Rusoro Mining Limited
TSX VENTURE : RML

Rusoro Mining Limited

November 30, 2011 08:00 ET

Rusoro Reports Q3 2011 Financial Results and Termination of Gold Export Permits and Provides Update on the Nationalization

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 30, 2011) - Rusoro Mining Ltd. (TSX VENTURE:RML) ("Rusoro" or "the Company") reports its financial results for the three months ended September 30, 2011 ("Q3 2011"). The Company's consolidated financial statements and management's discussion and analysis ("MD&A") for Q3 2011 have been filed on SEDAR (www.sedar.com).

All amounts set out in this news release and the Company's interim unaudited consolidated financial statements and MD&A are expressed in United States dollars, unless otherwise stated.

The following is a synopsis of the Q3 2011 financial results. For detailed information regarding Rusoro's Q3 2011 results, and results for the nine months ended September 30, 2011, please refer to the unaudited consolidated financial statements and related MD&A for Q3 2011, which can also be found on the Company's website at www.rusoro.com.

The Company's highlights for Q3 2011 were:

  • On September 16, 2011, the Venezuelan government, through publication in the Official Gazette of Venezuela, enacted a law-decree ("the Decree") which reserves to the State of Venezuela exclusive rights for the extraction of gold in Venezuela ("the Nationalization"). According to the Decree, all Venezuelan mining assets, including those of the Company, must be transferred to a new mixed-interest enterprise ("the Mixed Enterprise"), of which private enterprises, such as the Company, cannot own more than 45%. The Decree stipulates that the Company has 90 days from September 16, 2011 to negotiate the terms and conditions of the forced migration of mining assets to the Mixed Enterprise, including any compensation to the Company for assets transferred to the Mixed Enterprise as a result of the Nationalization. With respect to the amount of any compensation to be paid to the Company by the Venezuelan government, the Decree states that it will be based upon the unamortized book value of the assets to be transferred to the Mixed Enterprise. If the Company is unable to agree upon the terms and conditions of the forced migration within the designated time period, all titles and rights to the Company's Venezuelan mining assets will revert to the Venezuelan government, provided that no extension is granted on the negotiation period. Under this scenario, the Company would have no alternative but to seek fair compensation through continued negotiations or through its rights under the bilateral investment treaty between Canada and Venezuela. The mining assets and operations affected relate to the Choco mine, the Isidora mine, and the Company's exploration, evaluation and development properties, which are all located in Venezuela.
  • Effective September 16, 2011, the Decree mandated that 100% of all gold produced in Venezuela is required to be sold to the Central Bank of Venezuela ("CBV"), effectively terminating the Company's ability to export.
  • Average realized gold price per ounce sold of $1,662 (three months ended September 30, 2010 ("Q3 2010"): $1,233) and cash cost per ounce sold of $1,454 (Q3 2010: $979). The higher average realized gold price is a result of a higher international spot price per ounce of gold in Q3 2011. The higher cash cost per ounce sold is mainly due to the lower production and the increase in costs resulting from the Venezuelan inflation rate.
  • Gold production of 22,275 ounces of finished gold (doré form) for the three-month period ended September 30, 2011 (Q3 2010: 23,458 ounces) and gold sold of 18,068 ounces (Q3 2010: 34,626 ounces).
  • During Q3 2011, the Company exported 8,897 ounces of finished gold at the international spot price per ounce, less associated costs and commissions.
  • On June 10, 2011, the Company did not perform the repayment of the convertible loan for $30 million which remains outstanding as of the date of this news release.
  • As at September 30, 2011, the Company owed 6,643 ounces of finished gold to a third party as per a gold delivery contract. On September 20, 2011, as a result of the Decree and the Nationalization, a letter was written to the gold buyer indicating that management no longer expects to settle the obligation with the delivery of finished gold as stated in the agreement. Instead, the Company will settle the outstanding, undelivered ounces of finished gold owing with cash payments. The settlement amount is at the fair value determined using the current international spot price of gold.

Results for Q3 2011

  • Revenue decreased to $30.0 million (18,068 ounces sold) in Q3 2011 from $42.7 million (34,626 ounces sold) in Q3 2010 due to a lower amount of ounces of gold sold which more than offset the increase in the realized price of gold to $1,662 in Q3 2011 from $1,233 in Q3 2010. The reduction in gold sales is attributable to lower production.
  • Revenue from exports is paramount to the Company. During Q3 2011, the CBV continued to incur delays in granting export permits to the Company, forcing the Company to sell gold to the CBV, proceeds of which are collectible in Venezuelan currency, Bolivar Fuerte ("BsF"), at the official exchange rate of BsF 4.30/$1.00. This resulted in the Company not being able to maximize its export quota, which negatively impacted mining operations through decreased ability to fund sustaining capital expenditure, key consumables and services payable in US dollar. The US dollar cash flow constrains generated by reduced exports in turn caused lower production levels, in an iterative cycle.
  • Mining operating expenses and depreciation and depletion decreased to $24.8 million and $3.0 million, respectively, in Q3 2011 from $34.2 million and $4.2 million in Q3 2010. This cost decrease is primarily due to lower gold production. The decrease in tonnes mined and milled is the result of cash flow constraints which have hindered payments to vendors and in turn resulted in the reduction of products and services affecting the achievement of production targets.
  • General and administrative expenses decreased to $1.7 million in Q3 2011 from $2.7 million in Q3 2010 significantly due cost reductions driven by cash constraints.
  • Interest on the Company's convertible loan decreased to $0.8 million in Q3 2011 from $1.5 million in Q3 2010 due to the partial retirement of the convertible loan during 2010.
  • Gain on revaluation of derivative financial liabilities increased to $0.02 million in Q3 2011 from a loss of $0.6 million in Q3 2010 due to the issuance and subsequent revaluation of Canadian dollar (C$) warrants at lower current market prices. The warrants were issued in June 2010 as part of the convertible loan refinancing transaction.
  • Loss on revaluation of the gold delivery contract increased to $4.8 million in Q3 2011 from a loss of $nil in Q3 2010, due to the reclassification of a gold delivery contract from deferred revenue to a derivative financial liability, and its subsequent revaluation to its fair value using the current international spot price of gold.
  • Foreign exchange gain was $1.6 million in Q3 2011 compared to a foreign exchange gain of $10.2 million in Q3 2010, due to the elimination of the implicit exchange rate for translation of transactions and balances and the current use of a single official fixed rate.
  • Deferred tax recovery increased to $2.3 million in Q3 2011 from an expense of $1.0 million in Q3 2010 due to the winding down through the depreciation and depletion of fair value allocations which arose from prior business acquisitions.
  • Net loss amounted to $1.7 million during Q3 2011 compared to net profit of $6.4 million during Q3 2010.

Operating Performance

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

3 Months Ended
September 30, 2011
3 Months Ended
September 30, 2010
Choco Isidora Total Choco Isidora Total
Ore tonnes mined
('000 t)
340 7 347 409 5 414
Ore tonnes milled
('000 t)
394 11 405 559 6 565
Average grade (g/t) 1.54 9.80 1.76 1.24 14.37 1.38
Average recovery rate (%) 94 % 90 % 93 % 91 % 90 % 91 %
Gold produced (ounces) 19,064 3,211 22,275 20,781 2,677 23,458
Gold sold (ounces) 14,779 3,289 18,068 26,549 8,077 34,626
Total mining operating expenses $(000) $ 17,229 $ 7,563 $ 24,792 $ 23,575 $ 10,619 $ 34,194
-decommissioning and restoration provision accretion $(000) $ (277 ) $ (211 ) $ (488 ) $ (164 ) $ (133 ) $ (297 )
-impairment of inventories $(000) $ 3,239 $ (1,273 ) $ 1,966 - - -
Total cash costs $(000)(1) $ 20,191 $ 6,079 $ 26,270 $ 23,411 $ 10,486 $ 33,897
Total cash costs per ounce sold $(2) $ 1,366 $ 1,848 $ 1,454 $ 882 $ 1,298 $ 979
Average spot gold price per ounce $ n/a n/a $ 1,700 n/a n/a $ 1,277
Average realized gold price per ounce
sold $
$ 1,663 $ 1,661 $ 1,662 $ 1,238 $ 1,216 $ 1,233
The following notes are applicable to the above tables:
(1) Total cash costs used in the calculation of cash costs per ounce is calculated as mining operating expenses from the consolidated statement of comprehensive income (loss) excluding accretion expense related to the decommissioning and restoration provision and expense for impairment of inventories.
(2) Cash costs per ounce sold is a non-IFRS measure. Total cash costs per ounce sold 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 impairments of inventories.

Cautionary non-IFRS measures

Total cash costs per ounce sold is a non-IFRS measure. The Company believes that, in addition to conventional measures, prepared in accordance with IFRS, 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 IFRS as it does not have any standardized meaning prescribed by IFRS. 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, 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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