RNC Gold Inc.

March 10, 2005 08:28 ET

RNC Gold Releases 2004 Year End and Fourth Quarter Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: RNC GOLD INC.

TSX SYMBOL: RNC

MARCH 10, 2005 - 08:28 ET

RNC Gold Releases 2004 Year End and Fourth Quarter
Financial Results

TORONTO, ONTARIO--(CCNMatthews - March 10, 2005) - Not for release in
the United States

RNC Gold Inc. (TSX:RNC) today released its unaudited financial results
for the quarter and year ended December 31, 2004. All amounts are
expressed in United States dollars unless otherwise noted.

The audited financial statements will be released subsequent to the
close of the private placement financing announced in the press release
dated February 23, 2005.

During the fourth quarter of 2004, RNC significantly reduced its loss to
$1.9 million or $0.07 per share, as compared to a loss of $8.3 million
or $0.68 per share for the comparable period in 2003. For the year ended
December 31, 2004 RNC reported a loss of $2.1 million or $0.08 per
share, as compared to a loss of $13.6 million or $1.32 per share in
2003. The primary factor in the improvement was the Company's growth in
gold production and sales.

For the three-month period ended December 31, 2004, RNC sold 18,786
ounces of gold for revenues of $8.1 million. Production for the quarter
was 20,605 ounces of gold. Cash operating costs in the quarter were $306
per ounce of gold sold. During the full year 2004, RNC sold 78,966
ounces of gold for revenues of $32.2 million, as compared to gold sales
of 39,095 ounces in 2003 for revenues of $14.8 million. Cash operating
costs were $308 per ounce of gold sold in 2004.

A summary of RNC's quarterly results for 2004 is presented below:



Quarterly (Unaudited) results - 2004:

---------------------------------------------------------------------
2004 Q1 Q2 Q3 Q4 YTD 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold production
(ounces) 20,412 23,300 16,344 20,605 80,662
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold sales
(ounces) 19,297 23,969 16,914 18,786 78,966
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues($) 7,816,324 9,438,649 6,787,683 8,122,890 32,165,546
---------------------------------------------------------------------
---------------------------------------------------------------------
Net operating
margin
(deficit)($) 888,470 1,054,001 (225,228) 1,445,207 3,162,449
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income
(loss) before
non-controlling
interest and
discontinued
operations($)(692,914) 2,268,007 (1,664,243) (1,875,012) (1,964,162)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income
(loss)($) (768,024) 2,230,272 (1,664,243) (1,875,012) (2,077,007)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and
diluted loss
per share before
non-controlling
interest and
discontinued
operations
($ per share) (0.04) 0.08 (0.05) (0.07) (0.08)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted
loss per share
($ per share) (0.04) 0.05 (0.05) (0.07) (0.08)
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash flow from
operations
(before changes
in non- cash
working
capital) 717,789 123,749 (1,350,526) (268,615) (777,602)
---------------------------------------------------------------------
---------------------------------------------------------------------


In the fourth quarter, RNC realized a positive operating margin of
$1,445,000. The net loss of $1,875,000 was due primarily to the
following significant non-cash charges:

- The non-hedge derivative loss for the quarter amounted to $1,218,400.
This represents the opportunity cost associated with RNC's outstanding
option contracts.

- Interest expense was $680,000 for the quarter, of which $600,000
represented the recognition of additional interest related to the CORNAP
debt assumed by RNC when the company acquired its Nicaraguan assets in
2002. CORNAP is the Nicaraguan government's agency in charge of
privatization. To date, RNC has not paid any cash against this
obligation and expects to continue the Company's program of
infrastructure maintenance and improvement within Nicaragua. This work
has resulted in partial forgiveness of the CORNAP debt; RNC believes
that it will receive further reductions in the future.

- Stock based compensation expense for the quarter amounted to $382,000.

Also during the fourth quarter of 2004, RNC capitalized $500,000 related
to its 20% acquisition of Hemco. RNC was recently made aware of a legal
judgment against Hemco that had not previously been disclosed to RNC. A
final negotiated settlement of $500,000 was reached and has received
court approval. Management believes that it can recover the settlement
from a third party.

Selected summary financial results for the years ended December 31 are
presented below:



Consolidated (Unaudited) Financial Results Summary

2004 2003
Gold sales (ounces) 78,966 39,095
Gold sales $32,165,546 $14,815,367

Average net realized gold price per ounce(i) $365 $356

Cash operating cost per ounce sold(ii) $308 $377

Net operating margin (deficit) $3,162,449 ($3,557,377)

Loss before non-controlling interest
and discontinued operations $1,964,162 $14,194,262
Loss $2,077,007 $13,633,652
Loss per share - basic and diluted $0.08 $1.32

Weighted average common shares outstanding 26,714,111 10,337,606
Common shares outstanding - end of year 31,291,451 17,106,397
Diluted shares outstanding - end of year 49,219,096 27,984,020

(i) Net of non-hedge derivative losses.
(ii) Calculated in accordance with the Gold Institute Standard to
include all direct mining costs, refining and transportation
costs and by-product credits.


Results of mining operations are shown below. Desminic owns the La
Libertad mine, and Hemco owns the Bonanza mine.

Segmented (Unaudited) Financial Results:
---------------------------------------------------------------------
2004
---------------------------------------------------------------------
Desminic Hemco Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold sales (ounces) 51,428 27,538 78,966
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold production (ounces) 52,337 28,325 80,662
---------------------------------------------------------------------
---------------------------------------------------------------------
Mine operating costs(a) 15,505,054 8,783,598 24,288,652
---------------------------------------------------------------------
Cash operating costs(b) 15,505,054 8,783,598 24,288,652
---------------------------------------------------------------------
Per ounce sold $301 $319 $308
---------------------------------------------------------------------
---------------------------------------------------------------------
Royalties & production taxes 334,351 115,830 450,181
---------------------------------------------------------------------
Total cash costs ($)(b) 15,839,405 8,899,428 24,738,833
---------------------------------------------------------------------
Per ounce sold $308 $323 $313
---------------------------------------------------------------------
---------------------------------------------------------------------
Amortization & depletion ($) 3,439,792 671,110 4,110,902
---------------------------------------------------------------------
Accretion & severance costs ($) 37,560 115,830 450,181
---------------------------------------------------------------------
Total production costs ($)(b) 19,316,757 9,686,368 29,003,125
---------------------------------------------------------------------
Per ounce sold $376 $352 $367
---------------------------------------------------------------------


Segmented (Unaudited) Financial Results (continued):
---------------------------------------------------------------------
2003
---------------------------------------------------------------------
Desminic Hemco Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold sales (ounces) 19,556 19,539 39,095
---------------------------------------------------------------------
---------------------------------------------------------------------
Gold production (ounces) 19,806 19,539 39,345
---------------------------------------------------------------------
---------------------------------------------------------------------
Mine operating costs(a) 8,350,915 6,370,206 14,721,121
---------------------------------------------------------------------
Cash operating costs(b) 8,350,915 6,370,206 14,721,121
---------------------------------------------------------------------
Per ounce sold $427 $326 $377
---------------------------------------------------------------------
---------------------------------------------------------------------
Royalties & production taxes 150,905 - 150,905
---------------------------------------------------------------------
Total cash costs ($)(b) 8,501,820 6,370,206 14,872,026
---------------------------------------------------------------------
Per ounce sold $435 $326 $380
---------------------------------------------------------------------
---------------------------------------------------------------------
Amortization & depletion ($) 3,282,869 214,317 3,497,186
---------------------------------------------------------------------
Accretion & severance costs ($) 3,532 - 3,532
---------------------------------------------------------------------
Total production costs ($)(b) 11,788,221 6,584,523 18,372,744
---------------------------------------------------------------------
Per ounce sold $603 $337 $470
---------------------------------------------------------------------
(a) Mine operating costs are reduced by (i) silver by-product credits
and (ii) change in finished goods inventory. There is no
significant difference in the total cash cost per ounce of
production and total cash cost per ounce sold (as presented above)
(b) Cash operating costs, total cash costs and total production costs
should not be considered as alternatives to operating profit or net
profit attributable to shareholders, or as an alternative to other
Canadian generally accepted accounting principle measures and may
not be comparable to other similarly titled measures of other
companies. However, RNC believes that these measures are useful
indicators to investors and management of the performance of the
company.


Outlook - 2005

For 2005, RNC has budgeted production of 100,000 ounces of gold at a
cash operating cost of approximately $285 per ounce of gold sold.

For the first quarter ended March 31, 2005, RNC expects consolidated
gold sales of approximately 16,000 ounces. Higher than expected dilution
at Hemco and lower than anticipated equipment availability caused by a
lack of working capital at La Libertad have resulted in a first quarter
production shortfall. The Company anticipates these issues to be
substantially resolved and expects to return to budgeted production in
the second quarter of 2005.

The unaudited financial statements of RNC for the years ended December
31, 2004 and 2003 are below.



RNC Gold Inc.
Unaudited Consolidated Balance Sheets
As at December 31

2004 2003
Assets
Current assets
Cash and cash equivalents 87,592 504,279
Accounts receivable 1,933,270 1,650,583
Inventory 4,015,535 2,817,448
-------------------------

6,036,397 4,972,310
-------------------------
Property, plant and equipment 19,949,228 20,901,111
Mineral properties 7,782,226 3,459,013
-------------------------

33,767,851 29,332,434
-------------------------
-------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 5,473,559 4,967,485
Interest payable 2,300,000 1,707,032
Purchase price payable - 2,750,000
Current portion of unrealized loss on
option contracts 2,129,771 6,387,940
Current portion of long-term debt 955,252 3,787,284
-------------------------

10,858,582 19,599,741
-------------------------
Long-term liabilities
Long-term debt 2,782,013 3,803,458
Due to related parties 125,000 4,711,050
Asset retirement obligations 1,099,824 975,656
Unrealized loss on option contracts - 840,778
-------------------------

4,006,837 10,330,942
-------------------------
Non-controlling interest - 122,805
Shareholders' equity (deficiency)
Capital stock
Common shares 19,872,075 5,908,262
Warrants 6,991,914 2,880,475
Agents options 477,000 -
Contributed surplus 4,061,470 913,229
Deficit (12,500,027) (10,423,020)
-------------------------
18,902,432 (721,054)
-------------------------
33,767,851 29,332,434
-------------------------
-------------------------


RNC Gold Inc.
Unaudited Consolidated Statements of Operations and Retained Earnings
(Deficit)

Year ended Year ended
December 31, December 31,
2004 2003

Gold sales 32,165,546 14,815,367
------------ ------------

Mine operating costs (24,288,652) (14,721,121)
Royalties and production taxes (450,181) (150,905))
Amortization and depletion (4,110,902) (3,497,186)
Accretion expense and severance costs (153,362) (3,532)
------------ ------------

Net operating margin (deficit) 3,162,449 (3,557,377)

Corporate administration (1,807,061) (1,985,989)
Exploration (757,211) -
Interest expense (1,194,319) (1,877,007)
Foreign exchange losses (182,788) (321,197)
Other income (expense) (313,180) 250,044
Stock based compensation expense) (944,539) (675,530)
Nicaraguan minimum taxes (868,094) (444,461)
Non-hedge derivative gain (loss) 940,582 (5,582,745)
------------ ------------
Loss before non-controlling interest
and discontinued operations (1,964,162) (14,194,262)

Non-controlling interest (112,845) (122,805)
------------ ------------
Loss before discontinued operations (2,077,007) (14,317,067)
Income from discontinued operations - 683,415
------------ ------------
Loss for the year (2,077,007) (13,633,652)
Retained earnings (deficit)
- Beginning of year (10,423,020) 3,210,632
------------ ------------

Deficit - End of year (12,500,027) (10,423,020)
------------ ------------

Basic and diluted loss per share
before discontinued operations ($0.08) ($1.38)
Basic and diluted loss per share
($0.08) ($1.32)
Weighted average number of common
shares outstanding 26,714,111 10,337,606


RNC Gold Inc.
Unaudited Consolidated Statements of Cash Flows

Year ended Year ended
December 31, December 31,
2004 2004
$ $

Cash provided by (used in)

Operating activities
Loss before non-controlling interest
and discontinued operations (1,964,162) (14,194,262)
Non-cash items
Amortization of property, plant and equipment 4,110,902 3,497,186
Non-cash portion of non-hedge derivative
gain (4,247,639) 5,582,745
Accretion expense and severance costs 153,362 3,532
Stock based compensation expense 944,539 979,239
Other non-cash costs (income) 225,396 -
-------------------------
(777,602) (4,131,560)

Net change in non-cash working capital
balances related to operations (3,890,011) (878,934)
-------------------------
(4,667,613) (5,010,494)

-------------------------

Investing activities
Purchase of property, plant and equipment (3,159,019) (1,786,864)
Proceeds from disposition of
mineral properties 75,000 -
Investments in mineral properties (1,708,159) (238,856)
-------------------------

(4,792,178) (2,025,720)
-------------------------

Financing activities
Decrease in due to related parties (2,380,696) 1,877.537
Net proceeds of private placement 13,747,218 7,443,765
Proceeds of exercise of warrants 1,223,702 -
Decrease in debt (3,547,119) (1,896,404)
-------------------------

9,043,105 7,424,898
-------------------------

Increase (decrease) in cash and cash
equivalents during the year (416,686) 388,684

Cash and cash equivalents - Beginning of year 504,279 115,595
-------------------------

Cash and cash equivalents - End of year 87,593 504,279
-------------------------
-------------------------


About RNC Gold

RNC Gold is a gold mining company focused on projects in the Caribbean
basin. The Company's main assets include the La Libertad and Bonanza
Mines in Nicaragua, the Cerro Quema project in Panama and the Picachos
exploration property in Mexico, as well as the option to acquire 25% of
the San Andres mine in Honduras. RNC also recently announced the
discovery of a large area of interest within the Bonanza concession with
bulk mineable potential. The Company has 31,291,451 common shares
outstanding and on a fully diluted basis there are 49,219,096 securities
outstanding.

Certain statements included herein, include those that express
management's expectations or estimates of future performance, constitute
"forward looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995. Forward looking
statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management, are
inherently subject to significant business, economic, regulatory,
competitive and geological uncertainties and contingencies. Such
forward-looking statements involve known and unknown risks,
uncertainties and other risk factors that may cause the actual financial
results, performance, or achievements of RNC Gold to be materially
different from estimated future results, performance, or achievements
expressed or implied by those forward looking statements. These are
discussed in greater detail in RNC Gold's Annual Information Form and
other reports filed with Canadian provincial securities commissions at
www.sedar.com. RNC Gold expressly disclaims any intention or obligation
to update or revise any forward- looking statement whether as a result
of new information, events or otherwise.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    RNC Gold Inc.
    Randy Martin
    President and CEO
    (416) 365-9777
    or
    RNC Gold Inc.
    T.W. Lough
    Vice President Finance
    (416) 365-9777
    or
    The Equicom Group
    Martti Kangas
    (416) 815-0700 ext.243