Osisko Mining Corporation

TSX : OSK
FRANKFURT : EWX


Osisko Mining Corporation

May 14, 2014 17:51 ET

Osisko Reports First Quarter 2014 Results

Record Gold Production of 140,029 ounces;

Cash Costs per Ounce of US$577;

Record Cash Flow from Operations of $91.9 million

MONTREAL, QUEBEC--(Marketwired - May 14, 2014) - Osisko Mining Corporation (the "Company" or "Osisko") (TSX:OSK)(FRANKFURT:EWX) today reported net earnings of $24.2 million ($0.06 per share) for the first quarter of 2014 compared to $17.4 million ($0.04 per share) for the corresponding period of 2013. The Company generated cash flows from operating activities of $91.9 million during the first quarter of 2014 compared to $62.5 million in the first quarter of 2013.

Q1 Highlights

  • Record gold production of 140,029 ounces at operating cash costs(1) of US$577 per ounce (C$636 per ounce);
  • Earnings from Canadian Malartic of $77.6 million;
  • Operating cash flows of $91.9 million;
  • Net earnings of $24.2 million or $0.06 per share;
  • Investment of $32.9 million in mining assets and projects;
  • Increased cash and cash equivalents by $47.6 million;
  • Cash resources now stand at $258.1 million(2);
  • Repayment of $10.3 million in debt;
  • Net debt position(3) of $64.0 million at March 31, 2014;
  • Average grade milled of 1.13 g/t;
  • Updated life of mine plan for Canadian Malartic: average annual gold production of 597,000 ounces at US$525 per ounce;
  • Discovery of "Canadian Kirkland" gold zone on Kirkland property;
  • Discovery of "Odyssey North" and "Odyssey South" gold zones at Canadian Malartic;
  • Agreement with Yamana Gold Inc. and Agnico Eagle Mines Limited for the sale of 100% of the issued and outstanding common shares of Osisko for an implied price of $8.15 per common share.

April 2014 Update

  • Monthly gold production in April 2014 of 37,008 ounces despite shutdown for planned maintenance, exceeding budget by 19%.
(1) Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management and Discussion Analysis.
(2) Includes cash and cash equivalents and restricted cash.
(3) Gross long-term debt (long-term debt excluding unamortized debt issuance costs and accretion) less cash and cash equivalents and restricted cash.

Sean Roosen, President and Chief Executive Officer commenting on the first quarter results: "We are extremely proud of our team for delivering record quarterly gold production and financial results, particularly during a difficult time for all of our employees. Canadian Malartic has continued to progress into one of the top performing gold mines in the world. We generated $91.9 million in operating cash flow and increased our cash balances by $47.6 million." The mine operating statement for the production period is as follows:

2014 2013
Q1 Q4 Q3 Q2 Q1
Gold sales (ounces) 146,132 136,826 123,151 109,503 95,511
Silver sales (ounces) 141,817 106,907 117,750 95,205 73,683
($000 ) ($000 ) ($000 ) ($000 ) ($000 )
Revenues 212,131 185,774 171,298 159,195 159,381
Production costs (96,586 ) (94,876 ) (92,265 ) (90,619 ) (81,422 )
Royalties (2,729 ) (2,422 ) (2,144 ) (2,274 ) (1,992 )
Depreciation (35,205 ) (34,791 ) (37,902 ) (23,683 ) (20,982 )
Total (134,520 ) (132,089 ) (132,311 ) (116,576 ) (104,396 )
Earnings from mine operations 77,611 53,685 38,987 42,619 54,985

Cash flows and earnings generated from the Canadian Malartic mine were higher in the first quarter of 2014 as a result of record production and sales despite lower realized average prices. In the first quarter of 2014, 140,029 ounces of gold were produced and 146,132 ounces were sold compared respectively to 106,047 ounces and 95,511 ounces in the first quarter of 2013.

Key operating results

(in thousands of Canadian dollars, unless otherwise noted)

Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Gold production (oz) 140,029 137,321 120,208 111,701 106,047
Gold sales (oz) 146,132 136,826 123,151 109,503 95,511
Average sale price (US$/oz) 1,294 1,275 1,321 1,396 1,627
Average market price (US$/oz) 1,293 1,276 1,326 1,415 1,632
Cash costs per ounce(4) (C$/oz) 636 713 754 781 804
Cash costs per ounce(4),(5) (US$/oz) 577 679 726 765 798
Cash margin per ounce(4),(5) (US$/oz) 717 596 595 631 829
Revenues 212,131 185,774 171,298 159,195 159,381
Earnings from mine operations 77,611 53,685 38,987 42,619 54,985
Net earnings (loss) 24,241 10,488 9,755 (492,762 ) 17,416
Net earnings (loss) per share 0.06 0.02 0.02 (1.13 ) 0.04
Operating cash flows 91,867 72,476 70,665 55,947 62,478
(4) Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management and Discussion Analysis.
(5) Using the average exchange rate.

The ramp up of the mill was completed in the second half of 2013, and optimization work to continue to seek throughput efficiencies was ongoing during the first quarter. The mine generated earnings of $77.6 million during the quarter, compared to $55.0 million in the corresponding period in 2013. The increase in profitability is due to a 53% increase in gold ounces sold over the comparative period as well as reduced production costs on a per ounce basis.

During the quarter, approximately 319 equipment hours (0.3% of available hours) were lost due to noise and weather constraints, compared to 1,510 equipment hours (1.4% of available hours) in the first quarter of 2013 and 7,670 (6.3% of available hours) equipment hours in the fourth quarter of 2013.

The production statistics are as follows:

Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013
Tonnes Mined (000's)
- Ore 4,456 4,906 4,423 3,604 4,091
- Waste(6) 11,189 9,907 11,335 10,010 10,158
Total Mined 15,645 14,813 15,758 13,614 14,249
Overburden 763 160 305 871 1,783
Tonnes Milled (000's) 4,363 4,648 4,683 4,444 4,234
Grade (g Au/t) 1.13 1.04 0.90 0.87 0.88
Recovery (%) 88.2 88.6 89.2 89.7 88.0
Gold production (oz) 140,029 137,321 120,208 111,701 106,047

Altough mining activities during the quarter were negatively affected by difficult weather conditions (extreme cold) resulting in equipment failure, tonnes moved averaged at a record of 190,000 compared to 176,000 in Q4 2013 and Q1 2013. Also, mining activities continue to be affected by challenging conditions due to operating close to an urban area.

Production in the first quarter of 2014 averaged 50,444 tonnes per operating day compared to 54,043 tonnes per operating day in the previous quarter and 48,667 tonnes per operating day in the first quarter of 2013. the Canadian Malartic team continues to work on improving the mill throughput and enhancing operating efficiencies.

(6) Including topographic drilling of 1.2 million tonnes in 2014 and 4.9 million tonnes for the year 2013.

Mill operating statistics continue to show progress in all categories.

Total Available Hours Operating Hours (%) Tonnage Processed (t) Tonnes per Operating Hour Tonnes per Operating Day
Q1 2014 2,160 2,042 95 4,363,365 2,137 50,444
Q4 2013 2,208 2,054 93 4,647,677 2,263 54,043
Q3 2013 2,208 2,061 93 4,682,530 2,272 54,133
Q2 2013 2,184 2,014 92 4,444,042 2,207 52,592
Q1 2013 2,160 2,082 96 4,234,001 2,033 48,667
Q4 2012 2,208 2,052 93 4,088,021 1,992 47,535
Q3 2012 2,208 2,071 94 3,756,768 1,814 43,181
Q2 2012 2,184 1,960 90 3,236,281 1,651 38,074
Q1 2012 2,184 1,890 87 2,965,456 1,569 35,728

Operating Costs

Cash costs per ounce(7) for the first quarter of 2014 stood at US$577 (C$636), compared to US$798 (C$804) in the corresponding period of 2013. The improvement is mainly the result of increased throughput and gold production, improved efficiencies and reduction in contractors' costs. As the operations at Canadian Malartic are further optimized, the operating costs should continue their downward trend.

The Company continues to pursue operating efficiencies, and has intensified its cost optimization program as the operations are now at near name plate capacity.

Investments

The Company invested $32.9 million in property, plant and equipment during the first quarter. These investments were mainly focused on the Canadian Malartic mine (stripping costs, sustaining capital and expansion) and the Kirkland Lake and Upper Beaver exploration projects.

In February the Company announced a capital budget for 2014 of $148 million. The Company remains on track to meeting its capital expenditure guidance for the year.

Liquidity and Capital Resources

As at March 31, 2014, the Company's cash and cash equivalents and restricted cash amounted to $258.1 million compared to $210.5 million as at December 31, 2013, as summarized below:

(In thousands of dollars) March 31, 2014 December 31, 2013
Cash and cash equivalents 209,028 161,405
Restricted cash
Current 560 560
Non-current 48,490 48,490
258,078 210,455

During the first quarter of 2014, Osisko reduced its debt by $10.3 million.

(7) Refer to the non-IFRS measures provided under the Non-IFRS Financial Performance Measures section of the Management and Discussion Analysis.

2014 Outlook

Mill throughput is expected to stabilize at approximately 55,000 tonnes per day in 2014 with the completion of optimization programs currently in progress. Together with increased contribution from higher grade material in the now accessible northern pit wall, it is anticipated that gold production for the current year will increase to between 525,000 to 575,000 ounces (an increase of 11% to 21% over record 2013 production of 475,277 ounces gold).

Cash costs per ounce are estimated between $580 and $635, a 24% to 16% reduction in costs from 2013. Cash costs per ounce in US dollars are estimated at US$527 to US$577 using an exchange rate of 1.10.

Capital expenditures for 2014 are estimated at $148.0 million:

(In millions Canadian of dollars)
Canadian Malartic 125.8
Exploration and evaluation - capitalized 22.2
Capital Expenditures 148.0

Acquisition Agreement with Yamana and Agnico Eagle

On April 16th, 2014, Osisko announced that it had entered into an agreement pursuant to which Yamana and Agnico Eagle will jointly acquire 100% of Osisko's issued and outstanding common shares for total consideration of C$3.9 billion or C$8.15 per share. The total offer consists of approximately C$1.0 billion in cash, C$2.3 billion in Yamana and Agnico Eagle shares, and creation of a new company ("New Osisko") with an implied value of approximately C$575 million.

Terms of the Agreement

Under the Agreement, Yamana and Agnico Eagle will form a joint acquisition entity (with each company owning 50%) which will acquire, by way of a plan of arrangement (the "Arrangement"), all of the outstanding common shares of Osisko. Upon closing of the transaction, Yamana and Agnico Eagle will each own Osisko, and will form joint committees to operate the Canadian Malartic Mine in Quebec. The partners will also jointly explore and potentially develop the Kirkland Lake assets, and continue the exploration at Hammond Reef, Pandora/Wood, and Pandora properties, all located in Ontario.

Upon implementation of the Agreement, each outstanding common share of Osisko will be exchanged for:

  1. C$2.09 in cash;

  2. 0.26471 of a Yamana common share (a value of C$2.43 based on the closing price of C$9.18 for Yamana shares on the Toronto Stock Exchange as of April 15, 2014);

  3. 0.07264 of an Agnico Eagle common share (a value of C$2.43 based on the closing price of C$33.45 for Agnico Eagle shares on the Toronto Stock Exchange as of April 15, 2014);

  4. one new common share of New Osisko with a value of C$1.20 per share.

Pursuant to Arrangement, certain assets of Osisko will be transferred to New Osisko, the shares of which will be distributed to Osisko shareholders as part of the consideration. The following will be transferred to New Osisko:

  1. a 5% net smelter return royalty ("NSR") on the Canadian Malartic mine;

  2. a 2% NSR on all existing exploration properties including Kirkland Lake, Hammond Reef, Pandora/Wood and Pandora assets;

  3. C$155 million cash;

  4. all assets and liabilities of Osisko in the Guerrero camp;

  5. other investments.

The total value of the transaction is estimated at $3.9 billion, or C$8.15 per common share of Osisko on a fully diluted basis. Following the completion of the transaction, Osisko shareholders will own approximately 14% of Yamana and approximately 17% of Agnico Eagle.

Annual & Special Shareholders Meeting

Osisko's Annual and Special meeting will be held on May 30, 2014 at 1:30pm at the Fairmont Queen Elizabeth Hotel in Montreal. Shareholders are invited to approve the Plan of Arrangement for the Yamana and Agnico Eagle transaction.

Outstanding Share Data

As of May 14, 2014, 440,613,953 common shares were issued and outstanding. A total of 19,518,387 common share options were outstanding to purchase common shares under the Company's share option plan and 12,500,000 common share purchase warrants were outstanding.

Q1 Conference Call Information

Osisko will host a conference call on Thursday, May 15, 2014 at 9:00 am EDT, where senior management will discuss the financial results and provide an update of the Company's activities. Those interested in participating in the conference call should dial in approximately five to ten minutes before the start of the conference to allow ample time to access at 1-(647) 788-4922 (Toronto local and international), or 1-(877) 223-4471 (North American toll free). An operator will direct participants to the call.

The conference call replay will be available from 12:00 pm EDT on May 15, 2014 until 23:59 EDT on May 30, 2014 with the following dial in number: 1-(800) 585-8367, access code 27969500.

Non-IFRS Financial Performance Measures

The Company has included certain non-IFRS measures including "cash costs per ounce" and "cash margin per once" to supplement its consolidated financial statements, which are presented in accordance with IFRS.

The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data 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.

A reconciliation of non-IFRS financial performance measures is available in the Management's Discussion and Analysis for the three months ended March 31, 2014, under the section Non-IFRS Financial Performance Measures.

About Osisko Mining Corporation

Osisko Mining Corporation operates the Canadian Malartic Gold Mine in Malartic, Québec and is pursuing exploration on a number of properties in Ontario and Mexico.

Mr. Luc Lessard, Eng., Senior Vice-President and Chief Operating Officer of Osisko, is the Qualified Person who has reviewed this news release and is responsible for the technical information reported herein, including verification of the data disclosed.

Forward-Looking Statements

Certain statements contained in this press release may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Osisko expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, the improvement and stabilization of mill throughput, the completion of optimization programs and the enhancing of operating efficiencies, the decrease of costs and increase of grade and gold production, the continuation and success of exploration activities or the development of projects, the satisfaction of all technical, economical, regulatory and financial conditions in order to complete the Arrangement between Osisko, Agnico Eagle and Yamana, and the realization of all expected benefits of this Arrangement. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements.

Factors that could cause the actual results to differ materially from those in forward-looking statements include gold prices, access to skilled consultants, mining development and construction personnel, results of exploration and development activities, Osisko's limited experience with production and mining operations, uninsured risks, regulatory framework and changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations market prices, continued availability of capital and financing and general economic, market or business conditions. These factors are discussed in greater detail in Osisko's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.

Osisko Mining Corporation
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
March 31, December 31,
2014 2013
($) ($)
Assets
Current assets
Cash and cash equivalents209,028 161,405
Restricted cash560 560
Accounts receivable26,368 24,552
Inventories72,203 79,247
Prepaid expenses and other assets25,419 24,260
333,578 290,024
Non-current assets
Restricted cash48,490 48,490
Investments in associates3,251 3,557
Other investments9,834 8,998
Property, plant and equipment1,871,232 1,870,932
2,266,385 2,222,001
Liabilities
Current liabilities
Accounts payable and accrued liabilities72,515 78,967
Current portion of long-term debt75,554 71,794
Provisions and other liabilities7,100 6,913
155,169 157,674
Non-current liabilities
Long-term debt235,492 245,157
Provisions and other liabilities21,668 18,499
Deferred income and mining taxes92,812 69,603
505,141 490,933
Equity attributable to Osisko Mining Corporation shareholders
Share capital2,064,857 2,060,810
Warrants20,575 20,575
Contributed surplus76,865 75,626
Equity component of convertible debentures8,005 8,005
Accumulated other comprehensive income665 16
Deficit(409,723)(433,964)
1,761,244 1,731,068
2,266,385 2,222,001
Osisko Mining Corporation
Consolidated Statements of Income
For the three months ended March 31, 2014 and 2013
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per share amounts)
2014 2013
($) ($)
Revenues212,131 159,381
Mine operating costs
Production costs(96,586)(81,422)
Royalties(2,729)(1,992)
Depreciation(35,205)(20,982)
Earnings from mine operations77,611 54,985
General and administrative expenses(18,668)(7,387)
Exploration and evaluation expenses(2,568)(3,079)
Write-off of property, plant and equipment(2,220)(2,024)
Earnings from operations54,155 42,495
Interest income692 458
Finance costs(6,249)(7,891)
Foreign exchange loss(2,949)(2,281)
Share of loss of associates(306)(121)
Other gains (losses)2,107 (1,979)
Earnings before income and mining taxes47,450 30,681
Income and mining tax expense(23,209)(13,265)
Net earnings24,241 17,416
Net earnings per share
Basic0.06 0.04
Diluted0.05 0.04
Weighted average number of common shares outstanding
(in thousands)
Basic439,546 436,502
Diluted441,906 436,943
Osisko Mining Corporation
Consolidated Statements of Cash Flows
For the three months ended March 31, 2014 and 2013
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
2014 2013
($) ($)
Operating activities
Net earnings24,241 17,416
Adjustments for :
Interest Income(692)(458)
Share-based compensation1,654 1,796
Depreciation35,455 21,199
Finance costs6,249 7,891
Write-off of property, plant and equipment2,220 2,024
Unrealized foreign exchange loss3,180 1,962
Deferred gain - premium on flow-through shares(2,061)-
Provisions and other liabilities, net of settlements4,367 (114)
Income and mining tax expense23,209 13,265
Other non-cash items142 2,091
97,964 67,072
Change in non-cash working capital items(6,097)(4,594)
Net cash flows provided by operating activities91,867 62,478
Investing activities
Net decrease in short-term investments- 19,357
Net decrease in restricted cash- 4,005
Proceeds on disposal of investments50 -
Property, plant and equipment, net of government credits(32,894)(65,698)
Proceeds on disposal of property, plant and equipment97 15
Interest received672 388
Net cash flows used in investing activities(32,075)(41,933)
Financing activities
Long-term debt repayments(3,083)(2,471)
Finance lease payments(7,215)(6,142)
Issuance of common shares, net of expenses2,931 608
Interest paid(4,802)(5,411)
Net cash flows used in financing activities(12,169)(13,416)
Increase in cash and cash equivalents47,623 7,129
Cash and cash equivalents - beginning of period161,405 93,229
Cash and cash equivalents - end of period209,028 100,358

Contact Information

  • John Burzynski
    Vice-President Corporate Development
    (416) 363-8653
    www.osisko.com

    Sylvie Prud'homme
    Director of Investor Relations
    (514) 735-7131
    Toll Free: 1-888-674-7563