TORONTO–(BUSINESS WIRE)–Roxgold Inc. (“Roxgold” or the “Company”) (TSX: ROXG) (OTCQX: ROGFF) today reported its second quarter and first half financial results for the period ended June 30, 2020.
For complete details of the unaudited Condensed Interim Consolidated Financial Statements and associated Interim Management’s Discussion and Analysis please refer to the Company’s filings on SEDAR (www.sedar.com) or the Company’s website (www.roxgold.com). All amounts are in U.S. dollars unless otherwise indicated.
Q2 2020 Highlights:
During the three and six-month period ended June 30, 2020, the Company:
Safety
Operations
Financial
Growth
“In the face of an unparalleled global crisis, Roxgold has delivered remarkably strong operating and financial results,” commented John Dorward, President and CEO of Roxgold. “In the quarter, we achieved adjusted net income of US$11 million, generated over US$33 million in cash flow from mining operations and reported a return on equity of 16%. Our financial performance has been driven by the strong operational performance with 65,192 ounces of gold produced in the first half of this year, putting the company well on its way towards hitting the upper end of our annual production guidance of 120,000 to 130,000 ounces. This is further supported by operating performance in July with production over 12,600 ounces for the month. Our operations, while challenged by the pandemic, were able to continue uninterrupted, ensuring a continued 1,400 tpd throughput rate and low cash operating costs of $151/tonne which translated to record operating margins of $1,016/oz. With a solid balance sheet, strong momentum on production, and gold prices reaching record highs we are well positioned to deliver very strong results in H2 2020.
“Looking ahead, the Séguéla Gold Project in Cote d’Ivoire is advancing on schedule towards completion of the Feasibility early next year and a construction decision to follow soon thereafter. The Séguéla has been a substantially value accretive acquisition for Roxgold with an NPV of $548 million and 121% IRR at a gold price of $2,000 per ounce, as well as the potential to double our production within a short timeframe without dilution to our shareholders. With four drills turning on the project returning regular results, we believe there is a significant potential opportunity for the upcoming Feasibility Study to outline a bigger and more significantly accretive Séguéla project with additional production ounces and improved valuation.
“Finally, as we reported last month, recent exploration success at Boussoura is building confidence that the project has the potential to become Roxgold’s third advanced asset. The Boussoura project is in the right jurisdiction on the southern end of the Houndé greenstone belt – a prolific gold belt that is host to numerous high-grade, large scale gold discoveries. We have tested a fraction of the vein sets on our land package, and while early days, with continued success we are hopeful that these will come together to form the basis of a project. Two drills are currently turning at Boussoura conducting target definition drilling within the Fofora corridor, and we look forward to seeing the project take shape through the year towards a maiden resource next year.”
Q2 2020 Highlights
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Three months |
Three months |
Six months |
Six months |
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| Gold ounces produced | 32,812 | 34,354 | 65,192 | 68,006 |
| Gold ounces sold3 | 36,279 | 33,102 | 66,405 | 65,900 |
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| Financial Data (in thousands of U.S. dollars) |
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| Gold sales3 | 62,107 | 42,949 | 110,153 | 85,789 |
| Mine operating profit1 | 23,399 | 11,465 | 38,299 | 24,101 |
| EBITDA1 | 25,480 | 11,975 | 43,015 | 28,131 |
| Adjusted EBITDA1 | 29,035 | 15,677 | 48,809 | 33,952 |
| Adjusted EBITDA margin1 | 47% | 37% | 44% | 41% |
| Net income (loss) | 7,467 | (2,955) | 9,378 | (1,026) |
| Basic earnings per share attributable to shareholders | 0.02 | (0.01) | 0.02 | (0.01) |
| Adjusted net income1 | 11,021 | 747 | 15,172 | 4,795 |
| Per share1 | 0.03 | 0.00 | 0.04 | 0.01 |
| Cash flow from mining operations1 | 33,281 | 21,814 | 58,104 | 45,227 |
| Per share1 | 0.09 | 0.06 | 0.16 | 0.12 |
| Return on equity1 | 16% | 11% | 11% | 11% |
| Cash on hand end of period | 44,783 | 19,413 | 44,783 | 19,413 |
| Total assets | 303,829 | 278,813 | 303,829 | 278,813 |
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| Statistics (in dollars) |
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| Average realized selling price (per ounce) | 1,712 | 1,304 | 1,659 | 1,305 |
| Cash operating cost (per tonne processed)1 | 151 | 156 | 148 | 152 |
| Cash operating cost (per ounce produced)1 | 586 | 518 | 576 | 493 |
| Total cash cost (per ounce sold)1 | 696 | 580 | 678 | 554 |
| Sustaining capital cost (per ounce sold)1 | 245 | 206 | 290 | 193 |
| Site all-in sustaining cost (per ounce sold)1 | 940 | 785 | 969 | 749 |
| All-in sustaining cost (per ounce sold) 1 | 983 | 836 | 1,017 | 806 |
2020 Operating Outlook
Based upon Q2 production results, Roxgold is on track to deliver at the upper end of annual gold production guidance from Yaramoko. As noted earlier this year, AISC is expected to be relatively higher compared to prior years due to increased projected capital spend as the Bagassi South decline development is completed in 2020 along with enhanced security infrastructure investment. Growth spend has been maintained at $15-$20 million as the accelerated drilling program at Séguéla and Boussoura follow recent exploration successes at these projects. Although the COVID-19 pandemic has not materially impact Roxgold’s operations during the first half of 2020, a prolonged COVID-19 related interruption may have an impact on production and cost guidance.
Response to the COVID-19 Pandemic
As previously announced on April 8, 2020, management of the current global COVID-19 crisis is ongoing. Operations at Yaramoko were not materially impacted by COVID-19 with heightened preventative measures and response plans in place to mitigate and minimize any potential impacts from the virus. The Company is continually assessing the health and safety risks to the Company’s personnel and contractors at its operations and offices. Whilst production has been maintained, a prolonged COVID-19 related interruption may have an impact on the Company’s operations, financial position and liquidity.
The Company strengthened its liquidity position in the quarter following the refinancing of its existing Yaramoko Facility and secured an additional $20 million as a revolving credit facility to provide increased liquidity and financial flexibility given the volatile and uncertain financial market conditions. In addition, the Company continues to make regularly scheduled gold shipments from the Yaramoko Gold Mine.
Mine Operating Activities
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Three months |
Three months |
Six months |
Six months |
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| Operating Data |
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| Ore mined (tonnes) | 112,523 | 109,840 | 247,844 | 207,980 |
| Ore processed (tonnes) | 127,308 | 113,866 | 253,188 | 220,682 |
| Head grade (g/t) | 8.2 | 9.0 | 8.4 | 9.5 |
| Recovery (%) | 98.0 | 98.2 | 98.0 | 98.3 |
| Gold ounces produced | 32,812 | 34,354 | 65,192 | 68,006 |
| Gold ounces sold1 | 36,279 | 33,102 | 66,405 | 65,900 |
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| Financial Data (in thousands of dollars) |
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| Gold sales3 | 62,107 | 42,949 | 110,153 | 85,789 |
| Mine operating expenses1 | (21,507) | (17,285) | (38,419) | (32,722) |
| Government royalties1 | (3,730) | (1,904) | (6,613) | (3,880) |
| Depreciation and depletion1 | (13,471) | (11,835) | (26,822) | (23,778) |
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| Statistics (in dollars) |
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| Average realized selling price (per ounce) | 1,712 | 1,304 | 1,659 | 1,305 |
| Cash operating cost (per tonne processed) 1 | 151 | 156 | 148 | 152 |
| Cash operating cost (per ounce produced) 1 | 586 | 518 | 576 | 493 |
| Total cash cost (per ounce sold) 1 | 696 | 580 | 678 | 554 |
| Sustaining capital cost (per ounce sold) 1 | 245 | 206 | 290 | 193 |
| Site all-in sustaining cost (per ounce sold) 1 | 940 | 785 | 969 | 749 |
| All-in sustaining cost (per ounce sold)1 | 983 | 836 | 1,017 | 806 |
Health and safety performance
There were no Lost Time Injury (“LTI”) incidents in the second quarter of 2020 representing nil LTI reports in 530,955 hours worked.
Operational performance
The Company’s gold production in Q2 2020 was 32,812 ounces at a head grade of 8.2 g/t compared to 34,354 ounces at 9.0 g/t in Q2 2019.
Mining operations at the 55 Zone and Bagassi South saw notable improvement through the quarter, as mined grades at Bagassi South averaged a record 10.6 g/t in the quarter, while 55 Zone reported higher grades at depth with an average mined grade of 11.6 g/t in June 2020.
There was a total of 112,523 tonnes of ore mined at a grade of 8.83 g/t (includes marginal ore mined totalling 11,582 tonnes at a grade of 2.2 g/t) and 1,121 metres of waste development. This compares with 109,840 tonnes of ore at 9.3 g/t and 1,562 metres of waste development in Q2 2019. The 55 Zone mine produced 72,826 tonnes at 7.9 g/t and the Bagassi South mine contributed 39,698 tonnes at a grade of 10.6 g/t.
The mining tonnage increase was attributable to the ramping up of stoping activities at the Bagassi South mine in Q2, with stoping operations expanding as more development levels were completed. During Q2 2020, approximately 72% of ore produced came from stoping activities and 28% from development.
Decline development at the 55 Zone mine reached the 4734 level, approximately 580 metres below surface. Ore development continued down to 4754 level and on the eastern extensions of the 4845, 4862 and 4879 levels. The development of the Bagassi South decline reached the 5061 level and ore development commenced on the 5078 level, which is approximately 240 metres below surface. Good progress on ore development has seen the Bagassi South mine largely developed, providing additional stoping access for the remainder of the year.
Mine reconciliation performance between the Mineral Reserve and Grade Control model was 98% for tonnes and 106% for grade in the second quarter of 2020.
The plant processed 127,308 tonnes at an average head grade of 8.2 g/t in Q2 2020 compared to 113,866 tonnes of ore at 9.0 g/t in Q2 2019. There was an increase in the processing of stockpiled material to supplement the mined ore as Yaramoko operated with reduced personnel due to COVID-19 travel restrictions and isolation protocols in Q2 2020.
The processing plant availability was 96.7% in the quarter compared to 97.6% in Q2 2019 and reported an average throughput rate of 1,399 tonnes per day exceeding nameplate capacity by approximately 27%. Plant recovery was 98.0% in Q2 2020 compared to 98.2% for the comparative quarter.
The Yaramoko Gold Mine continued to maintain a low cash operating cost1 of $151 per tonne processed driven by increased throughput and strong cost control.
Financial Performance
i) Second quarter of 2020 vs second quarter of 2019
Gold sales in Q2 2020 totalled $62.1 million from 36,279 ounces of gold. The Company’s average realized gold price was $1,712 per ounce sold, 31% higher than the average realized gold price in Q2 2019.
The Company continued to maintain a low cash operating cost1 per tonne processed of $151 per tonne. The cash operating cost1 per ounce produced totalled $586 per ounce for the period compared to $156 per tonne and $518 per ounce in the prior.
The total cash cost1 per ounce sold of $696 in Q2 2020 was higher compared to $580 per ounce sold in Q2 2019. This was primarily impacted by the processing of lower grade stockpiled material which had an impact of $40 per ounce sold, the higher gold price in Q2 2020 which increased royalty payments by $20 per ounce sold and the commencement of the 1% contribution to the Mining fund for local development increasing royalties by $17 per ounce sold.
As a result, the Company achieved a site all-in sustaining cost1 of $940 per ounce sold and an all-in sustaining cost1 of $983 per ounce sold in the three-month period in 2020 compared to $785 per ounce and $836 per ounce sold, respectively in the comparable 2019 period. The higher all-in sustaining cost in the quarter is attributed to the higher cash cost per ounce sold and ongoing decline development at Bagassi South which is weighted towards the first half of the year.
The Company generated a mine operating margin1 of $1,016 per ounce in 2020 which was 40% higher than in 2019 mainly due to the higher average gold sales price.
The Company invested $5.4 million in underground mine development at the 55 Zone and $3.5 million at Bagassi South in the second quarter of 2020.
The Company generated strong cash flow from mining operations1 of $33.3 million in Q2 2020, for cash flow from mining operations per share1 of $0.09 (C$0.12/share). Comparatively, the Company generated cash flow from mining operations1 of $21.8 million and $0.06 cash flow from mining operations per share1 in Q2 2019.
ii) First six months of 2020 vs first six months of 2019
The Company sold 66,405 ounces of gold3 resulting in revenue from gold sales3 totalling $110.2 million compared to 65,900 ounces3 and $85.8 million, respectively in the comparable period in 2019. During this period, the Company’s average realized gold price was $1,659 per ounce sold compared to an average realized gold price of $1,305 per ounce in Q2 2019.
During the six-month period ended June 30, 2020, the maintained a low cash operating cost1 per tonne processed of $148 per tonne, which compared to $152 per tonne achieved during the comparable period in 2019. The cash operating cost1 per ounce produced totalled $576 per ounce for the period compared to $493 per ounce in the prior year mainly driven by the processing of lower grade stockpiled material which had an impact of $22 per ounce sold, the higher gold price in 2020 which increased royalty payments by $18 per ounce sold and the commencement of the 1% contribution to the Mining fund for local development increasing royalties by $17 per ounce sold.
The total cash cost1 per ounce sold of $678 in six-month ended period ended June 30, 2020 was higher compared to $554 per ounce sold in the same period in 2019. As a result, the Company achieved a site all-in sustaining cost1 of $969 per ounce sold and an all-in sustaining cost1 of $1,017 per ounce sold for YTD 2020 compared to $749 per ounce and $806 per ounce sold, respectively in the same period in 2019.
The Company has invested $11.5 million in underground development at 55 Zone for the six-month period compared to $12.7 million for the comparable period in 2019. The comparable period also included $12.0 million invested in pre-commercial production underground mine development at the Bagassi South mine.
Review of Q1 2020 financial results
Mine operating profit
During the quarter ended June 30, 2020, revenues totalled $62.1 million (2019 – $39.7 million) while mine operating expenses and royalties totalled $21.5 million (2019 – $14.8 million) and $3.7 million (2019 – $1.8 million), respectively. The increase in sales is primarily due to the 31% increase in the average realized gold price and the 10% increase in ounces sold. During the quarter, the Company achieved total cash cost1 per ounce sold of $696 and a mine operating margin1 of $1,016 per ounce sold.
During the six-month period ended June 30, 2020, revenues totalled $110.2 million (2019 – $79.5 million) while mine operating expenses and royalties totalled $38.4 million (2019 – $28.4 million) and $6.6 million (2019 – $3.6 million), respectively. The increase in revenue is primarily due to the 27% increase in the average realized gold price. During the six-month ended June 30, 2020, the Company achieved total cash cost1 per ounce sold of $678 and a mine operating margin1 of $981 per ounce sold.
For more information on the cash operating costs1 see the financial performance of the Mine Operating Activities section of this MD&A.
During the three and six-month period ended June 30, 2020, depreciation totalled $13.5 million and $26.8 million compared to $11.6 million and $23.4 million in 2019. The increase in depreciation is a result of the Company’s continued investment in the underground development of 55 Zone and Bagassi South combined with higher throughput.
General and administrative expenses
General and administrative expenses for the three and six-month period were $1.1 million and $2.4 million compared to $1.2 million and $2.6 million for respective periods.
Sustainability and other in-country costs
Sustainability and in-country costs totalled $0.4 million and $0.8 million for the three and six-month ended June 30, 2020, respectively compared to $0.5 million and $1.1 million in the comparative period. The decrease in expenditures primarily relates to timing of community investments in 2020. These expenditures are incurred as part of Roxgold’s commitment to responsible operations in Burkina Faso including several sustainability and community projects.
Exploration and evaluation expenses (“E&E”)
Exploration and evaluation expenses totalled $4.3 million and $12.0 million for the three and six-month ended June 30, 2020, respectively compared to $4.1 million and $7.3 million in the comparative period. The significant increase in exploration and evaluation activities was primarily due to advancing the PEA at the Séguéla Gold Project which was released in a press release on April 14, 2020. There was also drilling at the Boussoura project in Burkina Faso.
E&E expenses totalled $8.9 million at the Séguéla Gold Project and $3.1 million for Boussoura and Yaramoko for the six-month end June 30, 2020. Expenditures at the Séguéla Gold Project included $5.5 million in drilling costs with $3.5 million of exploration drilling primarily at Ancien and $2.0 million relating to infill drilling at Boulder and Agouti. The Company has spent an additional $1.3 million on PEA and feasibility study costs.
Drilling expenses totalled $1.7 million for YTD 2020 at the Boussoura permit and $0.3 million spent related to regional drilling at Yaramoko.
Share-based payments
Share-based payments totalled $1.7 million and $2.0 million for the three and six-month ended June 30, 2020, respectively compared to 0.7 million and $1.1 million in the comparative period. The increase is primarily due to the timing of the deferred share units (DSU”) grant and the Company’s higher share price.
Financial expenses
Financial expenses totalled $4.3 million and $5.9 million for the three and six-month ended June 30, 2020, respectively compared to $5.5 million and $9.0 million in the comparative period. The decrease is mainly attributed to the favourable movement in foreign exchange gain (loss) of $2.1 million along with a decrease in financing costs and other expenses of $1.1 million.
Current and deferred income tax expense
The current income tax expense for the three and six-month ended June 30, 2020 periods has increased with the comparable period in 2019 due to higher mine operating profits. The higher effective tax rate is also driven by the significant increase in exploration expenditures in 2020 incurred in Burkina Faso and Côte d’Ivoire not being tax effected due to the Company’s status under the mining regulations.
Net income & EBITDA
The Company’s net income was $7.5 million for the three-month ended June 30, 2020 and $9.4 million for the six-month ended June 30, 2020 compared to net loss of $3.0 million and $1.0 million respectively in the comparative 2019 period.
The Company’s EBITDA1 was $25.5 million for the three-month ended June 30, 2020 and $43.0 million for the six-month ended June 30, 2020, respectively compared to $12.0 million and $28.1 million, respectively in the comparative 2019 period.
Net income increased significantly compared to prior period primarily as a result of higher average realized gold sales price, offset by its focus on growth with significant investments in exploration and evaluation at Séguéla and Boussoura and higher depreciation.
Income Attributable to Non-Controlling Interest
For the three and six-month period ended June 30, 2020, the income attributable to the non-controlling (“NCI”) interest was $1.5 million and $2.5 million, respectively. The Government of Burkina Faso holds a 10% carried interest in Roxgold SANU SA and as such is considered Roxgold’s NCI. The NCI attributable income is based on IFRS accounting principles and does not reflect dividend payable to the minority shareholder of the operating legal entity in Burkina Faso.
Exploration activities
Séguéla Gold Project
Exploration activities have continued to progress with the objective of delineating additional mineral resources within close proximity to Antenna. The current targets, including Agouti, Boulder and Ancien, are within 6 kilometres of the Antenna deposit (Figure 1).
Figure 1: Séguéla Location Plan
Significant progress was made on defining and extending mineralization at Boulder, Agouti and Ancien with 4 RC/diamond core rigs active throughout the second quarter of 2020, along with concluding geotechnical drilling in support of the feasibility study.
Ancien
Infill and extension drilling continued during the quarter with two RC/ diamond core drill rigs completing 18 holes, bringing to a total of 81 holes which have been completed at Ancien since the drillhole data cut-off date (February 12 2020) used to support the Inferred Mineral Resource estimate in the PEA of 261,000 ounces (refer to Company press release dated April 14, 2020).
Contacts
Roxgold Inc.
Graeme Jennings, CFA
Vice President, Investor Relations
416-203-6401
gjennings@roxgold.com
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