St Andrew Goldfields (TSE:SAS) said Monday that third quarter profit nearly doubled as the junior miner saw record gold production from its three operations in northeastern Ontario, at lower overall cash costs.
For the third quarter, net income was $8.2 million, or 2 cents per share, compared to a year-ago profit of $4.7 million, or 1 cent per share.
Adjusted for special items, including mark-to-market losses on gold-linked liabilities and derivative foreign currency contracts, net earnings for the quarter were $5.5 million, or 2 cents per share, versus $3.5 million, or 1 cent per share, a year ago.
Production soared 32 percent over the second quarter, to 20,018 ounces of gold from the company's three producing mines, Holt, Holloway and Hislop. Mill throughput increased approximately 6 percent in the latest period at Holt due to the installation of a new SAG mill motor in July, with the Holt Mill averaging 2,829 tonnes per day (tpd).
Of the total produced ounces, St Andrew said it sold 19,260 ounces during the quarter, at a higher average realized price of US$1,715 per ounce, for revenues of $33.3 million - a 51 percent increase over the previous quarter and a 32 percent boost over a year ago.
Total cash costs of US$1,130 per ounce, including royalties, improved 12 percent over the previous quarter, the company said.
Cash flow from operations, a key measure by which to judge a company's ability to fund future activities, was a record $7.6 million since the re-start of mining operations in the fourth quarter of 2009, a rise of $9.8 million from the second quarter.
"We are very happy to report a strong quarter both on production and on the improvement in our cash costs", said president and CEO, Jacques Perron.
"The development and production at the Holt Mine saw significant improvements over the previous quarter, and Holt is on track to meet its production targets for 2011. Development of the Smoke Deep Zone at the Holloway Mine continued to progress, and Holloway's production for the quarter was satisfactory.
"Hislop continued to encounter difficult overburden conditions; however, all of the overburden stripping is expected to be completed during November. We remain confident that we will be able to meet our 2011 production target and that we will continue to see improvements in production in 2012".
At Holt, gold production increased by 82 percent over the previous quarter due to improved development and production rates, resulting in a 22 percent increase in throughput, coupled with a 48 percent improvement in mined ore grades.
Due to increased development, the company said the mining rate during the third quarter progressed towards the anticipated steady rate of production of 1,000 tonnes per day by the end of the first quarter of 2012, which is expected to help improve unit costs further. Production at Holt is on track for between 24,000 to 28,000 ounces of gold for the year, St Andrew reiterated.
At Holloway, production was negatively impacted by the mining of the remnant pillar recovery area of the Lightning Zone and the lower grade Blacktop Footwall Lower Zone that is winding down, the company said. The "very promising" Smoke Deep Zone, however, is being prepared for production, with 200 metres of ramp development having now been completed at a cost of $2.7 million, which will allow for more efficient output sometime this month, with improved grades and unit costs expected. A resource and reserve update from Smoke Deep is anticipated by year-end, the company said on a conference call this morning.
St Andrew said it expects the operating costs at the Holloway Mine to remain high until Smoke Deep is brought into steady state production and ore grades improve. The company, which is also looking to get ounces from extensions of the Blacktop Zone, stood by its production guidance for Holloway of between 23,000 to 26,000 ounces of gold for 2011.
Meanwhile, at Hislop, head grades increased by 10 percent over the second quarter, but remain below the company's expectations due to continuity issues in the upper western portion of the pit. Operations at the mine continue to be impacted by additional overburden removal and waste rock mining activities, further delaying stripping of the eastern portion of the pit. The overburden removal for the entire pit, however, is now expected to be completed before the end of November. Forecasted production for Hislop is between 18,000 to 21,000 ounces of gold for the full year.
St Andrew said the company's $10.9 million, 70,000 metre surface exploration program for the year returned positive results for a number of its targets, with the aim of adding resources near the company's existing mines for potential development within a five-year time frame. A mineral resource estimate for the Deep Thunder Zone is expected by year-end, while at the Taylor project, part of the company's 120 kilometre-long land package in the Timmins area, a pre-feasibility study is anticipated before the end of 2011.
Exploration for the remainder of the year will include continued surface drilling at the Ghost Zone, near the Holt Mine, and surface drilling at the Hislop North project, located northwest of the Hislop Mine, with three rigs. Recent highlights of drilling from the Ghost Zone include 5.48 grams per tonne (g/t) of gold over 12.0 metres, including 9.87 g/t gold over 6 metres in hole GZ11-002B; and 10.60 g/t gold over 8.1 metres, including 22.65 g/t gold over 2.6 metres, in hole GZ11-003.
Total capital expenditures during the quarter were $8.6 million, including $2.8 million in stripping and waste removal costs at the Hislop mine. The company ended the quarter with $15.3 million of cash, and does not see the need for a financing in the near future. It expects to be neutral with regards to its cash position in the fourth quarter as capital costs for Hislop decrease, while production is anticipated to improve from the third quarter.
Toronto-based St Andrew, which said it plans to meet the higher end of its 2011 production goal of between 65,000 to 75,000 ounces of gold, holds an extensive land package in the Timmins mining district, northeastern Ontario, which lies within the prolific Abitibi greenstone belt. The company is targeting annualized gold production of around 100,000 ounces in 2012.