Red Back Reports Strong Operating Results
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/03/10 -- Red Back Mining Inc. (TSX: RBI) (the 'Company' or 'Red Back') is pleased to report the results for the three and six months ended June 30, 2010. The interim consolidated financial statements together with Management's Discussion and Analysis will be available on the Company's web site (www.redbackmining.com) and on SEDAR (www.sedar.com).
Highlights for the Quarter
-- Total gold production of 106,362 oz (year-to-date: 202,522 oz).
-- Average realized gold price of $1,215 per oz (year-to-date: $1,167 per
oz).
-- Profit from mining operations of $54.3 million (year-to-date: $97.9
million).
-- Cash flow from operations of $68.0 million (year to date: $120.9
million).
-- Cash flow from operations per share of $0.27 (year to date: $0.50).
-- Net income of $21.9 million (year-to-date: $55.1 million).
-- Earnings per share adjusted for non-cash stock based compensation of
$0.18 (year to date: $0.33).
-- Cash operating costs of $481 per oz (year-to-date: $476 per oz).
-- CAD $600 million private placement from Kinross Gold Corporation.
-- Commencement of decline development and initial underground reserve at
Paboase of 920,000 oz.
Results of Operations
Key operating statistics for the second quarter and year-to-date are provided below.
Three months ended Three months ended
June 30, 2010 June 30,2009
Chirano Tasiast Total Chirano Tasiast Total
--------------------------------------------------------------------------
Ore tonnes mined,
open cut ('000t) 867 1,551 2,418 811 1,180 1,991
Ore tonnes mined,
underground ('000t) 223 - 223 24 - 24
Ore tonnes placed
on DL ('000t) - 1,150 1,150 - 809 809
Average grade of
DL tonnes (g/t) - 0.7 0.7 - 0.8 0.8
Ore tonnes milled
('000t) 858 499 1,357 583 294 877
Average grade (g/t) 2.3 3.0 2.6 2.5 3.7 2.9
Average recovery 89.6% 89.5% 89.6% 90.5% 91.1% 90.7%
Gold produced,
CIL (oz) 54,567 44,313 98,880 43,264 33,399 76,663
Gold produced,
dump leach (oz) - 7,482 7,482 - 3,574 3,574
Gold produced,
total (oz) 54,567 51,795 106,362 43,264 36,973 80,237
Gold sold (oz)
(Note 2) 55,579 52,314 107,893 37,273 37,722 74,995
Cash operating costs
per oz (Note 3)
Operating $ 600 $ 355 $ 481 $ 430 $ 327 $ 378
Royalties $ 56 $ 69 $ 62 $ 31 $ 28 $ 29
Depreciation,
amortization and
accretion per oz
(Note 4) $ 163 $ 163 $ 163 $ 111 $ 201 $ 156
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Note 1: Production statistics may not calculate exactly due to rounding.
Note 2: 2009 gold sold at Chirano excludes 4,208 oz recovered from
underground operations and capitalized during pre-production
development.
Note 3: This is a non-GAAP measure. It is calculated by dividing costs on
the statement of income and retained earnings by gold oz sold.
Chirano's 2010 cash costs are net of silver credits of $7
(2009: nil)
Note 4: For Tasiast, approximately $41 per oz (2009: $80 per oz) of
depreciation and amortization are due to the amortization of the
fair value excess on purchase of the Tasiast mineral properties
in 2007.
Six months ended Six months ended
June 30, 2010 June 30, 2009
Chirano Tasiast Total Chirano Tasiast Total
--------------------------------------------------------------------------
Ore tonnes mined,
open cut ('000t) 1,585 3,116 4,701 1,638 2,139 3,777
Ore tonnes mined,
underground ('000t) 352 - 352 34 - 34
Ore tonnes placed
on DL ('000t) - 2,108 2,108 - 1,334 1,334
Average grade of
DL tonnes (g/t) - 0.7 0.7 - 0.7 0.7
Ore tonnes milled
('000t) 1,653 1,016 2,669 1,196 645 1,841
Average grade (g/t) 2.1 3.0 2.4 2.2 3.5 2.7
Average recovery 89.6% 89.5% 89.6% 90.8% 92.7% 91.4%
Gold produced,
CIL (oz) 98,507 84,998 183,505 77,522 69,549 147,071
Gold produced,
dump leach (oz) - 19,017 19,017 - 3,574 3,574
Gold produced,
total (oz) 98,507 104,015 202,522 77,522 73,123 150,645
Gold sold (oz)
(Note 2) 100,000 106,580 206,580 72,820 74,007 146,827
Cash operating costs
per oz (Note 3)
Operating $ 593 $ 366 $ 476 $ 469 $ 299 $ 383
Royalties $ 49 $ 66 $ 57 $ 29 $ 28 $ 28
Depreciation,
amortization and
accretion per oz
(Note 4) $ 152 $ 157 $ 155 $ 96 $ 200 $ 148
--------------------------------------------------------------------------
Note 1: Production statistics may not calculate exactly due to rounding.
Note 2: 2009 gold sold at Chirano excludes 5,675 oz recovered from
underground operations and capitalized during pre-production
development.
Note 3: This is a non-GAAP measure. It is calculated by dividing costs on
the statement of income and deficit by gold oz sold. Chirano's 2010
cash costs are net of silver credits of $9 (2009: nil)
Note 4: For Tasiast, approximately $41 per oz (2009: $87 per oz) of
depreciation and amortization are due to the amortization of the
fair value excess on purchase of the Tasiast mineral properties
in 2007.
Red Back is reporting strong profits from mining operations (up 25% from Q1/10) and operating cash flows (up 29% from Q1/10) during the three months ended June 30, 2010. Increasing mining volumes and grade from the Akwaaba underground operation at Chirano will continue to boost production in the second half of the year. Annual production is expected to be 445,000 - 465,000 oz at estimated cash operating costs of $435 - $470 per oz. The increase in forecast cash operating costs is substantially due to the lower production expected at Tasiast as a result of a water line failure (News Release: July 21, 2010) and the annualized effect of a recent labour settlement at Chirano.
Royalties include the effect of a plant expansion fee payable to the government of Mauritania in 2010 in respect of the Tasiast plant expansion and increased Ghana government royalty rates from 3% to 5% starting in March at Chirano.
Depreciation costs per oz have increased at Chirano due to the commencement of depreciation of the plant expansion completed in late 2009. At Tasiast, the increased depreciation from a similar plant expansion, also completed in late 2009, is offset by the lower amortization of mineral property costs, now calculated over a significantly larger reserve base.
A non-cash stock based compensation expense of $22 million was recognised during the quarter. This is the result of a combination of the increase in RBI's share price in the second quarter, the annual option grant made in the quarter and the requirement to the defer the valuing and expensing 2009 stock option grants to the second quarter of 2010, when shareholders approved the Company's stock option plan.
Chirano
Chirano's production in the second quarter of 2010 continues to increase and was 54,567 oz (2009: 43,264 oz) at a cash operating cost of $600 per oz (2009: $430 per oz).
Included in the second quarter is the full impact of one-time costs from the re-structuring of contracts for the labour force. This was due to contractual negotiations with the unions which resulted in a change to fixed term contracts. The effect of this payment on Chirano's cash costs is $95 per oz for the quarter ($53 per oz for the half year) and the annualised effect is expected to be approximately $25 per oz.
Underground mining at the high grade Akwaaba operation is scheduled to ramp up to approximately 100,000 tonnes per month in the fourth quarter. This will result in lower cash costs per oz as higher mining volumes are achieved.
Red Back continues to forecast 2010 production from Chirano to be between 240,000 and 250,000 oz. After taking into account the annualised impact of the one-time labour contract re-structuring costs, cash operating costs are now forecast to be $485 to $525 per oz.
Chirano capital projects are proceeding as planned and no significant costs variances are expected. An $8.9 million exploration program focused on testing the depth potential of the Chirano shear on a systematic basis is now underway. Five rigs are currently on site working on this program.
Tasiast
Tasiast's production in the second quarter of 2010 was 51,795 oz (2009: 36,973 oz) at a cash operating cost of $355 per oz (2009: $327 per oz). Compared to the same period in 2009, cash operating costs are higher because of the scheduled mining of lower grade ore.
Production from dump leach operations at Tasiast continues to be affected by failures in the second water line from the Company's bore field, located 60 kilometers from the plant. The failing sections of the pipeline are being replaced with work expected to be completed in the fourth quarter, at which time full dump leach irrigation rates will resume. Consequently, it is anticipated that 2010 gold production at Tasiast will now be in the range of 205,000 - 215,000 oz at a cash operating cost of $375 to $400 per oz.
Exploration is ongoing at West Branch (Greenschist Zone) with 11 rigs currently drilling as part of a $25 million exploration budget for the second half of the year. As part of this program a further 10 drill rigs will be added in the coming months. The focus is infill drilling of the Greenschist Zone aimed at rapid reserve expansion. A reserve update is on target for the end of the third quarter and will include an initial heap leach reserve.
The Company continues to evaluate the further expansion potential of Tasiast based upon significant reserve increases. Expanded capital programs totalling an additional $55 million in 2010 include the commencement of construction of a heap leach operation, major expansion of the mining fleet and a significant increase in general infrastructure at Tasiast. The Company is also evaluating the potential of a major expansion to the CIL operation. Studies are underway and the Company expects to be in a position to make a decision in this regard by the end of the first quarter of 2011.
Strong Financial Position
At June 30, 2010, the Company has a strong balance sheet, no debt, no hedging, and $730 million in cash.
Current treasury and strong operating cash flows (based on current gold prices) are expected to fully fund Red Back's exploration programs and capital projects in 2010/11 and provide a strong financial platform for future growth.
About Red Back
Red Back is an un-hedged African focused gold producer. It owns and operates the Chirano Gold Mine in Ghana and the Tasiast Gold Mine in Mauritania. Aggressive exploration programs aimed at increasing the Company's resource and reserve base at both Chirano and Tasiast are ongoing.
FORWARD-LOOKING INFORMATION
This press release contains 'forward-looking information' that is based on Red Back's current expectations, estimates, forecasts and projections. This forward-looking information includes, among other things, statements with respect to Red Back's plans, outlook and business strategy. The words 'may', 'would', 'could', 'should', 'will', 'likely', 'expect', 'anticipate', 'intend', 'estimate', 'plan', 'forecast', 'project', and 'believe' or other similar words and phrases are intended to identify forward-looking information.
Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause Red Back's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. Such factors include, but are not limited to: uncertainties related to drilling results; the ability to raise sufficient capital to fund exploration; changes in economic conditions or financial markets; changes in prices for Red Back's mineral products or increases in input costs; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological or operational difficulties or inability to obtain permits encountered in connection with exploration activities; and labour relations matters.
This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. Red Back disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise.
On behalf of the Board of Directors:
Richard P. Clark, President
Contacts:
Red Back Mining Inc.
Simon Jackson
VP-Corporate Development
604-689-7842
Red Back Mining Inc.
Sophia Shane
Investor Relations
604-689-7842
(604) 689-5452 (FAX)
www.redbackmining.com
