Luna Gold Corp. (TSX VENTURE:LGC)(LMA:LGC) ("Luna" or the "Company") today
announces its results for the three months and year ended December 31, 2011. The
complete financial statements and management discussion and analysis are
available for review at www.lunagold.com and should be read in conjunction with
this news release.
OVERVIEW
Luna Gold Corp. (the "Company") is a publicly listed company on the TSX Venture
Exchange and on the Bolsa de Valores in Peru trading under the symbol "LGC". The
Company is actively engaged in the operation, exploration, acquisition and
development of gold properties in Brazil. The Company currently has one gold
mining operation, one development project and a large greenfield exploration
program located in northeast Brazil.
The Aurizona gold mining operation ("Aurizona") consists of an open pit mine and
gold processing plant. Aurizona contains the Piaba and Tatajuba deposits and
over 10 near mine exploration targets which are being actively explored by the
Company. It covers approximately 15,500 hectares of land and includes a mining
license and three exploration permits.
The Maranhao Greenfields exploration property ("Maranhao Greenfields") is
located next to Aurizona and consists of an extensive landholding of exploration
licenses totalling approximately 190,000 hectares. This land holding is highly
prospective due to its location in the southern extension of the Guyana Shield
and displays strong geologic and structural similarities to major West African
gold deposits. The area encompasses over 100 artisanal gold workings that are
being explored by the Company.
The Cachoeira gold project ("Cachoeira") is an advanced stage exploration
project with a National Instrument 43-101 compliant resource estimate in three
gold deposits consisting of quartz vein systems, hydrothermally altered host
rocks and stockworks within a north-south trending shear zone.
The Company's near term focus and goals are to(1):
-- Achieve 60,000 ounces of gold production at the Aurizona operation in
2012;
-- Complete phase 1 expansion scoping study, commence feasibility and
construction work to upgrade the Aurizona facility with the goal to
achieve 100,000 ounces of production per annum;
-- Complete phase 2 expansion scoping study and advance towards Preliminary
Economic Assessment to further assess the Aurizona plant expansion
potential to a range up to 300,000 ounces per annum;
-- Reduce the Aurizona average unit cash cost of production with a target
of $750(1) per ounce;
-- Continue generating solid exploration targets at Maranhao Greenfields
via surface exploration programs;
-- Commence drilling at Maranhao Greenfields to obtain greater
understanding of the mineralization potential at Maranhao Greenfields;
-- Define deep high-grade mineralized zones at Piaba through drilling; and
-- Define new mineralized structures at Aurizona for resource generation.
The Company's longer term focus and goals are to:
-- Discover and define a new sizable gold resource within the Maranhao
Greenfields Project;
-- Significantly increase the Aurizona mineral resources through further
exploration; and
-- Become a mid-tier gold producer in Brazil with gold production ranging
between 300,000 to 500,000 ounces per annum from the Aurizona Gold Mine
and through future discoveries leading to a new mine development growth
at Maranhao Greenfields.
HIGHLIGHTS - 2011
-- Record quarterly gold production of 13,620 ounces was achieved in Q4.
Gold production for the year was 41,898 ounces;
-- Significant Aurizona resource upgrade of 250% from the previous mineral
resource estimate. Aurizona gold resource includes measured and
indicated of 3,166,000 ounces and inferred of 720,000 ounces;
-- Q4 average unit cash cost of production was $851(2) per ounce and for
the year was $1,031(2) per ounce;
-- Gross profit at the Aurizona operation for Q4 was $6.2 million and for
the year was $8.8 million;
-- Net loss for Q4 was $0.1 million and for the year was $4.9 million;
-- Operating cash inflow before working capital movements for Q4 was $3.4
million and operating cash outflow before working capital movements for
the year was $0.4 million;
-- The Company successfully raised gross CA$42 million through a
combination of a marketed public offering and private placement;
-- Mechanical issues resolved at the plant, conversion to owner operated
mining advanced, major equipment fleet orders and new management in
place; and
-- Keith Hulley, current Chairman of the Board of Directors of Gabriel
Resources, appointed as a Director of the Company.
OUTLOOK AND STRATEGY
Operations - Aurizona
The Company is focused in 2012 to developing best in class health and safety,
environment and community development programs.
Steady health and safety improvements and performance were achieved in Q4 2011
throughout the Company including no lost time accidents. The Company has entered
into a contract with DuPont to perform a gap analysis and provide
recommendations regarding the Company's health and safety program. An agreement
was reached and signed with the military police where the Company will donate a
regional police post, furnishings and equipment to the State of Maranhao to help
the region and communities establish security.
The 2012 focus and goals include(1):
-- Achieve 60,000 ounces of gold production at a targeted average unit cash
cost of $750(1) per ounce;
-- Complete Phase I and II scoping studies by the end of Q2;
-- Commence construction of the Phase I expansion with targeted delivery of
a 100,000 ounces per annum production rate by year end; and
-- Deliver a Preliminary Economic Assessment of the Phase II expansion to
above 100,000 ounces per annum by year end.
A review of the process plant recoveries was completed during Q4, 2011. An
integrated plan involving operations and the Phase I expansion study team has
been developed targeting improvements to improve gold recoveries,
maintainability, operability and throughput. A design criteria of 10,000 tonnes
per day and 91% gold recovery has been established for the Phase I expansion.
The main strategy to improve recoveries includes the following: mine plan
optimizations of blending, process plant equipment upgrades, process control,
preventative maintenance and training.
SNC-Lavalin Inc., Vancouver, has been retained to complete the Phase I and II
scoping study. The Phase I expansion scope of work includes upgrades to the
following circuits: crushing, grinding, pre-leach thickening, CIL, gold elution,
carbon handling and reactivation, electro-winning and the replacement of the
shaking tables with an intense leach reactor. Engineering and trade-off studies
are progressing on the work package estimates and equipment orders.
Sufficient coarse ore has been stockpiled near the ore hopper during the last
quarter of 2011 to de-risk the 2012 rainy season.
Conversion to an owner operated mining fleet is progressing with final
deliveries and commissioning planned by the end of Q2 2012. CAT is currently
assisting with operator training of local employees and with deliveries of
twelve (12) CAT 740 articulated dump trucks and three (3) CAT 374 excavators
scheduled for delivery during the next few months.
Exploration
The Company's targeted exploration expenditure is $12 million for the 2012 year.
These expenditures will be spent in the Maranhao Greenfields project and in the
Aurizona brownfields area. The Company may alter the expenditure and programs
during the year based on the interim results of the ongoing programs to take
advantage of positive drill results.
Maranhao Greenfields Project
During the first half of 2012, the Company will finalize geologic studies
including ground geophysical surveys, structural mapping, auger drilling and
some trenching prior to drilling the three most advanced gold targets identified
to date in this region. The potential drill targets will be rate ranked in
priority and the current top three targets will be drilled commencing in the
third quarter of 2012. At the same time, the Company will continue to focus on
identifying new gold targets through field geochemical and geophysical surveys.
The information that is expected to be received through these programs will
assist the Company to obtain a greater understanding of the mineralization
potential at Maranhao Greenfields.
Aurizona
The Aurizona 2012 brownfields exploration programs have been designed to firstly
conduct exploration drilling at several near mine targets to deliver a resource
update and provide near surface operational blend flexibility. The second focus
is to drill a series of structurally guided deep drill holes to test for
extensions to the high grade ore zones that have been mapped in the Piaba Pit.
Detailed structural mapping has been completed and the first two holes have been
sited. The Company will continue to drill for high grade ore zones through the
second quarter of 2012. Any discovery of high-grade mineralization within the
large Piaba deposit will then be assessed for the possibility of developing an
underground mine and improving feed grade. Finally, the Company will continue
with surface exploration programs focused on the area to the east of Piaba to
deliver new drill targets in 2013.
AURIZONA GOLD MINE - MARANHAO STATE, BRAZIL
The Aurizona gold mine is wholly-owned by the Company and is situated in the
municipality of Godofredo Viana in Maranhao State, Brazil, near the coast of the
Atlantic Ocean. Aurizona contains the Piaba and Tatajuba deposits and over 10
near mine exploration targets. The area is covered by a mining licence and three
exploration permits. The Tatajuba deposit is located within an exploration
permit which is in the application process to convert to a mine license.
Segmented operating results
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Three months ended Year ended
December 31 December 31
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(tabled amounts are
expressed in thousands of
US dollars) 2011 2010 2011 2010
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Mined waste - tonnes 965,019 579,012 1,667,821 1,267,347
Mined ore - tonnes 622,480 457,873 1,266,708 1,453,762
Ratio of waste to ore 1.6 1.3 1.3 0.9
Ore grade mined - g/t 1.49 1.15 1.41 1.14
Processed ore - tonnes 389,476 328,735 1,310,249 747,349
Average grade processed -
g/t 1.39 1.19 1.29 1.15
Average recovery rate % 82% 78% 80% 59%
Gold produced (ounces) 13,620 9,768 41,898 15,759
Gold sold (ounces) 13,982 9,594 41,502 11,795
Total cash costs (per
ounce)(1) $ 851 $ 1,132 $ 1,031 $ 1,550
Gross profit (loss) $ 6,225.1 $ (2,048.6) $ 8,825.1 $ (7,919.1)
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Mining production
During the quarter, waste removal and ore mined increased by 67% and 36% over
the comparative quarter of 2010, respectively, and 180% and 48% over the
previous quarter, respectively. These increases were a direct result of the
implementation of the new management and mining team and the Company's decision
to become owner-operator of mining activities in the previous quarter. With the
mobilization of the Company's own fleet, which consisted of owned and rented
equipment, mining activities targeted to increase its waste removal to free up
higher grade ore areas and catch up on its waste stripping as outlined in the
mine plan. The increased ore mining was planned to build up the ore stockpile to
de-risk the ability to feed ore to the process plant in the upcoming rain season
while allowing for the delivery and commissioning of the new Company owned
mining fleet and operating team. The new equipment, which is expected to arrive
during the first half of 2012, consists of twelve (12) CAT 740 articulated dump
trucks, three (3) CAT 374 excavators and ancillary support equipment.
The annual mining volume in the current year was 8% higher than the prior year.
The Company demobilized its mining contractor in Q1, which led to minimal mine
production in Q2. At the beginning of Q3, the Company implemented its own mine
management team and mobilized a new fleet, which resulted in a significant
increase in mine production and allowed for the overall increase in tonnage
mined.
The overall change to larger, articulated dump trucks and matching fleet
requirements, as well as improved road design, drainage improvements and
laterite surfacing, is expected to result in additional year round mining
efficiencies and increased production in the upcoming year.
Mill Processing
During the quarter, gold production was 39% higher than the comparative quarter
of 2010. This was the result of an 18% increase in ore feed to the mill, a 17%
increase in ore grade processed and a 5% increase in recoveries. Gold production
was also on par with the previous quarter. The increase in ore processed and
recovery rate was due to the plant upgrades and improvements that were
implemented in Q2, which resulted in a decrease in plant downtime and loss of
gold to tails. The higher ore grade processed was a direct result of the
improvements in the mining activities and grade control. In addition,
gold-in-circuit inventory increased at year-end due to the timing of cut-off
procedures related to the gold smelting and piping and insulation upgrades in
the elution circuit.
Gold production for the year was significantly higher than prior year as the
plant was commissioned in early 2010 and first gold production was achieved in
Q2 2010. Production in the prior year was hampered by significant plant downtime
related to poor construction, which led to planned plant shutdowns in Q1 and Q2
of this year to upgrade the facility. In addition, a new operating management
team was hired in Q2 that delivered feasibility level production in Q3 and
maintained it throughout the remainder of 2011.
The following chart displays the quarterly gold production for the year:
http://media3.marketwire.com/docs/Luna_Gold_Chart.pdf
The Company expects to improve the gold recovery rate in 2012 with the
implementation of a carbon regeneration kiln, an intense leach reactor and
further plant upgrades with a target of achieving a 90% recovery rate.
Aurizona is subject to an agreement with Sandstorm Gold Ltd. ("Sandstorm")
pursuant to which Sandstorm has the right to purchase 17% of the production of
Aurizona at $400 per ounce. In Q3, the Company met the requirements of the
Completion Guarantee in the agreement with Sandstorm exceeding the three month
production minimum whereby the Company was required to produce 12,500 ounces of
gold in a three month period before April 2012.
January 2012's monthly production was approximately 5,300 ounces of gold.
Cash Costs(1)
The average unit cash cost of production for Q4 was higher than the target of
$750 to $780 per ounce due to lower than planned recoveries, increased payroll
related to year-end bonuses associated with the successful turnaround of the
operations and a one-time write down of consumable inventory recognized at the
end of the year. Q4 unit cash costs improved over the comparative quarter of
2010 due to increased production.
The average unit cash cost of production for the year remained higher than
target primarily due to lower than planned production, particularly in the first
half of the year and higher than planned employee and maintenance costs.
Employee costs were higher than planned due to high inflationary costs in Brazil
and the competition for employee talent in the mining industry. The Company
recruited and replaced a number of key employee positions during Q2 and Q3 that
were critical to the contribution of the production increases. Maintenance costs
were higher than planned due to the trouble shooting of the plant after shutdown
and ongoing plant upgrades in Q2 and Q3 to improve operating efficiencies. In
addition, diesel consumption for the power generators was higher than planned
due to the insufficient power supply from CEMAR, the state utility company. The
full year average unit cash cost was improved over the prior year due to the
increase in production.
The Company expects to reduce its average unit cash cost of production in 2012
with a target of $750 per ounce. This is expected to be achieved by continuous
improvement of gold production through increases in operating time, plant
throughput and recovery rates.
AURIZONA EXPLORATION
The Company's exploration team delivered a major resource update in early
December. Six drill rigs were demobilized from the project and two rigs remain
and have recently completed exploration drill holes at the Boa Esperanca,
Ferradura and Conceicao near mine targets. Deep drill holes are planned at the
Piaba deposit and will commence in late February. Results of the Tatajuba auger
drill program were received showing that mineralization outcrops along the
length of the Tatajuba deposit. A ground magnetic survey was completed and
provides new information on geological structures in the area immediately east
of the Piaba Deposit.
Aurizona Resource Update
The Company delivered a significant mineral resource update at the Aurizona
operation. Measured and Indicated gold resources now total 78.0 million tonnes
at 1.26 grams per tonne ("g/t") gold ("Au") or 3.17 million ounces gold, an
increase of 250% from the previous mineral resource estimate published in
January 2009. Inferred gold resources now total 15.2 million tonnes at 1.47 g/t
Au or 0.72 million ounces gold, an increase of 79% from the January 2009 mineral
resource estimate. The resource was updated by SRK Consulting (U.S.) Inc.
according to Canadian National Instrument 43-101 guidelines and is based on
43,968 metres of new diamond, reverse circulation and auger drilling by the
Company. The Piaba deposit is now 3.30 kilometres in length and significantly it
remains open at depth and along strike to the east and west. These results
confirm the Company's confidence in the geological mineral endowment at
Aurizona. The high percentage of pit constrained Measured and Indicated ounces
demonstrates the high quality of this resource estimate.
Consolidated Statement December 8, 2011, Inclusive of Reserves
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Deposit Classification kt Au g/t Au oz
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Measured 10,782 1.13 391,000
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Indicated 62,939 1.28 2,596,000
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Piaba Pit Constrained(1) Measured and Indicated 73,721 1.26
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Inferred 2,469 1.47 117,000
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Measured 0 0.00 ,000
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Indicated 2,738 1.29 113,000
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Piaba Underground(2) Measured and Indicated 2,738 1.29
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Inferred 10,901 1.56 547,000
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Measured 0 0.00 0
----------------------------------------------------------------------------
Indicated 1,554 1.31 66,000
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Tatajuba(3) Measured and Indicated 1,554 1.31
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Inferred 1,859 0.94 56,000
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Measured 10,782 1.13 391,000
----------------------------------------------------------------------------
Indicated 67,231 1.28 2,775,000
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Total Measured and Indicated 78,013 1.26
----------------------------------------------------------------------------
Inferred 15,229 1.47 720,000
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Notes:
25g/t Au capping at Piaba and 10 g/t Au capping at Tatajuba.
Block dimensions are 10m x 10m in the xy plane and 3m on the z axis.
Piaba database consists of 69,578 metres consisting of 335 diamond drill
holes and 142 reverse circulation holes and 374 auger drill holes.
(1) Piaba pit constrained resources are reported at a cutoff grade of 0.30
g/t Au inside a pit optimization shell based on a gold price of US$1500 per
ounce.
(2) Piaba underground resources are reported at a cutoff grade of 0.75 g/t
Au outside the pit optimization shell. The cutoff grade has been calculated
at a gold price of US$1500 per ounce.
(3) Tatajuba database consists of 4,740 metres in 45 diamond drill holes
(2008). The Tatajuba resources are not constrained by a pit optimization
shell. Mineral resources that are not mineral reserves do not have a
demonstrated economic viability. The independent QP responsible for the
preparation of the mineral resource estimate and who has reviewed the above
disclosure is Leah Mach, CPG, of the Denver office of SRK Consulting (U.S.),
Inc.
(4) The Company has not yet up-dated its mineral reserves estimate for the
Aurizona Gold Operation based on the new mineral resource discussed in this
MD&A. For greater clarity, the Company's mineral reserves estimate effective
as of July 13, 2010 previously disclosed by the Company is based on an
earlier mineral resource estimate which did not include the additional
drilling data.
(5) There may be political, environmental, legal and other risks that may
materially affect the mineral resource estimate disclosed in this MD&A.
Deep Diamond Drilling - Piaba Deposit
Work significantly advanced on the identification of deep structural drill
targets beneath the limit of the updated Piaba resource. In November, Itasca CA
completed a structural mapping program in the Piaba pit to define the high-grade
mineralization controls. This work program combined with in house structural
mapping has developed a better understanding of the structural setting of Piaba
and controls on high-grade shoots and will guide deep drilling planned for
commencement in late February 2012.
Auger Drilling - Tatajuba Deposit
A shallow auger drill program (1,365 metres in 141 holes) was completed at the
Tatajuba gold deposit. This followed a review of the 2008 Tatajuba resource
estimate which identified a lack of near surface drill data. The samples are
currently at the assay laboratory, though preliminary results confirm that the
ore body is outcropping along the deposit strike and these holes should have a
positive effect on future Tatajuba resource estimates.
Diamond and Reverse Circulation Drilling - Boa Esperanca
A diamond and reverse circulation ("RC") drill program commenced at the Boa
Esperanca near mine target in November 2011. Eight diamond drill holes totalling
1,949 metres were completed, testing a target strike length of 1,000 metres.
Fourteen RC drill holes totalling 1,548 metres were also completed at Boa
Esperanca testing a strike length of 1,000 metres. Assay data will be released
when the results have been fully received and validated. Core geology is
dominated by tonalities interbedded with metavolcanics and weak to moderate
hydrothermal alteration.
Diamond Drilling - Ferradura
Diamond drilling commenced at the Ferradura near mine target in December 2011.
Eight diamond drill holes totalling 1,283 metres were completed testing a target
strike length of 500 metres. Assay data will be released when the results are
fully received and validated. Core geology is dominated by tonalities and
gabbros.
Diamond Drilling - Conceicao
Diamond drilling commenced at the Conceicao near mine target in February 2012.
Three diamond drill holes totalling 400 metres were completed, testing a strike
length of 300 metres. Assay data will be released when the results have been
fully received and validated. Core geology is dominated by tonalities and
gabbros.
Ground Magnetic Geophysical Surveys
The ground magnetic surveying data collected at Aurizona during the last quarter
was interpreted. The data was collected over several near mine targets located
to the east of the Piaba deposit within the mine licence. The data
interpretation shows numerous sub-parallel structures associated with gold
anomalies that will be rate/ranked ahead of future drill programs at Aurizona.
These results are very positive.
Permitting
The process of converting the Tatajuba exploration licence, which hosts the
Tatajuba deposit, to a mining license advanced during the quarter and the full
application is expected to be submitted to the DNPM in Q1 2012.
CACHOEIRA GOLD PROJECT
The Cachoeira Gold Project is located in northern Brazil in the Gurupi
Greenstone Belt, approximately 220 kilometres southeast of the Para State
capital of Belem and about 270 kilometres northwest of the port city of Sao
Luis, Maranhao State. Cachoeira comprises one contiguous block consisting of two
mining and three exploration licenses covering approximately 4,742 hectares.
In October 2007, the Company announced that it had finalized an option agreement
whereby it could earn a 100% interest in the property from a consortium of
vendors. According to the terms of the agreement the Company can earn its
interest by making a one-time cash payment and by incurring work expenditures of
at least BRL 9.5 million over a 50 month period. The Company achieved this
commitment during the year. The Company's interest in the property is subject to
a 4.0% net profits royalty with a provision for a partial buy-out of this
royalty.
The major asset associated with Cachoeira is a series of shear zone hosted gold
deposits consisting of quartz veins, stockworks and wall rock alteration. Three
deposits, Tucano, Arara and Coruja, have been defined to date within the
north-south trending Cachoeira Shear Zone. In December 2010, the Company
released a maiden NI 43-101 compliant mineral resource estimate at Cachoeira and
filed the technical report on February 7th, 2011 on SEDAR.
All activities during Q4 were related to social and community development within
the Cachoeira project.
MARANHAO GREENFIELDS EXPLORATION PROPERTY - MARANHAO STATE, BRAZIL
The Maranhao Greenfields exploration property is located to the southwest and
southeast of Aurizona and contains multiple shear zones and over 100 historic
artisanal gold workings (garimpos). It consists of approximately 190,000
hectares of contiguous exploration licenses and is located within the Sao Luis
Craton, southeast of the Guiana shield, which hosts several major gold deposits
including Rosebel and Las Cristinas. Geologic reconstruction of the South
American and African continents places the Sao Luis Craton in close proximity to
the Birimian Gold Belt of West Africa. Strong geologic and structural
similarities exist between the Sao Luis Craton, the Guiana shield and the West
African Craton. The area is characterized by low relief and an extensive
sedimentary cover sequence with deep weathering profiles. Historic exploration
in the district was limited to soil and rock sampling, auger drilling,
geophysical surveys and some shallow reconnaissance drill holes.
Following the delivery of a major resource upgrade at Aurizona in 2011, the
Company is now focused on unlocking the potential of the Maranhao Greenfields
project through aggressive exploration programs targeting large scale
mineralizing systems. The Company's geologic interpretation shows that the
Maranhao Greenfields project area is transected by numerous major shear zones
associated with gold anomalies and artisanal gold workings. The Company
established 3 field bases which provide support for teams over the entire
project area and currently have 10 exploration teams active in the project area
conducting soil and geophysical surveys, geological mapping of artisanal pits
and larger scale geological programs in addition to auger drilling. To date the
crews have registered 70 artisanal gold workings within the Company's
landholding and the program is ongoing. This evidence of gold mining activity
combined with results from the Company's exploration programs demonstrate the
major potential of this new gold district to host gold deposits.
The Company currently has six exploration teams working five targets
simultaneously in the Maranhao Greenfields project area.
Areal Gold Target
Areal is a new gold target located 21 kilometres due southwest from the Aurizona
plant. It was identified via soil and ground magnetic surveys followed-up by
geological mapping and rock sampling. An auger drill program designed to test
the main gold anomaly on a 200 metre by 20 metre grid was finalized. 382 holes
totaling 2,223 metres were drilled. Samples are at the assay laboratory. A
topographic survey was also completed over the Areal target.
Ceara-Arete Targets (PC Grid)
Soil geochemical data were received and interpreted for the PC Grid that is
located along strike to the west of the Aurizona mine. Two targets identified
within this grid were prioritized for further work - Ceara located 16.5
kilometres due west/southwest from the Aurizona plant, and Arete is located 15
kilometres due west/southwest from the Aurizona plant. Geological mapping was
completed over both targets. Ceara is a historic garimpo with several old pits
while Arete is a new geochemical discovery. Both targets are associated with
favourable geophysical structural lineaments. An auger drill program was
completed at Arete. 239 holes totaling 1,309 metres were drilled. A similar
program has been planned for Ceara. A reconnaissance rock sampling program was
also completed and a ground magnetic survey commenced over both targets. Full
exploration results for the Ceara-Arete target will be released shortly. Several
other gold targets were also discovered within the PC grid and these are being
prioritized for geological mapping.
Nova Vida Target
The Nova Vida target is located 42 kilometres due southwest from the Aurizona
plant. Nova Vida is a large low-grade gold-in-soil anomaly associated with
recent and paleo-conglomerates and several alluvial gold garimpos. Assay results
were received for the Nova Vida east extension soil sampling program with
positive results. Full exploration results for the Nova Vida target will be
released shortly.
Jiboia, Santarem, Tatu Targets (JST Grid)
The JST targets are located in the far southwest of the Maranhao Greenfields
project area 50 kilometres due southwest from the Aurizona plant. They are
significant in that they extend surface gold mineralization in the project area
to the extreme southwestern limit of the Company's claim boundaries. No work was
conducted at JST in the quarter. Geologic mapping and ground geophysical surveys
will be conducted at JST in 2012 and the targets will be reported on
finalization of these programs.
CPB, PJP, BML, SDP, C-MAG Grids
Work continued at these targets in the quarter and assay data are being uploaded
to the databases. The Company is aggressively exploring its extensive and
prospective landholding at Maranhao Greenfields to deliver drill targets on 100%
owned mineral rights in 2012.
DNPM Permitting
The Company currently has 5 new claim applications totaling approximately 33,000
hectares at Maranhao Greenfields. These applications are under evaluation at the
DNPM and will be reported on as and when they are granted.
SUMMARY OF OPERATING RESULTS
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Three months ended December
31, Year ended December 31,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(tabled amounts
are expressed
in thousands of
US dollars)(4) 2011 2010 2009 2011 2010 2009
----------------------------------------------------------------------------
Gold sales
(ounces) 13,982 9,594 - 41,502 11,795 -
Revenue 19,854.1 13,656.7 - 55,301.4 16,106.5 -
Operating
expense (11,361.3)(13,922.3) - (40,090.1)(21,891.9) -
Depreciation and
amortization (2,267.7) (1,783.0) - (6,386.2) (2,133.7) -
----------------------------------------------------------------------------
Gross profit
(loss) 6,225.1 (2,048.6) - 8,825.1 (7,919.1) -
General &
administration
(3) (2,043.9) (1,320.7) (813.4) (7,654.5) (4,744.4) (2,631.4)
Exploration
expense (2,352.6) (665.4) (576.1) (5,724.5) (2,788.8) (3,234.7)
Financing (cost)
income, net (1,583.4) (491.2) 977.4 (4,542.6) (866.4) 1,489.9
Unrealized gains
(losses) from
derivatives (5,356.6) (899.0) - (3,064.8) (947.2) -
Foreign exchange
and other (693.4) 519.1 (891.2) 1,576.1 903.6 2,259.4
Income taxes 5,695.7 - - 5,695.7 - -
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Net income
(loss) (109.1) (4,905.8) (1,303.3) (4,889.5)(16,362.3) (2,116.9)
----------------------------------------------------------------------------
Basic/diluted
loss per share (0.00) (0.02) (0.00) (0.01) (0.04) (0.01)
----------------------------------------------------------------------------
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Total assets 158,201.8 109,932.5 71,921.4 158,201.8 109,932.5 71,921.4
----------------------------------------------------------------------------
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Total
liabilities 59,090.8 47,687.7 34,859.9 59,090.8 47,687.7 34,859.9
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Revenue increased over the comparative periods of 2010 due to the increase in
gold production and the increase in the price of gold. The Company's average
realized price of gold received was $1,571 per ounce for 2011, excluding gold
sales to Sandstorm and delivery of gold on behalf of the prepaid gold agreement
with RMB. The Company achieved operating profits in Q4 and the full year
compared to operating losses in the comparative periods of 2010. This was due to
an increase in gold production and a decrease in the average unit cash cost of
production in the current periods.
G&A expense was significantly higher than comparative periods of 2010 primarily
due to increases in stock based compensation expense related to the hiring of
new management and increases in marketing and investor relations expenditures.
Exploration expenditure was approximately $4.5 million in Q4 and $20.1 million
for the year, of which, $2.1 million in Q4 and $14.3 million for the year was
related to the Aurizona resource definition (capitalized in mineral properties
for accounting purpose). The Company embarked on a significant drill program at
Aurizona resulting in the increase in the size of the Aurizona resource, which
was publicly released in December. The balance of exploration activities was
related to Maranhao Greenfields and Cachoeira. Exploration activities increased
in the Maranhao Greenfields area as the Company began identifying drill targets
for 2012, with the expectation of discovering and defining a new gold resource
for the Company. Exploration activities at Cachoeira were limited to social and
environmental work.
Net financing cost was higher in both Q4 and the full year as compared to the
same periods of 2010 due to the non-cash accreted interest (for accounting
purpose) from the settlement of RMB debt facility and due to higher outstanding
debt balances in 2011.
Unrealized gains (losses) from derivative liability were related mark-to-market
adjustments on foreign exchange forward contracts, interest rate swap contracts
and a warrant derivative related to the transition to IFRS, whereby the warrants
outstanding were reclassified as a derivative liability on the balance sheet and
subject to mark-to-market adjustments through the profit and loss statement. The
full year unrealized loss on derivatives consisted of a loss on foreign exchange
forward contracts and warrants liability of $3.1 million $0.1 million,
respectively, which was offset by a gain on interest rate swap contract of $0.2
million. The loss during the current quarter was primarily due to changes in the
BRL:USD exchange rate in Q4.
Foreign exchange gains and losses for 2011 were primarily related to the WestLB
Revolving Credit Line, which is denominated in BRL currency. The foreign
exchange gains in the comparative periods of 2010 included foreign exchange
gains on working capital items.
Income tax provision recovery was mainly triggered by recognition of tax loss
carry forward from MASA. As a result, an amount of $8.1 million was capitalized
as deferred tax asset. This impact was netted out by current tax provision of
$2.4 million from MASA's annual taxable income.
Consolidated profit and loss - 2 year historic trend
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(tabled amounts are
expressed in thousands of Q4 11 Q3 11 Q2 11 Q1 11
US dollars)(4)
----------------------------------------------------------------------------
Revenue 19,854.1 15,910.5 9,179.4 10,357.4
Operating expense (11,361.3) (9,009.2) (10,990.7) (8,728.9)
Depreciation and amortization (2,267.7) (2,012.9) (1,203.5) (902.1)
----------------------------------------------------------------------------
Gross profit (loss) 6,225.1 4,888.4 (3,014.8) 726.4
General & administration(3) (2,043.9) (2,370.5) (2,178.1) (1,062.0)
Exploration expense (2,352.6) 263.2 (2,236.4) (1,398.7)
Financing (cost) income, net (1,583.4) (1,979.1) (624.5) (355.6)
Unrealized gains (losses) from
derivative liability (5,356.6) (73.8) 737.3 1,628.3
Foreign exchange and other (693.4) 1,994.2 (375.1) 650.4
Income taxes 5,695.7 - - -
----------------------------------------------------------------------------
Net income (loss) (109.1) 2,722.4 (7,691.6) 188.8
----------------------------------------------------------------------------
Basic/Diluted (loss) income per
share (0.00) 0.01 (0.02) 0.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(tabled amounts are
expressed in thousands of Q4 10 Q3 10 Q2 10 Q1 10
US dollars)(4)
----------------------------------------------------------------------------
Revenue 13,656.7 1,620.3 829.5 -
Operating expense (13,922.3) (5,576.2) (2,393.4) -
Depreciation and amortization (1,783.0) (303.8) (46.9) -
----------------------------------------------------------------------------
Gross profit (loss) (2,048.6) (4,259.7) (1,610.8) -
General & administration(3) (1,320.7) (1,367.6) (1,037.0) (1,019.1)
Exploration expense (665.4) (1,334.5) (725.7) (63.2)
Financing (cost) income, net (491.2) (327.4) (78.6) 30.8
Unrealized gains (losses) from
derivative liability (899.0) 472.7 (520.9) -
Foreign exchange and other 519.1 30.4 349.5 4.6
Income taxes - - - -
----------------------------------------------------------------------------
Net income (loss) (4,905.8) (6,786.1) (3,623.5) (1,046.9)
----------------------------------------------------------------------------
Basic/Diluted (loss) income per
share (0.01) (0.02) (0.01) (0.00)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue's began in Q2 2010 with the Company's first ounce of gold produced and
increased up to Q4 2010 due to higher production output and rising gold prices.
However, production decreased in Q1 2011 and Q2 2011 due to the planned Aurizona
plant shutdown and upgrade to improve the plant's operating capabilities.
Subsequent to the shutdown and upgrade, production increased to feasibility
levels resulting in an increase in gold sold in Q3 and Q4 2011. Operating
expenses followed the same trend as gold sales with movements in quarterly
operating expense directly related to the number of ounces of gold sold within
that period. In addition, operating expenses based on an average unit cash cost
of production basis were directly impacted by production and recovery rates.
General and administration expense remained consistent quarter on quarter since
production began in Q2 2010, except for the period between Q2 2011 to Q4 2011,
which was impacted by an increase in stock based compensation expense related to
the hiring of new management and increases in marketing and investor relations
related costs.
Exploration expense was related to the Cachoeira and Maranhao Greenfields
exploration programs which began in Q2 2010. Variances between quarters were due
to the timing of executing the planned exploration programs and the seasonal
weather.
Net financing costs were directly related to the interest expense on the
outstanding loan balance and interest income on the cash balance of the Company.
Unrealized derivative gains and losses quarter on quarter was mainly driven by
the volatility in the Company's share price (and its relation to the outstanding
warrants) and the foreign exchange rate.
Foreign exchange movements each quarter are related to changes in the USD:BRL
exchange rate in relation to the Company's working capital accounts in Brazil
and its WestLB revolving credit facility which is denominated in BRL.
Income tax provision recovery was mainly triggered by recognition of tax loss
carry forward from MASA. As a result, an amount of $8.1 million was capitalized
as deferred tax asset. This impact was netted out by current tax provision of
$2.4 million from MASA's annual taxable income.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------------------------------
Three months ended Year ended December 31
December 31
----------------------------------------------------------------------------
(tabled amounts are
expressed in thousands of
US dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Cash flows from operating
activities
- Before working capital 3,459.4 (2,576.2) (434.8) (12,307.7)
- After working capital (250.4) (1,532.7) (3,018.2) (22,403.9)
Cash flows from financing
activities (656.3) 9,514.5 52,722.5 53,546.3
Cash flows from investing
activities (4,501.7) (5,156.2) (24,525.0) (33,647.7)
Effect of exchange rates on
cash (296.0) 310.8 (229.9) 643.4
Net cash flows (5,408.4) 2,825.6 25,179.3 (2,505.3)
Cash balance 35,653.0 10,703.6 35,653.0 10,703.6
----------------------------------------------------------------------------
At December 31, 2011, the Company had cash and cash equivalents of $35.7 million
and finished gold bullion inventory of approximately 2,700 ounces. The Company
has adequate funds available to meet its working capital requirements, debt
payments, and execute its planned capital upgrades and exploration activities in
2012. The Company expects to spend approximately $39 million in capital
additions to Aurizona consisting of approximately $18 million on general
operations expansion and sustaining projects, $11 million on mining fleet and
$10 million on expansion studies and plant equipment. The Company also plans to
spend approximately $12 million on exploration activities, which consist of some
deep drill holes at the Piaba pit and on exploration targets within the Maranhao
Greenfields project.
In Q4, the Company achieved positive operating cash inflow before working
capital due to the achievement of operating income during the quarter. The full
year operating cash outflow was due to net loss for the year. The Q4 and full
year operating cash flow improved over the comparative periods of 2010 due to
the improved operating results.
Cash outflow from financing activities in Q4 included the $3 million debt
repayment to Brascan and Eldorado, which was offset by the over-allotment
proceeds from Q3's equity financing and private placement. The full year cash
inflow of $52.5 million consists of proceeds raised from equity financing and
private placement and the drawdown of the WestLB facilities, which were
partially used to repay the RMB facility. The 2010 comparative periods included
private placement equity financings.
Cash outflow from investing activities in Q4 consisted of $2.1 million on
payments to further define the Aurizona resource and $2.4 million on capital
items at the Aurizona plant. The annual expenditure consisted of $14.3 million
on payments related to the Aurizona resource definition and $10.2 million on
capital items at Aurizona, which included the plant upgrades. The 2010
comparative periods included capital payments related to the construction of the
Aurizona plant.
As at December 31, 2011, the Company had the following contractual obligations
outstanding:
----------------------------------------------------------------------------
(tabled
amounts are
expressed in
thousands of Total Less than 1 - 2 2 - 3 3 - 4 4 - 5 Thereafter
US dollars) 1 year years years years years
----------------------------------------------------------------------------
Long term
debt 30,291.0 3,273.9 5,373.9 6,073.9 14,390.3 1,179.0 -
Accounts
payables 8,178.5 8,178.5 - - - - -
Asset
retirement
obligation 7,008.9 - - - - - 7,008.9
----------------------------------------------------------------------------
Senior secured credit facility with WestLB AG ("WestLB")
In July 2011, the Company closed a senior secured credit facility with WestLB.
This facility is comprised of a $20.0 million senior secured term loan (the
"Term Loan") and a 15.6 million BRL senior secured revolving loan (the
"Revolving Facility"). The Term Loan also has a cash sweep provision, which has
no material impact to the Company's cash position or financial statements as at
December 31, 2011. The purpose of the Facility was to refinance the Company's
existing debt with RMB Resources and to fund additional capital expenditures and
working capital needs at the Aurizona gold mine.
The Term Loan is a 5 year loan with semi-annual instalments commencing on July
1, 2012 and bears interest at LIBOR plus 3.625%. The Revolving Facility is
denominated in Brazilian Reais, matures on July 1, 2014 and bears interest at
CDI plus 3.25%. Any outstanding commitments under the Revolving Facility shall
be repaid in full on the final maturity date.
The Company has provided security on the facility in the form of a first fixed
floating charge over the Aurizona operation, a first mortgage over the shares of
Mineracao Aurizona S.A. ("MASA") and of the rights, title and licenses
associated with the operation and a general security agreement by the Company in
favour of WestLB AG.
The Company shall maintain a debt service coverage ratio ("DSCR") to be greater
than 1.35, a loan life coverage ratio ("LLCR") to be less than 1.35 and a
reserve tail ratio ("RTR") to be greater than 30% over the life of the loan.
Aurizona project debt facility
In December 2009, the Company entered into a senior secured, project debt
facility (the "RMB Facility") in the amount of up to $15.0 million with RMB
Resources Inc. ("RMB") to assist in the completion of the Aurizona processing
plant. The RMB Facility was comprised of two tranches in the amount of $7.5
million each that bore interest at LIBOR plus 7.5% and was to be fully repaid by
December 31, 2012.
The RMB Facility was repaid in full with the proceeds from the West-LB Term Loan
during the year.
RMB $5.5 million prepaid gold agreement
On May 25, 2011, the Company entered into a $5.5 million prepaid gold agreement
with RMB. In exchange for the upfront cash received by the Company, the Company
was required to deliver a total of 3,880 ounces of gold to RMB. The Company had
fulfilled this obligation during the year.
Commitment from Acquisition of Aurizona Goldfields Corporation
In January 2007, the Company acquired the Aurizona property from Brascan Brasil
("Brascan") and Eldorado Gold Corporation ("Eldorado") in exchange for a series
of staged payments (the "Purchase Agreement"), some of which were conditional
upon the project reaching commercial production, as defined in the Purchase
Agreement. The Company has repaid all outstanding amounts in relation to this
agreement but remained liable for payments of $1.0 million payable to each party
on the first, second and third anniversary of the commencement of commercial
production of Aurizona. As defined under the terms of the Purchase Agreement,
the Company achieved commercial production on December 2, 2010 resulting in the
first payment becoming due and payable on December 2, 2011.
In July 2011, the Company entered into an agreement with Brascan and Eldorado to
amend the outstanding debt of $6.0 million of the Company to Brascan and
Eldorado. The Company paid $1.5 million and issued 2,417,949 common shares of
the Company, to each party respectively and the debt obligation was fulfilled as
at December 31, 2011.
FINAME Equipment Purchase Financing ("FINAME")
In February 2011, the Company entered into debt financing in the amount of 4.0
million Brazilian Reais ("BRL") to purchase mining equipment through the FINAME
financing program, which is administered through the Brazilian Development Bank
("BNDES"). Interest is calculated at 5.5% per annum and the FINAME is repayable
in equal monthly instalments beginning September 15, 2011 and ending February
15, 2016.
Derivative Contracts
Subsequent to quarter end, the Company entered into the following derivative
contracts as required under the terms of the WestLB Facility:
BRL / USD Forward Contracts
The Company sells US dollars and buys Brazilian Real as follows:
----------------------------------------------------------------------------
Expiry Date Notional Amount (USD) BRL / USD Price
----------------------------------------------------------------------------
December 16, 2013 $6,000.0 1.86725
June 16, 2014 $6,000.0 1.92986
December 15, 2014 $6,000.0 1.99265
June 15, 2015 $6,000.0 2.04843
December 15, 2015 $6,000.0 2.11206
June 15, 2016 $6,000.0 2.16633
----------------------------------------------------------------------------
Floating to Fixed Interest Rate Swap Contracts
The Company pays a fixed annual interest rate of 1.495% and receives 6 month US
Libor rate as follows:
----------------------------------------------------------------------------
Start Date End Date Notional Amount (USD)
----------------------------------------------------------------------------
January 25, 2012 July 25, 2012 $ 20,000.0
July 25, 2012 January 25, 2013 $ 12,304.0
January 25, 2013 July 25, 2013 $ 12,304.0
July 25, 2013 January 27, 2014 $ 4,235.7
January 27, 2014 July 25, 2014 $ 4,235.7
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Shareholders' equity increased over the prior year due to the Company's equity
financing activities during the period, which was partially offset by an
increase in the deficit.
During the current fiscal 2011, the Company closed a marketed public offering
and concurrent private placement of units of the Company for total gross
proceeds of approximately CA$39.4 million and subsequent to the quarter end, an
additional CA$2.6 million was received on the exercise of the over-allotment
option. Each unit consisted of one common share of the Company plus one half
common share purchase warrant at a price of CA$0.52 per unit.
The Company intends to use the proceeds as follows:
-- Aurizona expansion scoping study / pre-feasibility / feasibility study;
-- Aurizona resource definition expansion;
-- Aurizona plant expansion;
-- Maranhao Greenfields discovery exploration;
-- Cachoeira social impact study;
-- Reduction of debt;
-- Corporate development; and
-- General corporate purposes and working capital.
Each full warrant is exercisable to acquire one common share of the Company at a
price of CA$0.70 for a period of 24 months from the closing of the offering,
which was September 29, 2011.
On February 24th, 2012, the Company completed its share consolidation of the
Company's common shares at a ratio of 5 to 1. The Company's currently
outstanding non-listed warrants (the "Non-Listed Warrants") and stock options
were adjusted on the same basis. There are currently 6,859,221 Non-Listed
Warrants and 40,600,282 listed warrants (the "Listed Warrants") issued and
outstanding. Following the Consolidation, each five (5) Non-Listed Warrants will
entitle the holder to purchase one post-consolidation Common Share at an
aggregate exercise price of $5.00 per post-consolidation Common Share and each
five (5) Listed Warrants will entitle the holder to purchase one
post-consolidation Common Share at an aggregate exercise price of $3.50 per
post-consolidation Common Share. Both the Non-Listed Warrants and the Listed
Warrants are exercisable at any time until September 29, 2013.
As at the date of this report the Company had 104,540,169 common shares
outstanding, options to purchase 5,198,000 common shares and warrants to
purchase 9,491,901 common shares outstanding.
The following is a summary of stock options outstanding as at the date of this
report:
----------------------------------------------------------------------------
Price per share
Number of shares ('000s) Vested ('000s) CA$ Expiry Date
----------------------------------------------------------------------------
20 20 2.50 14-Mar-12
41 41 4.25 8-Aug-12
42 42 6.15 16-Jan-13
33 33 5.25 2-May-13
50 50 4.50 20-Jun-13
140 140 4.50 19-Sep-13
990 990 2.10 24-Jul-14
150 150 1.83 29-Jul-14
20 20 2.75 4-Jan-15
162 162 3.15 5-Jul-15
1,000 300 2.90 24-Sep-15
1,265 180 3.25 12-Apr-16
570 50 2.75 18-May-16
520 173 2.95 9-Aug-16
195 - 2.30 14-Oct-16
----------------------------------------------------------------------------
5,198 2,351
----------------------------------------------------------------------------
Subsequent to the Consolidation, as explained above, each 5 Warrants will
entitle the holder to purchase 1 post-consolidation Common Share at an aggregate
exercise price per the post-consolidation common share listed in the table
below. The following is a summary of warrants outstanding as at the date of this
report:
----------------------------------------------------------------------
Number of warrants ('000s) Price per share CA$ Expiry Date
----------------------------------------------------------------------
6,859 5.00 29-Sep-13
----------------------------------------------------------------------
40,600 3.50 29-Sep-13
----------------------------------------------------------------------
47,459
----------------------------------------------------------------------
Consolidated Statements of Loss and Comprehensive Loss
For the years ended December 31,
(expressed in thousands of U.S. dollars, except where indicated)
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Revenue
Gold sales $ 55,301.4 $ 14,028.5
Other revenue - 2,078.0
----------------------------------------------------------------------------
55,301.4 16,106.5
----------------------------------------------------------------------------
Operating expenses
Cost of goods sold (40,090.1) (21,891.9)
Depletion and amortization (6,386.2) (2,133.7)
----------------------------------------------------------------------------
Gross Profit 8,825.1 (7,919.1)
----------------------------------------------------------------------------
Other (expenses) income, net
Exploration (5,724.5) (2,788.8)
General and administrative (4,397.0) (2,934.1)
Loss on derivative liability (3,064.8) (947.2)
Foreign exchange gain 2,771.3 921.3
Stock-based compensation (3,257.5) (1,810.3)
Finance income 251.2 226.2
Finance cost (4,793.8) (1,092.6)
Other expenses (1,195.2) (17.7)
Loss before income taxes (10,585.2) (16,362.3)
Income taxes expense - current (2,426.7) -
Income taxes recovery - future 8,122.4 -
----------------------------------------------------------------------------
Net loss and comprehensive loss $ (4,889.5) $ (16,362.3)
----------------------------------------------------------------------------
Loss per common share
Basic & fully diluted (0.01) (0.04)
Weighted average shares outstanding (000's)
Basic & fully diluted 459,024 387,402
----------------------------------------------------------------------------
Total shares issued and outstanding (000's) 522,551 434,539
----------------------------------------------------------------------------
Consolidated Balance Sheets
As at December 31,
(expressed in thousands of U.S. dollars, except where indicated)
----------------------------------------------------------------------------
December 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ $ $
Accounts receivable and prepaid
expenses 5,029.7 3,647.9 743.7
Derivative asset 106.0 - -
Inventory 8,710.3 6,325.5 393.6
Investments - - 2,942.9
----------------------------------------------------------------------------
49,499.0 20,677.0 16,645.7
Property, plant and equipment 97,862.4 88,166.0 54,867.6
Derivative asset 58.9 - -
Deferred tax asset 8,122.4 - -
Other assets 2,659.1 1,089.5 408.1
----------------------------------------------------------------------------
Total assets $ $ $
----------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ $ $
Current portion of derivative
liability - 1,605.8 -
Current portion of debt
instruments 3,098.2 8,118.3 301.6
Current portion of other
liabilities 576.3 1,748.2 1,787.2
----------------------------------------------------------------------------
11,853.0 14,996.5 7,453.4
Debt instruments 25,937.8 9,383.2 4,989.2
Derivative liability 9,435.8 1,019.2 -
Other liabilities 9,676.6 19,917.9 20,308.8
Asset retirement obligation 2,187.6 2,370.9 2,108.5
----------------------------------------------------------------------------
Total liabilities 59,090.8 47,687.7 34,859.9
----------------------------------------------------------------------------
Shareholders' equity
Share capital 148,989.0 107,233.3 65,687.7
Deficit (49,878.0) (44,988.5) (28,626.2)
----------------------------------------------------------------------------
Total shareholders' equity 99,111.0 62,244.8 37,061.5
----------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ $ $
----------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity and Deficit
As at December 31,
(expressed in thousands of U.S. dollars, except where indicated)
----------------------------------------------------------------------------
Attributable to equity holders of the Company
----------------------------------------------------------------------------
Shares Share Contributed
('000) capital surplus Deficit Total
----------------------------------------------------------------------------
Balance at
January 1,
2010 358,837 $ $ 5,624.5 $ $
Net loss for
the year - - - (16,362.3) (16,362.3)
Escrow shares
returned to
treasury and (214) (35.7) 35.7 - -
Stock options
exercised 3,267 1,183.2 (405.6) - 777.6
Stock-based
compensation
charges - - 1,952.9 - 1,952.9
Issue of share
capital, net 72,649 38,701.6 113.5 - 38,815.1
----------------------------------------------------------------------------
Balance at
December 31,
2010 434,539 $ 99,912.3 $ 7,321.0 $ $ 62,244.8
----------------------------------------------------------------------------
Net loss for
the year - - - (4,889.5) (4,889.5)
Stock options
exercised 2,475 1,583.6 (596.3) - 987.3
Stock-based
compensation
charges - - 3,257.6 - 3,257.6
Issue of share
capital, net 85,537 37,510.8 - - 37,510.8
----------------------------------------------------------------------------
Balance at
December 31,
2011 522,551 $139,006.7 $ 9,982.3 (49,878.0) $ 99,111.0
----------------------------------------------------------------------------
Consolidated Statements of Cash Flows
For the years ended December 31,
(expressed in thousands of U.S. dollars, except where indicated)
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) for the year $ (4,889.5) $ (16,362.3)
Items not affecting cash
Income tax provision (5,695.7) -
Depletion and amortization 6,437.6 2,180.5
Recognition of other liabilities (3,118.2) (429.9)
Unrealized foreign exchange gains (2,970.8) (872.4)
Unrealized (gains) losses from derivative 3,064.8 947.2
Stock-based compensation charges 3,257.5 1,810.3
Accretion of asset retirement obligation 257.9 188.5
Accretion of interest 2,074.8 251.8
Other 1,146.8 (21.4)
----------------------------------------------------------------------------
(434.8) (12,307.7)
Change in non-cash operating working capital
Increase in accounts receivable and prepaid
expense (2,719.8) (3,993.5)
Increase in inventory (2,112.5) (5,617.8)
Increase (decrease) in accounts payable and
accruals 2,248.9 (484.9)
----------------------------------------------------------------------------
(3,018.2) (22,403.9)
----------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from prepaid gold agreement 5,500.0 13,868.8
Payment for settlement of prepaid gold agreement (3,862.7) -
Proceeds from debt 30,000.0 -
Payment of debt financing fees (1,712.7) -
Repayment to principal of debt financing (16,333.3) (1,666.7)
Proceeds from issuance of special warrants, net - 29,786.0
Proceeds on issuance of common shares 39,131.2 11,558.2
----------------------------------------------------------------------------
52,722.5 53,546.3
----------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from disposal of investments - 2,964.2
Payments for mineral properties (14,334.6) (2,628.7)
Payments for property, plant and equipment (10,190.4) (33,983.2)
(24,525.0) (33,647.7)
Effect of exchange rate changes on cash (229.9) 643.4
Increase (decrease) in cash and cash equivalents 25,179.3 (2,505.3)
Cash and cash equivalents - beginning of year 10,703.6 12,565.5
----------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 35,653.0 $ 10,703.6
----------------------------------------------------------------------------
Reference
(1) The foregoing are goals and targets forming part of the Company's
business plan and strategy. There is no assurance that such goals and
targets will be realized. Future production goals and targets and
mineralization definition goals will be subject to detailed mining
studies and decisions of the board of the Company.
(2) Cash cost is a non IFRS measure. See "Non IFRS Measures".
(3) General and administration ("G&A") consists of general and
administrative expenses, professional fees and stock based
compensation charges.
(4) The quarterly and annual comparatives from 2009 are presented under
Canadian GAAP. IFRS transition began on January 1, 2010.
On behalf of the Board of Directors
LUNA GOLD CORP.
John Blake - President and CEO
Forward-Looking Statements
This MD&A includes certain statements that constitute "forward-looking
statements", and "forward-looking information" within the meaning of applicable
securities laws ("forward-looking statements" and "forward-looking information"
are collectively referred to as "forward-looking statements", unless otherwise
stated). These statements appear in a number of places in this MD&A and include
statements regarding our intent, or the beliefs or current expectations of our
officers and directors. Such forward-looking statements involve known and
unknown risks and uncertainties that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. When
used in this MD&A, words such as "believe", "anticipate", "estimate", "project",
"intend", "expect", "may", "will", "plan", "should", "would", "contemplate",
"possible", "attempts", "seeks", "goals", "targets" and similar expressions are
intended to identify these forward-looking statements. Forward-looking
statements may relate to the Company's future outlook and anticipated events or
results and may include statements regarding the Aurizona property (including
amount of production, cost of production, future potential) and other
development projects of the Company, the Company's future financial position,
business strategy, budgets, litigation, projected costs, financial results,
taxes, plans and objectives. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends affecting the financial condition of our business. These
forward-looking statements were derived utilizing numerous assumptions regarding
expected growth, results of operations, performance and business prospects and
opportunities, general business and economic conditions, interest rates, the
supply and demand for, deliveries of, and the level and volatility of prices of
gold and related products, the timing of the receipt of regulatory and
governmental approvals of our projects and other operations, our costs of
production and production and productivity levels, as well as those of our
competitors, power prices, continuing availability of water and power resources
for our operations, market competition, the accuracy of our resource and reserve
estimates (including with respect to size, grade and recoverability) and the
geological, operational and price assumptions on which these are based,
conditions in financial markets, the future financial performance of the
Company, our ability to attract and retain skilled staff, our ability to procure
equipment and operating supplies, positive results from the studies on our
projects, our gold inventories,
our ability to secure adequate transportation for our products, our ability to
obtain permits for our operations and expansions, and our ongoing relations with
our employees and business partners that could cause our actual results to
differ materially from those in the forward-looking statements. While the
Company considers these assumptions to be reasonable, based on information
currently available, they may prove to be incorrect. Accordingly, you are
cautioned not to put undue reliance on these forward-looking statements.
Forward-looking statements should not be read as a guarantee of future
performance or results. To the extent any forward-looking statements constitute
future-oriented financial information or financial outlooks, as those terms are
defined under applicable Canadian securities laws, such statements are being
provided to describe the current anticipated potential of the Company and
readers are cautioned that these statements may not be appropriate for any other
purpose, including investment decisions.
Forward-looking statements are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those expressed in
or suggested by the forward-looking statements. Risks and uncertainties that may
cause actual results to vary materially include, but are not limited to, changes
in gold prices, changes in interest and currency exchange rates, acts of foreign
governments, inaccurate geological and metallurgical assumptions (including with
respect to the size, grade and recoverability of mineral reserves and
resources), unanticipated operational difficulties (including failure of plant,
equipment or processes to operate in accordance with specifications or
expectations, cost escalation, unavailability of materials and equipment,
government action or delays in the receipt of government approvals, adverse
weather conditions and unanticipated events related to health, safety and
environmental matters), labour disputes, political risk, social unrest, failure
of counterparties to perform their contractual obligations, changes in our
credit ratings and changes or further deterioration in general economic
conditions, uncertainties with respect to operating in Brazil, including
political unrest, theft, uncertainties with respect to the rule of law,
corruption and uncertain court systems and other risks discussed elsewhere in
this MD&A and our latest AIF filed on SEDAR at www.sedar.com.
Forward-looking statements speak only as of the date those statements are made.
Except as required by applicable law, we assume no obligation to update or to
publicly announce the results of any change to any forward-looking statement
contained or incorporated by reference herein to reflect actual results, future
events or developments, changes in assumptions or changes in other factors
affecting the forward-looking statements. If we update any one or more
forward-looking statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking statements.
You should not place undue importance on forward-looking statements and should
not rely upon these statements as of any other date. All forward-looking
statements contained in this MD&A are expressly qualified in their entirety by
this cautionary statement.
Other Technical Information
Peter Mah, P.Eng., Certified Mining Engineer, the Company's Vice President
Operations is the Qualified Person as defined under National Instrument 43-101
responsible for the scientific and technical work on the development programs
and has reviewed and approved the corresponding technical disclosure throughout
this MD&A. Titus Haggan Ph.D., EurGeol Certified Professional Geologist #746,
the Company's Vice President of Exploration, is the Qualified Person as defined
under National Instrument 43-101 responsible for the scientific and technical
work on the exploration programs and has reviewed and approved the corresponding
technical disclosure throughout this MD&A.
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