Newmarket Gold Inc.
TSX : NMI

Newmarket Gold Inc.

July 30, 2015 06:30 ET

Newmarket Gold Reports Strong Second Quarter Results; Record Low Operating Cash Costs of $681 Per Oz and Record First-Half Production of 115,674 Oz

VANCOUVER, BRITISH COLUMBIA--(Marketwired - July 30, 2015) - Newmarket Gold ("Newmarket" or the "Company") (TSX:NMI) is pleased to announce financial results for the three and six months ended June 30, 2015. Full Financial Statements and Management Discussion & Analysis documents can be found at www.sedar.com and the Company's website, www.newmarketgoldinc.com.

Second Quarter Highlights ("Q2/15") (All figures are in United States ("U.S.") dollars, unless stated otherwise)

  • Consolidated production of 55,998 ounces, up 3.7% vs. Q2/14, and eighth consecutive quarter of gold production above 53,000 ounces. H1 2015 consolidated production was a record 115,674 ounces.
  • Record low operating cash costs of $681 per ounce sold, a 29.4% decrease vs. Q2/14, below full-year 2015 guidance of $780-$860 per ounce sold.
  • All-in sustaining cash costs ("AISC") per ounce sold of $1,037, a 21.2% decrease vs. Q2/14, with an average realized gold price of $1,196 in Q2/15.
  • Revenue of $66.0 million based on 55,154 ounces sold.
  • Increased operating cash flow to $27.1 million, up 4.9% from Q2/14.
  • Net income of $12.1 million, or $0.10 earnings per share*, vs. $3.9 million, or $0.01 earnings per share* in Q2/14. H1 2015 net income of $27.8 million, or $0.24 earnings per share.*
  • Cash and gold bullion balance of $38.8 million and working capital of $25.1 million.
  • Completed merger between Newmarket Gold and Crocodile Gold establishing a new, sustainable 200,000 plus ounce gold producer. An exceptional operations team combined with a senior management team and board of directors, with a proven track record of superior value creation and ability to leverage deep capital markets and mining sector relationships, will continue to execute on a gold asset consolidation strategy creating significant shareholder value.

*Income per share, basic and diluted, is presented after giving effect to the share exchange ratio following the completion of the merger between Newmarket Gold and Crocodile Gold. Refer to note 2 of the interim financial statements dated July 30, 2015.

Douglas Forster, President & CEO, Newmarket Gold commented: "During the second quarter we announced a strategic combination between Newmarket and Crocodile Gold. The merger closed successfully on July 10, 2015 establishing a new 200,000 plus ounce per year gold producer with an exceptional operations and senior management team and board of directors. With our newly combined team and proven track record of operational excellence and superior value creation, we continue to focus on sustaining current gold production levels and maintaining cost profiles. Consolidated gold production in the second quarter was 55,998 ounces, up 3.7% year-over-year, representing two years of quarterly production above 53,000 ounces. In the first six months of 2015, we delivered a record 115,674 ounces of consolidated gold production, positioning us well to meet the top end of our full-year 2015 production outlook of 205,000 to 220,000 ounces. Despite a challenging gold price environment, we achieved solid revenue and continued to meet our cost reduction and productivity targets resulting in record low operating cash costs of $681 per ounce, increased profitability and positive free cash flow. We remain confident in our ability to deliver on our 2015 cash cost and AISC guidance of $780 to $860 per ounce and $1,020 to $1,100 per ounce respectively.

"We entered H2 2015 with a solid cash and gold bullion balance of $38.8 million and an increased working capital level of $25.1 million. The positive free cash flow generated during the quarter enabled us to turn on several growth exploration programs across the sites that has resulted in significant discoveries and many resource building opportunities. At Fosterville, we have intersected extremely high-grade gold mineralization containing visible gold at the Eagle Fault discovery in the Lower Phoenix System. Drill results from the Eagle Fault discovery include 386 g/t gold over 9.15 metres (estimate true width 3.35 metres) and 268 g/t gold over 7.85 metres (estimated true width 2.77 metres). These drill results represent the highest grades ever recorded at Fosterville and confirm significant gold mineralization at depth outside of previously reported Indicated Mineral Resources. Additionally, we have discovered the Aurora B East Flank target at Stawell and the Western Lodes Target at Cosmo."

Mr. Forster concluded: "Looking ahead, we will continue to advance on our growth exploration programs, while monitoring movements in the gold price, to ensure we achieve our top priority of resource growth to support future sustainable production and continued positive cash flow generation. We also look forward to executing on our growth strategy through the acquisition of new opportunities that will be accretive to our business with the goal of creating significant value for shareholders."

Second Quarter 2015 Financial Results

Financial Results Q2 2015 Q2 2014 YTD 2015 YTD 2014
Revenue ($) 66,044,377 69,231,729 138,941,212 139,619,365
Cost of operations, including depletion and depreciation ($) (46,526,035 ) (61,103,354 ) (99,661,175 ) (124,193,323 )
Mine operating income ($) 19,518,342 8,128,375 39,280,037 15,426,042
Net income ($) 12,071,914 3,934,331 27,774,834 608,594
Net income per share ($/share) basic(1) 0.10 0.03 0.24 0.01
Net income per share ($/share) diluted(1) 0.10 0.03 0.23 0.01
Cash generated from operating activities ($) 27,071,458 18,184,443 54,557,811 30,643,907
Capital investment in mine development, property, plant and equipment ($) 17,156,990 16,978,369 30,617,360 33,811,057
Average realized gold price ($) 1,196 1,291 1,190 1,289
Average quoted gold price ($) 1,192 1,289 1,206 1,291
Operating cash costs per ounce sold ($)(2) 681 965 682 968
All-in sustaining cash costs per ounce sold ($)(2) 1,037 1,316 985 1,311
(1) Income per share, basic and diluted, is presented after giving effect to the share exchange ratio following the completion of the merger between Newmarket Gold and Crocodile Gold. Refer to note 2 of the interim financial statements dated July 30, 2015.
(2) Refer to non-IFRS measures below.

Three Months Ended June 30, 2015

Consolidated gold production in Q2 2015 of 55,998 ounces increased 3.7% compared to Q2 2014, also representing two full years of quarterly production above 53,000 ounces. Average consolidated mill grade of 3.31 g/t increased 8.5% compared to prior year, in addition to a strong increase in consolidated mill recovery to 88.0%. Total gold sold increased 2.9% year-over-year to 55,154 ounces.

For the quarter ended June 30, 2015, consolidated revenues were $66.0 million, down 4.6% compared to $69.2 million in the corresponding quarter of 2014. The decline was attributable to a 7.4% drop in the average realized gold price per ounce to $1,196, down from $1,291 in Q2 2014, which more than offset the increase in gold sold over the corresponding period in 2014.

Operating expenses, including royalties, decreased 27.3%, resulting in record low operating cash costs of $681 per ounce sold compared to $965 in the prior year. The decrease in costs is attributable to a focus on cost management across the business and productivity initiatives. In particular, lower expenses at Cosmo, greater productivity at Fosterville, lower fuel costs, general cost reduction initiatives including, hiring freezes and supply tender processes, all contributed to record low operating cash costs. Additionally, a 16.6% year-over-year weakening of the average Australian dollar exchange rate further contributed to the decline. As a result, mine operating income improved 140% year-over-year to $19.5 million.

Net income for the quarter ended June 30, 2015 was $12.1 million, or $0.10 per share, compared to $3.9 million or $0.01 per share in Q2 2014. Per share amounts are presented after giving effect to the share exchange ratio following the completion of the merger between Newmarket Gold and Crocodile Gold. Refer to note 2 of the interim financial statements dated July 30, 2015.

Operating cash flow for the quarter ended June 30, 2015 was $27.1 million, a 48.9% improvement compared to the Q2 2014 period driven by strong gold sales and a significant reduction in operating costs which offset the impact of a lower gold price environment.

Mine development in the second quarter was $12.8 million. Development focused largely at Fosterville and Cosmo, with an additional $4.4 million invested in plant and equipment. Capital expenditures were relatively comparable to the corresponding quarter of 2014, due to the timing of certain projects and capital development and the weaker Australian dollar.

Due to a significant decrease in operating cash costs, increasing gold production, driven by strong grades and recoveries, and a weakened Australian dollar, all-in sustaining cash costs improved to $1,037 per ounce sold from $1,316 in Q2 2014, a 21.2% decrease.

Financial Position

For the period ended June 30, 2015, the cash and gold bullion balance (at fair market value) was $38.8 million. In the first six months of 2015, working capital increased significantly to $25.1 million, compared to $12.6 million at December 31, 2014. This was a notable achievement as the Company was able to make a one-time cash payment of $16.7 million (C$20 million), and grant a royalty over Fosterville and Stawell Mines, to AuRico Gold Inc. to terminate a net free cash flow sharing arrangement over Fosterville and Stawell, without the addition of debt.

As at June 30, 2015, the unaudited pro-forma cash and gold bullion balance was $39.4 million, which included the balances for Newmarket and Crocodile Gold. The pro-forma balance is before the net proceeds from the subscription receipt financing and most transaction costs associated with the merger between Newmarket Gold and Crocodile Gold. The pro-forma unaudited working capital was approximately $24.0 million at June 30, 2015.

Foreign Exchange

The significant drop in the Australian dollar exchange rate has markedly increased the gold price in Australian dollar terms (the functional currency of the Company's current operations) while having the effect of lowering cash costs in US dollar terms. The Australian dollar closed at $0.7693 on June 30, 2015, down 5.8% from year-end. Consequently, Australian dollar denominated gold has traded above A$1,500 per ounce consistently since mid-January, trading above A$1,600 for a period of time. The average quarterly exchange rate has dropped 16.6% compared to Q2 2014, which accounted for a portion of the decrease of operating and all-in sustaining cash costs per ounce sold, complementing the reduction in local currency costs achieved through cost reduction and productivity initiatives.

Exploration Update

For the quarter ended June 30, 2015, $2.7 million was deployed on various exploration drill programs advancing several strategic near-term growth projects across all sites. These drill programs resulted in significant discoveries and resource building opportunities including the high-grade Eagle Fault discovery at Fosterville, the Western Lodes Target at Cosmo and the Aurora B East Flank discovery at Stawell.

Additionally, a phased Feasibility Study on the 100% owned Maud Creek Gold Deposit commenced on the first phase being the completion of a Preliminary Economic Assessment ("PEA") which is expected to be completed in early 2016.

Second Quarter 2015 Operational Results

Fosterville Gold Mine Q2 2015 Q2 2014 YTD 2015 YTD 2014
Ore Milled (t) 173,323 202,927 348,650 423,306
Grade (g/t Au) 5.92 3.95 5.84 4.14
Recovery (%) 89.0 85.7 89.1 84.9
Gold Oz Produced 29,648 22,198 58,783 47,984
Gold Oz Sold 29,139 21,509 60,371 47,318
Cosmo Gold Mine
Ore Milled (t) 193,084 213,815 383,390 444,630
Grade (g/t Au) 2.97 3.69 3.33 3.23
Recovery (%) 92.7 86.3 91.9 86.0
Gold Oz Produced 17,073 21,845 37,685 39,686
Gold Oz Sold 16,522 21,977 36,721 41,393
Stawell Gold Mines Q2 2015 Q2 2014 YTD 2015 YTD 2014
Ore Milled (t) 221,974 234,363 442,061 461,990
Grade (g/t Au) 1.57 1.69 1.66 1.70
Recovery (%) 83.1 78.8 81.7 79.1
Gold Oz Produced 9,277 9,981 19,207 19,937
Gold Oz Sold 9,493 10,126 19,356 19,636

2015 Production and Cash Cost Guidance

As previously announced, see Crocodile Gold's press release dated January 12, 2015, Newmarket reaffirmed full year production and cash cost guidance for fiscal 2015 as follows:

(U.S.) $ Fosterville Cosmo Stawell Consolidated
2015
Gold Production (ounces) 100,000 - 105,000 75,000 - 85,000 ~30,000 205,000 - 220,000
Operational Cash Costs per ounce* $670 - $750 $850 - $930 $945 - $1,025 $780 - $860
AISC per ounce*(1) $1,020 - $1,100

* See Non-IFRS Disclosures

(1) All-In Sustaining Cash Costs per Ounce ("AISC") Includes Corporate General and Administrative Expenses.

Second Quarter 2015 Financial Earnings Conference Call Details

Douglas Forster, President and Chief Executive Officer, Rodney Lamond, Chief Operating Officer and Robert Dufour, Chief Financial Officer, will host a conference call to discuss second quarter financial results ended June 30, 2015 on Thursday, July 30, 2015, at 10:30 a.m. (EDT).

Participants may listen to the call by dialing toll free 1-800-319-4610 or 1-416-915-3239 at approximately 10:20 a.m. (EDT) and ask to join the Newmarket Gold conference call. International or local callers should dial 1-416-915-3239 at approximately 10:20 a.m. (EDT) and ask to join the Newmarket Gold conference call.

The call will also be webcast live at http://services.choruscall.ca/links/newmarketgold150730.html and at www.newmarketgoldinc.com in the Events and Webcast section under the Investor Relations tab.

The live audio webcast will be archived and made available for replay at www.newmarketgoldinc.com.

Presentation slides which accompany the conference call will be made available in the Investors section of the Newmarket Gold website, under Presentations, prior to the conference call.

Qualified Person

Mark Edwards, MAusIMM (CP), MAIG, General Manager, Exploration, Newmarket Gold, is a "qualified person" as such term is defined in National Instrument 43-101 and has reviewed and approved the technical information and data included in this press release.

ON BEHALF OF THE BOARD

Douglas Forster, M.Sc., P.Geo., President & Chief Executive Officer

About Newmarket Gold Inc.

Newmarket Gold is a Canadian-listed gold mining and exploration company with three 100% owned operating mines across Australia. The Company is focused on creating substantial shareholder value by maintaining a strong foundation of quality gold production, over 200,000 ounces annually, generating free cash flow and maintaining a large resource base as it executes a clearly defined gold asset consolidation strategy. The Company is focused on sustainable operating performance, a disciplined approach to growth, and building gold reserves and resources while maintaining the high standards that the Newmarket Gold core values represent.

NON-IFRS MEASURES

Newmarket Gold has included in this MD&A certain non-IFRS performance measures as detailed below. In the gold mining industry, these are common performance measures but do not have any standardized meaning. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Operating Cash Costs per Ounce of Gold - Newmarket Gold calculates operating cash costs per ounce by deducting silver sales revenue as a by-product from operating expenses per the consolidated statement of operations, then dividing by the gold ounces sold during the applicable period. Operating expenses include mine site operating costs such as mining, processing and administration as well as royalties, however excludes depletion and depreciation, share-based payments and rehabilitation costs.

All-In Sustaining Costs per Ounce of Gold - Newmarket Gold has adopted an all-in sustaining cost performance measure that reflects all of the expenditures that are required to produce an ounce of gold from current operations. While there is no standardized meaning of the measure across the industry, the Company's definition conforms to the all-in sustaining cost definition as set out by the World Gold Council in its guidance dated June 27, 2013. The World Gold Council is a non-regulatory, non-profit organization established in 1987 whose members include global senior mining companies. The Company believes that this measure will be useful to external users in assessing operating performance and the ability to generate free cash flow from current operations.

The Company defines all-in sustaining costs as the sum of operating cash costs (per above), sustaining capital (capital required to maintain current operations at existing levels), capital lease repayments, corporate general and administrative expenses, mine exploration within the known resource, and rehabilitation accretion and amortization related to current operations. All-in sustaining costs excludes capital expenditures for significant improvements at existing operations deemed to be expansionary in nature, exploration and evaluation related to growth projects, rehabilitation accretion and amortization not related to current operations, financing costs, debt repayments, share-based compensation not related to operations, and taxes.

Q2 2015 Q2 2014 YTD 2015 YTD 2014
Operating expense per the condensed interim consolidated statement of operations, including royalties 37,649,451 51,821,752 79,622,377 105,046,126
By-product silver sales credit (80,728 ) (91,998 ) (169,201 ) (171,358 )
Operating cash costs ($) 37,568,723 51,729,754 79,453,176 104,874,768
Sustaining mine development (1) 12,560,599 13,610,514 23,531,627 27,616,278
Sustaining capital expenditures, including capital lease payments 4,730,234 3,323,711 7,457,219 6,281,278
General and administration costs 1,909,379 1,187,625 3,417,462 2,162,300
Rehabilitation - accretion and amortization (operating sites) 260,152 394,440 529,350 661,438
Mine exploration 143,524 297,047 292,405 493,310
All-in sustaining cash costs ($) 57,172,611 70,543,091 114,681,239 142,089,446
Gold ounces sold 55,154 53,612 116,447 108,347
Operating cash costs per ounce sold ($ / ounce) 681 965 682 968
All-in sustaining cash costs per ounce sold ($ / ounce) 1,037 1,316 985 1,311

(1) Sustaining mine development are defined as those expenditures which do not increase annual gold production at a mine operation and exclude expenditures for growth projects and mine development to commercial production. Total sustaining capital is calculated as follows:

Q2 2015 Q2 2014 YTD 2015 YTD 2014
Expenditure on mine development per the statement of cash flows 12,793,418 14,777,079 23,937,799 29,758,705
Less: Big Hill Project development costs (232,819 ) (1,166,565 ) (406,172 ) (2,142,353 )
12,560,599 13,610,514 23,531,627 27,616,352

Cautionary Note Regarding Forward-Looking Information

Certain information set forth in this news release contains "forward-looking statements", and "forward-looking information under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements, which include the Company's expectations about its business and operations, and are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "will", "expects", "anticipates", "believes", "projects", "plans", and similar expressions. These statements are not guarantees of future performance or outcomes and undue reliance should not be placed on them. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are included in this press release or incorporated by reference herein, except in accordance with applicable securities laws.

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