American Bonanza Gold Corp.

American Bonanza Gold Corp.

September 14, 2012 20:41 ET

American Bonanza Announces Progress at its Copperstone Mine, and Arrangement of Additional Funding

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 14, 2012) - American Bonanza Gold Corp. (TSX:BZA)(OTCQX:ABGFF) ("Bonanza" or "Company") announces progress and second quarter results from operations at the newly constructed high grade Copperstone gold mine in Arizona. The Company continues to work towards its aim of achieving commercial production in the fall of 2012, planned at 450 tons per day of ore mined and production of 46,000 ounces of gold per year during the first three years of the mine life.

During the second quarter of 2012, when the main zone then being mined entered into the initial backfilling cycle, the two next zones had not yet been accessed through development mining. As a result, Copperstone experienced reduced ore production and concentrate shipments, which impacted the cash balances. Therefore the decision was taken to approach existing and long-term supportive shareholders for additional funding, as described below, to help achieve the Company's Q4 2012 target for commercial production. The funding allows for investment in new underground capital equipment, additional spare parts inventories and other improvements.

Underground Development Recent Progress

During the summer of 2012, Copperstone has made progress towards bringing development mining forward. The initial backfilling cycle (in the D Zone) was completed, and development mining has now reached a second main mining zone (the C Zone) and is nearing a third (Lower D Zone). Achieving three developed mining areas with a combined total of 7 to 8 working faces is a key goal toward operating the underground mine at design output rates of 450 tons per day.

The Company expects future backfilling cycles to be completed at an accelerated rate compared to the initial cycle, which included extra time for testing and confirmation of acceptable performance of the backfill material.

Underground Development Activity in the Second Quarter

Progress at the Copperstone gold mine was impacted during the second quarter of 2012 by unexpected delays in underground mine development and a longer-than-expected period to establish initial backfilling operations. The decision was taken during Q4, 2011 to replace the mining contractor and transition to owner-mining, and while the Copperstone team quickly sourced the replacement mining fleet (lead times to acquire new mining equipment often run between one and two years) and staff, the progress of underground development remained behind schedule during the second quarter of 2012. The result of delayed development was reduced tonnages of ore being produced because a second ore zone was not available for production during the initial backfilling cycle.

Processing Plant Performance

The gold processing plant has been operated at design performance during the quarter, when steady feed has been available. During the second quarter, on a limited basis, the plant has operated at throughput rates exceeding the design 450 tons per day rate, and is expected to continue operating with good performance.

Mine Production and Gold Output

3 months ended 3 months ended 6 months ended
March 31, 2012 June 30, 2012 June 30, 2012
Mine Production (tons)
Ore Mined 10,353 17,116 27,469
Waste/Development Moved 11,158 13,063 24,221
Total Ore Mined and Waste/Development Moved 21,511 30,179 51,690
Ore Stockpile - Opening 7,213 942 7,213
Ore Mined 10,353 17,116 27,469
Plant Feed (16,624) (17,608) (34,232)
Ore Stockpile - Closing 942 450 450
Ore Mined 10,353 17,116 27,469
Ore Grade (ounces per ton) 0.27 0.12 0.18
Gold Ounces in Ore 2,803 2,068 4,871
Milling (tons)
Plant Feed 16,624 17,608 24,232
Mill Feed Grade (ounces per ton) 0.13 0.13 0.13
Gold Ounces in Feed 2,138 2,221 4,359
Gold Ounces in Feed 2,138 2,221 4,359
Gold Ounces Recovered 1,080 1,888 2,908
Mill Gold Recovery 48% 85% 67%

Ore mined, development progress, ore processed and recovered gold improved during the second quarter compared to the first quarter, although the improvements fell short of targets. The main impact of development delays, combined with reduced ore available during the initial backfilling cycle, is a reduction in the grade of ore mined, as ore mining targeted lower grade material to maintain tonnage output when the scheduled ore zones were down for backfilling. As a result, mill feed grades in both quarters were impacted by substantial amounts of this lower grade material being processed.

Private Placement

The Company has completed a non-brokered private placement (the "Offering") to continue ramping up production at the Copperstone gold mine and for general working capital. In connection with the Offering, the Company has issued 25,000,000 units (the "Units") at a price of $0.20 per Unit for gross proceeds of $5,000,000. Each Unit is comprised of one common share (a "Share") and one common share purchase warrant (a "Warrant"). Each Warrant entitles the holder thereof to purchase one additional common share at a price of $0.30 for a period of one year from the date of issuance.

The Units were sold by way of private placement exemptions in Canada and other jurisdictions where they can be issued on a private placement basis, exempt from any prospectus, registration or other similar requirements. In connection with the Offering, the Company paid finder's fees in the amount of $224,167.

All securities issued in connection with the Offering are subject to a statutory hold period in Canada expiring January 15, 2013.

Expansion of Gold Loan Facility

A third party, arms-length investor has invested an additional US$1.5 million through Bonanza's existing Gold Loan (see news release dated June 14, 2012), increasing the size of the facility to US$6 million. In connection with the investment, the Gold Loan has been restructured so as to be repaid commencing six months after the restructuring, with repayments estimated to commence during March, 2013 and completing during October, 2013, through the delivery of gold ounces at a price of US$1,200 per ounce (instead of US$1,400 per ounce currently agreed). The Company will thus not be required to make interest payments from October 2013 to June 2015, as associated with the current Gold Loan. In connection with the additional advance and the restructuring of the Gold Loan, the Company issued one common share purchase warrant for each US$1.00 principal amount of the Gold Loan which remains outstanding (a total 6,001,000 warrants were issued). Each warrant entitles the holder to purchase one common share of the Company at a price of $0.50 per share, exercisable for a period of two years from closing.

This news release was reviewed by Douglas Wood, P.G., Vice President, Exploration of Bonanza, a non-independent Qualified Person within the meaning of NI 43-101.

About Bonanza

For more information please visit Bonanza's website at


Brian Kirwin, President & Chief Executive Officer

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