St Andrew Goldfields Ltd.

St Andrew Goldfields Ltd.

August 06, 2008 08:30 ET

St Andrew Reports 2008 Q2 Financial Results

OAKVILLE, ONTARIO--(Marketwire - Aug. 6, 2008) - St Andrew Goldfields Ltd. (TSX:SAS)("St Andrew" or the "Company") is pleased to report for the three months ended June 30, 2008, it had net income of $13,404,982 or $0.06 per share as compared to a loss of $22,877,720 or $0.22 per share for the same period in 2007. Net income for the six months ended June 30, 2008 was $1,840,775 or $0.01 per share as compared to a loss of $38,118,338 or $0.23 per share for the six months ended June 30, 2007.

During the second quarter of 2008, the Company recorded gains from the sale of non core assets in the aggregate amounts of $22.1 million ($19.8 million from the sale of the Stock Mill Complex to Apollo Gold Corporation ("Apollo Gold") and $2.3 million from the sale of the shares of Glass Earth Gold Limited ("Glass Earth"). The Company also recognized a gain on the debt settlement with a mining contractor of $2.3 million. These transactions have not resulted in any tax liabilities.

Highlights during the Quarter

- the receipt of an independent technical report with respect to St Andrew's Holloway-Holt mine assets and the announcement in early July 2008 of a production decision, subject to obtaining suitable financing;

- the sale of its Stock Mill Complex, including its mill and related equipment, infrastructure, laboratory and tailings facilities, located near Timmins, Ontario, to Apollo Gold for $20.0 million;

- the divestiture of the Company's non core investment in Glass Earth for $8.1 million;

- the grant of an option by the Company to Kenrich-Eskay Mining to acquire up to 80% interest in Eskay Creek properties in British Columbia (see May 8, 2008 press release);

- the finalization of a debt settlement agreement with a mining contractor for $15.0 million;

- the conversion of $42.0 million of principal amount of indebtedness due to related parties into common shares of the Company at a conversion price of $0.55 per share; and

- the appointment of Duncan Middlemiss as Vice President and General Manager, East Timmins Operations.

Results of Operations

Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007

Amounts in thousands of Canadian dollars,
except per share and per ounce amounts

Tonnes mined(1) - 14,429 10,846 64,086
Tonnes milled(1) - 35,413 9,207 82,016
Gold grade (grams per tonne)(1) - 4.6 4.1 5.4

Gold production (ounces)(1),(2) - 3,816 1,490 9,915
Gold sold (ounces)(2) 368 5,521 3,253 8,809

Gold sales(2),(3) $ 166 $ 3,924 $ 166 $ 6,594
Net income (loss) $13,405 $(22,878) $ 1,841 $(38,118)
Net income (loss) per share $ 0.06 $ (0.22) $ 0.01 $ (0.23)

Working capital (deficit) $ 4,713 $(15,379)
Shareholders' equity $91,240 $ 83,773
Number of shares outstanding 311,867,448 189,491,891


(1) Tonnage (mining and milling) and gold production information for the
three months and six months ended June 30, 2008 were derived from the
Company's Holloway-Holt Mines, which operations are in the exploration
and mine development stage. For the three months and six months ended
June 30, 2007, tonnage information (both mining and milling) was
Derived from the Company's gold production operations at the Stock
Gold Complex and at the Nixon Fork Gold Mine.

(2) During the six months ended June 30, 2008, the Company sold 2,810
ounces of gold produced from the Holloway-Holt mine development and
from the Holt Mill clean up. The Company also extracted and sold 253
ounces of gold from stripping activities conducted at the Stock Mill.
Revenues generated from these activities were accounted for as
reductions to the expenditures of the respective each operation.

(3) During the three months ended June 30, 2008, the Company sold 190
ounces of gold contained in 15 tonnes of copper concentrate sold
to a custom smelter.

St Andrew's accounting policy is to expense all exploration and mine development expenditures prior to the establishment of economically recoverable reserves at a property. When the Company has determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, costs incurred to develop the property are capitalized. As announced on July 10, 2008, the Company converted approximately 629,000 ounces of gold mineral resources to proven and probable gold reserves at its flagship Holloway-Holt Mines. There are no other significant gold reserves established at other advanced stage projects.

Sale of Stock Mill

The Company completed the sale to Apollo Gold of the Company's Stock Mill complex, including its mill and related equipment, infrastructure, laboratory and tailings facilities, located near Timmins, Ontario, to Apollo Gold for a purchase price of $20.0 million and realized a gain of $19.8 million. The carrying value of the Stock Mill Complex was written off in 2006 to reflect that the Company did not have sufficient mineral resources in the surrounding areas for mill feed to the Stock Mill.

Sale of Glass Earth Shares

During the second quarter of 2008, St Andrew sold 65,095,667 shares in Glass Earth at an average price of $0.12 per share for proceeds of $8.1 million, of which 22,891,000 Glass Earth shares were sold to related parties at an average price per share of $0.13 for gross proceeds of $3.1 million. The Company also assigned 6,666,667 Glass Earth shares it owned to a mining contractor in partial settlement of a liability. Gain realized on the disposition of the Glass Earth shares during the second quarter of 2008 was $2.3 million.

Conversion of Debt to Equity

On June 23, 2008, the minority shareholders of the Company approved the conversion of the principal amount of $42.0 million of indebtedness due to Herbert Abramson, Chairman of the Company and Technifund Inc. (collectively "Technifund"), a private company under Mr. Abramson's control, into equity of the Company by the issuance of 76,363,636 common shares of the Company at a conversion price of $0.55 per share, which represented a premium of 38% to the closing price of the Company's common shares on the Toronto Stock Exchange on April 18, 2008 (the last trading day prior to of the approval of the transaction by the board of directors) and was equal to the price at which the Company had completed its $14.8 million private placement financing to arm's length investors in January 2008. This transaction resulted in an increase of $42.0 million in shareholders' equity and eliminated $4.2 million of annual debt servicing costs.

Advance Exploration Update

Holloway-Holt Project

As announced on July 11, 2008, the Company made a production decision to recommence mining and milling activities at the Holloway-Holt Mines, conditional on arranging the required financing. The Company is currently seeking a $35.0 million debt financing to restart the Holloway-Holt Mines, to fund the Company's exploration programs and for corporate purposes. Once the financing is in place and depending on the ability of the Company to recruit skilled labour and recall existing employees on lay off notices since early 2008, it will take approximately 6 months to complete the required pre-production activities and attain commercial production. During the second half of the pre-production period, ore development and stope preparation activities will start to generate broken ore.

Nixon Fork Gold Mine

The Company completed at the end of the first quarter of 2008, a 5,700 metres definition drilling program to better define the irregular geometry of the gold mineralization for improved future mining recovery and dilution at its Nixon Fork Gold Mine. Due to the limited resources available to the Company, it has not completed an updated resource estimate at its Nixon Fork Gold Mine but expects to complete this resource estimate in the second half of 2008.

Based on the expected future cash flows of the Nixon Fork Project, the Company recorded an asset impairment charge of $2.7 million in the second quarter of 2008 to write off the net carrying value of the Nixon Fork mine. The impairment charge consists of the net carrying amount of the mine's surface infrastructure and equipment.

Liquidity and Capital Resources

At June 30, 2008, St Andrew had working capital of $4.7 million. The Company expects to generate sufficient cash flow from the divesture of its non-core assets and to obtain additional capital from the $35.0 million debt financing which it is endeavouring to complete to restart the Holloway-Holt Mines, which should be sufficient to satisfy the Company's ongoing working capital commitments and other contractual obligations.

About St Andrew

St Andrew is a gold mining and exploration company with operations in Timmins, Ontario and Alaska. St Andrew controls a very large land position in the Timmins Mining Camp, an extensive land position at Eskay Creek in northern British Columbia and land positions around Nixon Fork Gold Mine in the Kuskokwim-Tintina Mining Camp in Alaska. St Andrew also an approximate 15.2% equity interest in Apollo Gold Corporation, which has operations in Montana, Mexico and the Black Fox Deposit located in the vicinity of St Andrew's Timmins operations.

For further information about St Andrew Goldfields Ltd., please contact Investor Relations at (416) 368-3116 or toll-free at 1-800-463-5139 or email


This news release may contain forward-looking information under applicable securities laws, concerning St Andrew's business, operations, financial performance, condition and prospects, as well as management's objectives, strategies, beliefs and intentions. Forward looking information are frequently identified by such words as "may", "will", "plan", "expect", "anticipate", "intend" and similar words referring to future events and results. This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by the forward-looking information. Factors that may cause actual results to vary material include, but are not limited to, inaccurate assumptions concerning the exploration for and development of mineral deposits, political instability, currency fluctuations, unanticipated operational or technical difficulties, changes in laws or regulations, the risks of obtaining necessary licenses and permits, changes in general economic conditions or conditions in the financial markets and the inability to raise additional financing. Readers are cautioned not to place undue reliance on this forward-looking information as actual results may differ materially from those expressed or implied in the forward looking information. St Andrew does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

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