Rusoro Mining Limited
TSX VENTURE : RML

Rusoro Mining Limited

August 30, 2010 14:22 ET

Rusoro Reports Q2 2010 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 30, 2010) - Rusoro Mining Ltd. (TSX VENTURE:RML) ("Rusoro" or "the Company") Q2 2010 consolidated financial statements and management's discussion and analysis ("MD&A") have been filed on SEDAR (www.sedar.com).

All amounts set out in this news release are unaudited and in United States Dollars unless otherwise stated.

The Company's highlights for the second quarter of 2010 were:

  • Repayment of $30 million of the convertible debt principal and refinancing the remaining $30 million principal until June of 2011.
  • Expected fiscal 2010 gold production guidance of 110,000 ounces reduced from 142,000 ounces previously reported mainly as a result of the decrease in capital asset expenditures at the Choco 10 gold mine ("the Choco Mine") due to conservation of cash for the convertible debt principal payment made in Q2 2010. Expected fiscal 2010 cash cost per ounce sold of $831 was increased from $613 previously reported as a result of a change in the Venezuelan Bolivar Fuerte ("the BSF") /US Dollar exchange rate used for translation made in Q2 2010 and the reduction of expected ounces produced. Due to this change in exchange rate the Company expects revenue per ounce for the second half of 2010 to approximate the average spot price of gold whereas previously revenue has been recorded at a significant discount.
  • Cash cost per ounce sold increased significantly to $649 (Q2 2009: $322) as a result of mining an ore mix with a greater portion of hard rock (fresh unoxidized ore) at the Company's Choco Mine mill compared to Q2 2009 and due to a lower grade. Hard rock requires more treatment, which complemented with lower than planned capital asset expenditures recorded at the Choco Mine mill during the first half of 2010, resulted in decreased gold production and a corresponding increase in cash cost per ounce sold. Gold production of 25,579 ounces of finished gold (doré form) (Q2 2009: 48,523 ounces) and gold sold of 66,551 ounces (Q2 2009: 18,484 ounces).
  • The company recorded a foreign exchange loss of $147 million. $146 million of this foreign exchange loss is unrealized and mainly relates to the Company's future income tax liability. The future income tax liability represents the non-deductibility of certain assets which the Company will not be able to deduct in the future in calculating statutory income taxes payable.
  • Completion of a pre-feasibility study ("the Pre-Feasibility Study") and National Instrument 43-101 technical report ("the Technical Report") on the San Rafel El Placer ("SREP") project including a mine plan for the existing indicated resources resulting in a probable reserve of 1,157,000 tonnes grading 10.1 g/t gold (375,700 ounces). At a gold price of $950/oz, the Pre-Feasibility Study estimates the net present value (8% discount) to be $28.2 million with an after-tax internal rate of return of 30%. The results were reported in a news release dated May 11, 2010 and the news release, Technical Report and Pre-Feasibility Study are available on www.sedar.com.
  • As at June 30, 2010 gold inventories comprise 20,330 ounces of finished gold, 4,427 ounces of gold in process and 22,991 ounces of gold in stockpile. From July 1, 2010 to August 27, 2010 the Company has sold 16,147 ounces of finished gold which was all sold to the Central Bank of Venezuela ("the CBV"). Unsold finished gold as at August 27, 2010 totalled 21,045 ounces.

The Company's highlights subsequent to Q2 2010 were:

  • CBV Resolution No. 10-07-01 and an updated Exchange Agreement No. 12 became effective August 12, 2010. This resolution increases the portion of gold production the Company is allowed to export contingent on obtaining export permits. The updated Exchange Agreement No. 12 provides greater flexibility to use certain proceeds from gold exports to make certain direct payment in foreign currency. Further details on this resolution and the updated exchange agreement are provided in the "Venezuelan Currency Exchange and Gold Sales" section of the MD&A.
  • In July 2010 an updated resource estimate ("the Updated Estimate") was released for the Choco Mine resulting in a 78% increase in measured and indicated ounces to 8.3 million ounces of gold (139.9 Mt @ 1.85 g/t Au) with an additional 2.8 million ounces of gold inferred (59.2 Mt @ 1.48 g/t Au). The Updated Estimate was prepared by D. Makepeace, P.Eng. senior geologist for the independent consulting firm Micon International Limited. The results were reported in a news release dated July 6, 2010 and the technical information on the Updated Estimate is detailed in a NI-43-101 compliant technical report titled "Technical Report on the Mineral Resources of the Choco 10 Deposits, Bolivar State, Venezuela" dated August 18, 2010 both of which are available on www.sedar.com.

Results of Operations

The Company recorded a net loss of $151.4 million during Q2 2010 compared to a net loss of $6.4 million in Q2 2009. The Company's revenue increased from $11.2 million in Q2 2009 to $51.1 million in Q2 2010 due to an increase in ounces sold from 18,484 ounces in Q2 2009 to 66,551 ounces in Q2 2010 and an increase in average realized gold price from $681/ounce (adjusted for the change in foreign currency conversion rate) in Q2 2009 to $768/ounce in Q2 2010.

The Company's mining operating expenses increased from $5.6 million in Q2 2009 to $43.4 million in Q2 2010 and mining amortization increased from $1.5 million in Q2 2009 to $9.4 million in Q2 2010 due to an increase in ounces sold and an increase in mining operating expenses and mining amortization per ounce. Foreign exchange loss was $146.8 million ($145.8 million unrealized) in Q2 2010 compared to a foreign exchange gain of $0.6 million in Q2 2009. This was the result of a change in the translation method of foreign subsidiaries into US dollars and in the exchange rate used for translation as described in the MD&A. 

Operating performance

The following table summarizes key operating statistics for 100% of the Choco Mine and 50% of the Isidora Mine:

  3 Months Ended June 30, 3 Months Ended June 30,
  2010 2009
  Choco Isidora Total Choco Isidora Total
             
Ore tonnes mined ('000 t) 420 6 426 623 8 631
Ore tonnes milled ('000 t) 492 10 502 548 11 559
Average grade (g/t) 1.61 16.31 1.90 2.38 21.56 2.76
Average recovery rate (%) 93% 90% 92% 93% 90% 93%
Gold produced (ounces) 21,664 3,915 25,579 40,739 7,784 48,523
Total gold sold (ounces) 60,162 6,389 66,551 15,348 3,136 18,484
Total mining operating expenses $(000) $38,517 $4,854 $43,371 $4,478 $1,089 $5,567
  - asset retirement obligations accretion $(000) ($119) ($67) ($186) ($120) ($70) ($190)
  - adjustments to foreign currency conversion rate $(000)(1) - - - $451 $127 $578
Total cash costs $(000)(2) $38,398 $4,787 $43,185 $4,809 $1,146 $5,955
Total cash costs per ounce sold $(3) $638 $749 $649 $313 $365 $322
Average spot gold price $ n/a n/a $1,196 n/a n/a $922
Average realized gold price ($)(4) $750 $940 $768 $605 $607 $605(1)
Official exchange rate (BsF to US Dollar)(5) n/a n/a 2.60/4.30 n/a n/a 2.15
  1. Revenue in Q2 2009 was negatively impacted by $1.4 million and mining operating expenses was positively impacted by $0.6 million due to a change in the computation of the foreign currency conversion rate applied to revenue and mining operating expenses. Excluding the effect in revenue of the change in method mentioned above, the average realized gold price for the three months ended June 30, 2009 is $681.
  2. Total cash costs used in the calculation of cash costs per ounce is calculated as mining operating expenses from the consolidated statement of operations excluding accretion expense related to the asset retirement obligations and the adjustment to foreign currency conversion rate.
  3. Cash costs per ounce sold is a non Canadian generally accepted accounting principles ("GAAP") measure. Total cash costs per ounce sold as shown above is calculated by dividing the total cash costs by the gold ounces sold during the period. Cash costs per ounce sold includes all expenditures related to the mine such as mining, processing, administration, royalties and production taxes but excludes reclamation, capital and exploration expenditures, and the adjustment to foreign currency conversion rate.
  4. Average realized gold price for gold sold to the CBV and to domestic private buyers is impacted by factors described in the Choco Mine and Isidora Mine results of the "Consolidated Results of Operations" section of the MD&A.
  5. See "Venezuelan Currency Exchange and Gold Sales" section of the MD&A.

Choco Mine

Gold production at the Choco Mine was 21,664 ounces in Q2 2010 compared to 40,739 ounces in Q2 2009. This decrease was due to a decrease in tonnes milled and average grade in Q2 2010 compared to Q2 2009 as shown in the table above. As the Choco Mine mill is designed for 5,000 tonnes per day of hard rock, tonnes milled decreased in Q2 2010 as the Company mined a greater portion of hard rock in Q2 2010 compared to Q2 2009 which decreased throughput at the Choco Mine mill. The decrease in average grade is a result of mining lower grade areas of the Choco Mine and due to lack of availability of certain mining equipment due to delayed capital asset expenditures.

The Company has updated its Choco Mine gold production guidance for 2010 to 95,000 ounces of gold from 116,500, as reported in the news release dated June 1, 2010, as a result of the decrease in capital asset expenditures described in the "Outlook" section of the MD&A. The Company has also updated its Choco Mine cash cost per ounce sold guidance to $800 from $600, as reported in the news release dated June 1, 2010, due to the change in exchange rate used for translation as described in the "Outlook" section of the MD&A and the reduction of expected ounces produced.

Isidora Mine

Company's 50% share of the Gold production at Isidora Mine was 3,915 ounces in Q2 2010 compared to 7,784 ounces in Q2 2009. 

The Company has updated its Isidora Mine gold production guidance for 2010 to 15,000 ounces of gold net to the Company from 25,500 ounces of gold net to the Company, as reported in the news release dated June 1, 2010 due to lack of availability of mining fleet equipment and work stoppages. The Company has also updated its Isidora Mine cash cost per ounce sold guidance to $1,025 from $670, as reported in the news release dated June 1, 2010 due to the change in exchange rate used for translation as described in the "Outlook" section of the MD&A and the reduction of expected ounces produced.

San Rafael El Placer

The Company has constructed the 1,500 metres Alvarez underground ramp on the SREP project (4.5 metres x 5.0 metres) in order to provide access to main mineralized areas at a vertical depth of approximately 200 metres below surface. In the first quarter of 2010 the Company intercepted the mineralized zone and began test sampling. The ramp provides all of the necessary access to conduct further underground development around the main mineralized zones and exploration with a view to upgrading the classification of the current resources at SREP. 

The Pre-Feasibility Study and the Technical Report for the SREP project were completed in May 2010. The Technical Report detailing the Pre-Feasibility Study titled "Preliminary Feasibility Study – NI 43-101 Technical Report on the San Rafael and El Placer Deposits, State of Bolivar, Venezuela" dated May 7, 2010 authored by Whillans Mine Studies Ltd. was filed on www.sedar.com and the results were reported in a news release dated May 11, 2010 which is available on www.sedar.com. The Pre-Feasibility Study included completion of a mine plan for the existing indicated resources resulting in a probable reserve of 1,157,000 tonnes grading 10.1 g/t Au (375,700 ounces). The study assumes all mined material is processed at the existing Choco Mine mill. Gold production from the SREP deposit includes the recovery of a total of 319,456 ounces over a six year mine life reaching a peak of 76,000 ounces in year 2014 at a life-of-mine cost of production of $324/oz Au. Mine capital development is estimated at $9.8 million, capital infrastructure and equipment at $17.3 million, capital mine indirect costs at $14.6 million, and sustaining capital at $20.4 million over the life of mine (6 years). Life-of-mine net income after taxes is $51.9 million with a payback estimated at three years. At a gold price of $950/oz, the Pre-Feasibility Study estimates the net present value (8% discount) to be $28.2 million with an after-tax internal rate of return of 30%.

Qualified Person: Mr. Gregory Smith, P.Geo, the Vice-President, Exploration of the Company, is the Qualified Person as defined by National Instrument 43-101, and is responsible for the accuracy of the technical and scientific information within this news release.

Cautionary Non-GAAP Measures

Total cash costs per ounce sold is a non-GAAP measure. The Company believes that, in addition to conventional measures, prepared in accordance with GAAP, certain investors use the cash costs per ounce data 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 GAAP as it does not have any standardized meaning prescribed by GAAP. Data used in the calculation of total cash costs per ounce may not conform to other similarly titled measures provided by other precious metals companies.

ON BEHALF OF THE BOARD

"Andre Agapov"

Andre Agapov, President & CEO

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

"The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release."

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