crush circuit in preparation for the anticipated ramp up from 55,000 to 60,000 tonnes per day. The Company has re-purchased a 1% royalty interest from Géoconseils Jack Stoch Limitée in consideration for the issuance of 460,000 common shares of Osisko. This royalty was encumbering a portion of the Canadian Malartic and Barnat deposits and is part of a 2.5% Gross Metal Royalty interest that was granted as a result of the acquisition of certain claims of the Canadian Malartic property in March 2006. Following this purchase, only 60% of the recoverable gold ounces at the entire Canadian Malartic Mine are subject to a 1.5% Net Smelter or Gross Metal Royalty, based on the most recently published reserve estimates.Exploration and DevelopmentA new resource estimate for Hammond Reef was released on November 7, 2011. New drilling by Osisko and Brett Resources from January 2010 to July 2011 (approximately 300,000 meters) has significantly increased the size of the deposit. Global inferred resource now stands at 10.52 million ounces of gold (based on 0.30 g/t Au lower cut-off), and in-pit inferred resource reaches 6.86 million ounces at a diluted grade of 0.63 grams per tonne gold, based on a Whittle-optimized pit shell using a gold price of US$1,200 per ounce, a corresponding lower cut-off grade of 0.28 grams per tonne gold and a waste/ore strip ratio of 1.25.Additional drilling subsequent to July 2011 is anticipated to allow for the upgrade of the entire in-pit deposit to indicated category by the end of the first quarter of 2012 and measured and indicated category by the end of the second quarter 2012.The Company continues to aggressively pursue growth of reserve and resource base through intensive drilling programs around the Canadian Malartic Mine, at its Hammond Reef Project and on various grassroots projects in Eastern Canada. A total of 86,141 metres (318 holes) were drilled during the third quarter, mostly from the definition drilling program at Hammond Reef.During the third quarter, Osisko entered into a binding agreement with Energía y Minerales Sociedad Del Estado, the La Rioja state mining corporation in Argentina, regarding the development of the Famatina gold project. The Company decided during the third quarter to terminate its option to acquire an interest in the Goldboro Gold Property of Orex Exploration. As a result, a write-off of $3.3 million was recorded in the third quarter. The Company also abandoned other grassroots projects for a total of $1.6 million.Summary from the Company's financial position and results are as follows:(in millions of dollars)September 30, 2011December 31, 2010(1)Cash Position(2)173.5397.9Working Capital103.3282.9Total Assets2,000.81,958.9Total Debt306.8287.9Shareholders' Equity1,610.71,594.0Q3 2011Q3 2010Net earnings (loss)9.3(19.8)Cash flow from operations49.5(18.5)(1) Revised under IFRS(2) Includes Cash and Cash equivalents, Short-term investments and Restricted cash.The unaudited condensed interim consolidated financial statements and Management Discussion and Analysis for the period ended September 30, 2011 will be filed on SEDAR on November 14, 2011.Non-IFRS Financial Performance MeasuresThe Company has included certain non-IFRS measures including "cash cost per ounce", "adjusted profit" and "cash margin per ounce" to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards ("IFRS"). Refer to the Company's third quarter 2011 Management Discussion and Analysis.Third Quarter 2011 Results Conference CallOsisko will host a conference call on Monday, November 14 at 11:00 AM ET, where senior management will discuss the financial results and provide an update of the Company's activities. Those interested in participating in the conference call should dial in at 416-981-9000 (Toronto local and international), or 1-800-773-0519 (North American toll free). An operator will direct participants to the call. The call will be retransmitted for 14 days with the following dial in number: 416-626-4100 or Toll-free 1-800-558-5253, access code 21545826.About Osisko Mining Corporation Osisko Mining Corporation operates the Canadian Malartic Gold Mine in Malartic, Quebec and is pursuing exploration on a number of properties, including the Hammond Reef Gold Project in Northern Ontario.Mr. Luc Lessard, P. Eng., Senior Vice-President and COO of Osisko, is the Qualified Person who has reviewed this news release and is responsible for the technical information reported herein, including verification of the data disclosed. Osisko Mining CorporationConsolidated Balance Sheets(Unaudited)(tabular amounts expressed in thousands of Canadian dollars)September 30, 2011December 31, 2010$$AssetsCurrent assetsCash and cash equivalents152,759358,493Short-term investments-17,068Restricted cash17,15911,176Accounts receivable41,23530,731Mining taxes receivable-2,058Inventories42,270-Other current assets7,5727,329260,995426,855Non-current assetsRestricted cash3,57511,202Investment in an associate1,6782,158Other investments19,25940,851Property, plant and equipment1,715,2691,477,8182,000,7761,958,884LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities76,59273,519Current portion of long-term debt81,09470,405157,686143,924Non-current liabilitiesLong-term debt225,690217,481Provisions5,4073,494Deferred mining taxes1,275-390,058364,899Equity attributable to Osisko Mining Corporation shareholdersShare capital1,650,7511,606,051Warrants13,16613,166Contributed surplus52,53043,390Equity component of convertible debenture8,0058,005Accumulated other comprehensive income (loss)(6,283)11,019Deficit(107,451)(87,646)1,610,7181,593,9852,000,7761,958,884Osisko Mining CorporationConsolidated Statements of Income (Loss)For the three and nine months ended September 30, 2011 and 2010(Unaudited)(tabular amounts expressed in thousands of Canadian dollars)Three months ended September 30,Nine months ended September 30,2011201020112010$$$$Revenues122,879-135,308-Mine operating costsProduction costs(74,647)-(84,045)-Royalties(1,192)-(1,351)-Depreciation and depletion(8,748)-(9,986)-Earnings from mine operations38,292-39,926-General and administrative expenses(6,577)(10,464)(24,563)(20,455)Exploration and corporate development expenses(7,774)(972)(20,934)(1,543)Other gains (losses)--(485)-Earnings (loss) from operations23,941(11,436)(6,056)(21,998)Interest income4549811,9642,282Finance costs(6,995)-(10,766)-Foreign exchange loss(4,331)(191)(2,817)(99)Share of loss of associate(29)(412)(480)(610)Other gains (losses)(1,758)8981,326(468)Earnings (loss) before income and mining taxes11,282(10,160)(16,829)(20,893)Income and mining tax expense(1,980)(5)(2,976)(11)Earnings (loss) for the period9,302(10,165)(19,805)(20,904)Attributable to:Osisko Mining Corporation9,302(10,230)(19,805)(20,904)Non-controlling interests-65--9,302(10,165)(19,805)(20,904)Earnings (loss) per shareBasic0.02(0.03)(0.05)(0.06)Diluted0.02(0.03)(0.05)(0.06)Osisko Mining CorporationConsolidated Statements of Cash FlowsFor the nine months ended September 30, 2011 and 2010(Unaudited)(tabular amounts expressed in thousands of Canadian dollars)20112010$$Operating activitiesLoss for the period(19,805)(20,904)Adjustments for:Interest income(1,964)(2,282)Share-based compensation7,7809,607Depreciation10,304320Finance costs10,765-Write-off of property, plant and equipment16,276-Unrealized foreign exchange loss (gain)3,395(1,084)Share of loss of associate480610Gain on sale of available-for-sale financial assets(5,041)-Unrealized net loss on financial assets at fair value through profit and loss8,515468Deferred gain - premium on flow-through shares(4,282)-Provisions395-Deferred income and mining tax expense2,976-Other non-cash gain(639)-29,155(13,265)Change in non-cash working capital items16,885(11,988)Net cash flows used in operating activities46,040(25,253)Investing activitiesNet decrease in short-term investments17,06852,558Net decrease in restricted cash1,6447,151Decrease in cash collateral investments-3,450Acquisition of investments(12,283)(24,447)Proceeds on disposal of investments12,0383,891Property, plant and equipment, net of government credits(297,254)(341,279)Acquisition of assets-33,885Interest received2,1692,139Net cash flows used in investing activities(276,618)(262,652)Financing activitiesDebt issuance costs(635)-Finance lease payments(3,823)(9,641)Long-term debt repayments(2,083)-Issuance of common shares, net of issue expenses38,77619,733Interest paid(7,391)Net cash flows generated from financing activities24,84410,092Decrease in cash and cash equivalents(205,734)(277,813)Cash and cash equivalents – beginning of period358,493673,777Cash and cash equivalents – end of period152,759395,964Cautionary Notes Concerning Estimates of Mineral Resources This news release uses the terms measured, indicated and inferred resources as a relative measure of the level of confidence in the resource estimate. Readers are cautioned that mineral resources are not economic mineral reserves and that the economic viability of resources that are not mineral reserves has not been demonstrated. In addition, inferred resources are considered too geologically speculative to have any economic considerations applied to them. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies or economic studies except for Preliminary Assessment as defined under NI 43-101. Readers are cautioned not to assume that that further work will lead to mineral reserves that can be mined economically.Note Regarding Certain Measures of PerformanceThis press release contains certain non-IFRS measures, including "cash cost per ounce", "adjusted profit" and "cash margin per ounce". The Company believes that these measures, together with measures determined in accordance with IFRS, provides investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.Forward-Looking StatementsCertain statements contained in this press release may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Osisko expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, further development of its Hammond Reef project and increasing of throughput at the mill to achieve design capacity at its Canadian Malartic Mine, timely installation of the pre-crush circuit, compliance with noise regulations, increasing of mining fleet availability, increasing of production. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, including, without limitation, that all technical, economical and financial conditions will be met in order to warrant further development of its Hammond Reef project and that the diligent ongoing optimizing of its operations at Canadian Malartic mine will be achieved and will, accordingly, improve its operating performance, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include gold prices, access to skilled consultants, mining development personnel, results of exploration and development activities, Osisko's limited experience with production and development stage mining operations, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations market prices, continued availability of capital and financing and general economic, market or business conditions. These factors are discussed in greater detail in Osisko's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.FOR FURTHER INFORMATION PLEASE CONTACT: Vice-President Corporate DevelopmentJohn Burzynski(416) 363-8653ORDirector of Investor RelationsSylvie Prud'homme(514) 735-7131Toll Free: