Asanko Gold Reports Q3 2019 Results (All dollar amounts are
Asanko Gold Reports Q3 2019 Results
(All dollar amounts are
United States
dollars unless otherwise stated)
VANCOUVER
,
Nov. 7, 2019
/CNW/ -
Asanko Gold Inc. ("Asanko" or the "Company") (TSX,
NYSE American: AKG)
reports third quarter ("Q3") 2019 operating and financial results for the
Asanko Gold Mine ("AGM"), located in
Ghana
,
West Africa
. The AGM is a 50:50 joint venture ("JV")
with Gold Fields Ltd (JSE, NYSE: GFI), which is managed and operated by Asanko.
Q3 2019 Asanko Gold Mine Highlights (100% basis)
Record proceeds of
$91.0 million
generated from gold sales of 63,009 ounces at an average
realized price of
$1,443
per ounce
Record gold production of 62,440 ounces, on track to meet 2019 production guidance of
225,000 to 245,000 ounces
All-in sustaining cost
1
("AISC") of
$1,179
/oz, with 2019 guidance of
$1,040
–
$1,060
/oz
maintained as AISC are expected to drop in Q4 2019 with the completion of the Nkran Cut 2
pushback
Generated adjusted EBITDA
1
of
$25
.7 million, operating cash flows of
$45.6 million
and free
cash flow
1
of
$13.9 million
Net income after tax of
$5.1 million
, before any impairment adjustments that may arise from the
ongoing work associated with the AGM Life of Mine ("LOM") plan, which was announced on
August 15, 2019
Cash balance, receivables and gold on hand totalling
$46.5 million
Concluded a revolving credit facility in the amount of
$30 million
with
Rand Merchant Bank
Q3 2019 Quarterly Highlights for Asanko Gold Inc.
Net loss of
$147.5 million
primarily as a result of a
$128.3 million
impairment recognized by the
Company on its equity investment in the AGM JV, as a result of the ongoing work associated
with the AGM LOM plan
Adjusted net income of
$0.8 million
Adjusted EBITDA of
$9.4 million
Cash balance of
$13.6 million
and
$3.1 million
in receivables
Markus Felderer appointed as Senior Vice President, Corporate Development
"We are pleased to deliver another solid operating performance this quarter with record production
and sales that resulted in the mine generating adjusted
EBITDA of $
25.7
million
," said
Greg
McCunn
, Chief Executive Officer. "We have now completed the significant capital expenditure
program which was undertaken with the Cut 2 pushback at Nkran. As a result, we expect to see
substantially reduced AISC in Q4 and through 2020 which is expected to translate into free cash
flow from the AGM generating a return on invested capital to the JV partners. With cash building
and no debt, we believe that we are initiating a prudent capital allocation strategy, balancing the
requirement for value-enhancing exploration with a potential return of capital to our shareholders."
"We have also taken the necessary steps to align our balance sheet with the most recent
developments to the scope of the AGM Life of Mine plan which resulted in a non-cash impairment
charge this quarter. The updated Life of Mine plan is still subject to completion, but remains on
track to be completed and published along with an updated Mineral Resource and Reserve
declaration during the first quarter of 2020."
Summary of Q3 2019 Asanko Gold Mine Operational and Financial Results
AGM (100% Basis before any impairment
adjustments)
Q3 2019
Q2 2019
Q3 2018
Waste mined ('000t)
6,372
7,808
9,084
Ore mined ('000t)
1,105
1,056
1,730
Strip ratio (W:O)
5.8
7.4
5.3
Average gold grade mined (g/t)
1.5
1.6
1.4
Mining costs ($/t mined)
4.48
4.36
3.63
Ore treated ('000t)
1,439
1,375
1,299
Gold feed grade (g/t)
1.4
1.5
1.6
Gold recovery (%)
94
93
94
Processing costs ($/t treated)
10.42
10.60
11.26
Gold production (oz)
62,440
62,067
61,599
Gold sales (oz)
63,009
66,337
65,267
Average realized gold price ($/oz)
1,443
1,290
1,198
Operating cash costs
1
($/oz)
799
660
743
Total cash costs
1
($/oz)
872
724
803
All-in sustaining costs
1
($/oz)
1,179
1,180
971
All-in sustaining margin
1
($/oz)
264
110
227
All-in sustaining margin
1
($m)
16.6
7.3
14.8
Revenue ($m)
91.0
85.7
78.4
Income from mine operations ($m)
11.2
20.8
0.6
Net income (loss) after tax ($m)
5.1
13.6
(128.8)
Adjusted net income (loss) after tax
1
($m)
5.1
13.6
(2.1)
EBITDA
1
31.8
35.2
(103.5)
Adjusted EBITDA
1
25.7
31.2
23.1
Cash provided by operating activities
45.6
20.5
21.2
Key Operational Highlights of the AGM (on a 100% basis)
No lost time injuries ("LTI") were reported during the quarter, and the AGM has now achieved
over 30 months and more than 15.7 million employee hours worked without an LTI. There were
also no recordable injuries ("RI") reported during the quarter.
Record gold production of 62,440 and 184,932 ounces during the three and nine months ended
September 30, 2019
, on track to meet 2019 production guidance of 225,000-245,000 ounces.
Ore mined during Q3 2019 totaled 1.11 million tonnes ("Mt"), including 0.62Mt of ore from the
Esaase pit, at an average mined grade of 1.5 g/t and a total strip ratio of 5.8:1. The decrease
in strip ratio from Q2 2019 was due to a reduction in waste mining at Nkran as the Cut 2
pushback neared completion in Q3 2019.
The processing plant delivered another record quarterly milling performance of 1.44Mt, at an
average plant feed grade of 1.4 g/t.
JV Financial Performance
The AGM incurred operating cash costs per ounce
1
of
$799
and total cash costs per ounce
1
of
$872
for the quarter. Relative to Q2 2019, total cash costs per ounce increased by 20% in Q3
2019 as a result of the impact of lower gold sales volumes in Q3 2019, which had the effect of
increasing cash production cost on a per-unit basis. Total cash costs per ounce
1
was also
impacted by a decrease in the amount of stripping costs that was deferred (due to the Cut 2
pushback at Nkran nearing completion during the quarter) and thus more operational waste
mining costs were included in total cash costs per ounce
1
. Additionally, in Q3 2019, the AGM
recognized a
$4.7 million
adjustment to the carrying value of stockpile inventory in order to
reflect the net realizable value of stockpiled ore, of which
$1.9 million
was recorded in
production costs (
$30
/oz increase); whereas, in Q2 2019, the AGM recognized a
$0.6 million
reversal of previously recorded net realizable value adjustments on its stockpile inventory (
$9
/oz
decrease).
AISC
1
for Q3 2019 were
$1,179
per ounce, although higher than 2019 annual cost guidance of
$1,040
-
$1,060
per ounce, AISC
1
for the quarter correlates closely with the plan for Q3 2019.
It is expected that there will be a substantial reduction in AISC in Q4 2019 as capitalized
stripping will be completed early in the quarter. The Company reaffirms the 2019 cost guidance
for the AGM.
Q3 2019 gold sales of 63,009 ounces generated a record
$91.0 million
of gold sales proceeds
at an average realized gold price of
$1,443
per ounce, an increase of
$12.8 million
from Q3
2018. Revenue for Q3 2019 amounted to
$91.2 million
and includes by-product sales of
$0.2
million
.
Total cost of sales (including depreciation and depletion and royalties) amounted to
$79.9 million
in Q3 2019, an increase of
$2.1 million
from Q3 2018. The increase in cost of sales was
primarily due to higher operating cash costs per ounce, partially offset by a decrease in gold
ounces sold. It also included
$0.6 million
higher royalties expense due to record quarterly
revenues.
The AGM's net income after tax for the quarter amounted to
$5.1 million
, compared to a net
loss after tax of
$128.8 million
in Q3 2018, driven by income from operations of
$6.6 million
for
the quarter, compared to a net loss from operations of
$2.2 million
in Q3 2018. The net loss for
Q3 2018 was further impacted by the recognition of a fair value adjustment associated with the
JV Transaction. The improvement in operating earnings was due to an increase in the realized
gold price, partly offset by higher production cost and increased exploration activity.
The AGM reported adjusted EBITDA of
$25.7 million
for the three months ended
September
30, 2019
.
As at
September 30, 2019
, the JV had unaudited cash of
$36.6 million
on hand (
$3.0 million
of
which was restricted and held as collateral in respect of gold collar hedges),
$7.0 million
in
receivables from gold sales and
$2.9 million
in gold on hand (with a market value of
$3.1
million
).
Asanko Gold Inc. – Summary Q3 2019 Financial Results
Consolidated
Q3 2019
Q2 2019
Q3 2018
Net income (loss) attributable to
common shareholders ($m)
(147.5)
6.1
(0.3)
Net income (loss) per share attributable to common shareholders
($0.65)
$0.03
($0.00)
Adjusted EBITDA
1
($m)
9.4
12.4
13.3
The Company reported a net loss of
$147.5 million
in Q3 2019 compared to a net loss
attributable to common shareholders of
$0.3 million
in Q3 2018. The increase in net loss for Q3
2019 was predominantly the result of a
$128.3 million
impairment recognized on the Company's
equity investment in the AGM JV. The impairment was based on management's estimate of the
recoverable amount of the AGM, based on the latest available information from the ongoing
work associated with the AGM LOM plan which indicates that the target mine life and
production is expected to result in the extraction of materially less than the total previously
estimated reserves, and that the overall resource base for the AGM may be reduced
considerably (the JV has not yet finalized the AGM LOM plan and the life of mine cash flow
projections used in the impairment assessment are not based on a National Instrument 43-101
technical report and are not currently supported by the associated detailed engineering).
Additionally, the Company recognized a
$20.0 million
downward fair value adjustment on its
redeemable preference shares as a result of a change in the estimated timing of the cash flows
expected to be distributed by JV (there was no change to the face value of the preferred
shares). These factors were partly offset by improved financial performance of the AGM.
Adjusted net income for Q3 2019 amounted to
$0
.8 million (
$0.00
earnings per share)
compared to an adjusted net loss of
$1.6 million
(
$0.01
loss per share) in Q3 2018. The
improvement in adjusted net income was due to the Company's 45% interest in the adjusted net
income of the AGM which improved from an adjusted net loss of
$2.1 million
in Q3 2018 to
adjusted net income of
$5.1 million
in Q3 2019. In addition, the Company earned
$0.8 million
more in net service fees as operator of the AGM.
Cash used in operating activities in Q3 2019 was
$3.5 million
, compared to cash provided by
operating activities of
$2.9 million
in Q3 2018. The cash flow results for Q3 2018 still included
one month of the operating cash flow results of the AGM, which was deconsolidated effective
July 31, 2018
, whereas 2019 result do not include the operating results of the AGM.
Adjusted EBITDA
1
for Q3 2019 amounted to
$9.4 million
, compared to
$13.3 million
in Q3
2018. The decrease in adjusted EBITDA was primarily a result of the reduction in the
Company's interest in the AGM from 100% to 45%, as well as higher general and administrative
costs during associated with the restructuring of the executive management team. These
factors were partially offset by the increase in the AGM's mine operating earnings.
Held
$13.6 million
in cash and
$3.1 million
in receivables as of
September 30, 2019
. On
August
29, 2019
, the Company received
$10.0 million
from Gold Fields based on the achievement of
the agreed Esaase development milestone. The
$10.0 million
payment was recorded as a
partial redemption of the previously recognized
$20.0 million
preference shares. The remaining
$10.0 million
is expected to be received during the fourth quarter of 2019.
2019 Outlook
The Asanko Gold Mine is on track to meet 2019 guidance of 225,000 – 245,000 ounces at AISC of
$1,040
–
$1,060
/oz.
Guidance
Q3 2019 (Actual)
YTD 2019 (Actual)
FY 2019 (Forecast)
Gold Production (oz)
62,440
184,932
225,000 – 245,000
AISC ($/oz)
1,179
1,163
1,040 – 1,060
Further to the agreed development philosophy for the Asanko Gold Mine, which is to focus on near
term free cash flow generation and minimize capital investments, the JV partners are working on an
updated Mineral Reserve Estimate, which is expected to be published in Q1 2020. The updated
Mineral Reserve Estimate will not be based on any major development capital investments such as
further processing plant expansions or Esaase ore transportation infrastructure in the near term.
Appointment of Markus Felderer as Senior Vice President, Corporate Development
The Company is pleased to announce that Markus Felderer has been appointed Senior Vice
President of Corporate Development. Markus was most recently Vice President of Corporate
Development at Alio Gold. Prior to that he was Managing Director, Investment Banking, at
Canaccord Genuity, where he led an M&A and equity business focused solely on the mining sector.
Previously, he led HSBC's Metals & Mining Advisory/M&A business in the Americas. During his time
in investment banking, he provided a broad range of clients globally with financial and strategic
analyses and advice regarding growth and financing strategies. Prior to investment banking, Mr.
Felderer worked at Teck Cominco Ltd. in business development where he conducted evaluations of
mining projects and companies. Markus holds a Chartered Financial Analyst (CFA) designation and
has an MBA and a Bachelor of Applied Science, Mining and Mineral Process Engineering.
This news release should be read in conjunction with Asanko's Management's Discussion and Analysis and the Condensed Consolidated Interim Financial Statements for the
three and nine months ended
September 30, 2019, which are available at
www.asanko.com
and filed on SEDAR.
Notes:
1
Non-GAAP Performance Measures
The Company has included certain non-GAAP performance measures in this press release. These
non-GAAP performance measures do not have any standardized meaning. Accordingly, these
performance measures are 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.
Refer to the Non-GAAP Measures section of Asanko's Management Discussion and Analysis for an
explanation of these measures and reconciliations to the Company's reported financial results in
accordance with IFRS.
Operating Cash Costs per ounce and Total Cash Costs per ounce
Operating cash costs are reflective of the cost of production, adjusted for share-based
payments and by-product revenue per ounce of gold sold. Total cash costs include production
royalties of 5%.
All-in Sustaining Costs Per Gold Ounce
The Company has adopted the reporting of "all-in sustaining costs per gold ounce" ("AISC") as
per the World Gold Council's guidance. AISC include total cash costs, corporate overhead
expenses, sustaining capital expenditure, capitalized stripping costs and reclamation cost
accretion per ounce of gold sold.
Adjusted net income attributable to common shareholders
The Company has included the non-GAAP performance measures of adjusted net income (loss)
attributable to common shareholders and adjusted net income (loss) per common share.
Neither adjusted net income nor adjusted net income per share have any standardized meaning
and are therefore unlikely to be comparable to other measures presented by other issuers.
Adjusted net income excludes certain non-cash items from net income or net loss to provide a
measure which helps the Company and investors to evaluate the results of the underlying core
operations of the Company and its ability to generate cash flows and is an important indicator of
the strength of our operations and the performance of our core business.
Adjusted EBITDA
EBITDA provides an indication of the Company's continuing capacity to generate income from
operations before taking into account the Company's financing decisions and costs of amortizing
capital assets. Accordingly, EBITDA comprises net income (loss) excluding interest expense,
interest income, amortization and depletion, and income taxes. Adjusted EBITDA adjusts
EBITDA to exclude non-recurring items and to include the Company's interest in the adjusted
EBITDA of the JV. Other companies and JV partners may calculate EBITDA and Adjusted
EBITDA differently.
Free cash flow
The Company believes that in addition to conventional measures prepared in accordance with
IFRS, the Company and certain investors and analysts use free cash flow to evaluate the JV's
performance with respect to its operating cash flow capacity to meet non-discretionary outflows
of cash. The presentation of free cash flow is not meant to be a substitute for the cash flow
information presented in accordance with IFRS, but rather should be evaluated in conjunction
with such IFRS measures. Free cash flow is calculated as cash flows from operating activities
of the JV adjusted for cash flows associated with sustaining and non-sustaining capital
expenditures and payments made to mining contractors for leases capitalized under IFRS 16.
Qualified Person Statement
Frederik Fourie
(Pr.Eng), Asanko Senior Mining Engineer, is the Asanko Qualified Person, as
defined by Canadian National Instrument 43-101 (Standards of Mineral Disclosure), who has
approved the preparation of the technical contents of this news release.
About Asanko Gold Inc.
Asanko is focused on building a low-cost, mid-tier gold mining company through organic production
growth, exploration and disciplined deployment of its financial resources. The company currently
operates and manages the Asanko Gold Mine, located in
Ghana
,
West Africa
which is jointly owned
with Gold Fields Ltd. The Company is strongly committed to the highest standards for environmental
management, social responsibility, and health and safety for its employees and neighbouring
communities. For more information, please visit
www.asanko.com
.
Forward-Looking and other Cautionary Information
Certain statements and information contained in this news release constitute "forward-looking
statements" within the meaning of applicable U.S. securities laws and "forward-looking
information" within the meaning of applicable Canadian securities laws, which we refer to
collectively as "forward-looking statements". Forward-looking statements are statements and
information regarding possible events, conditions or results of operations that are based upon
assumptions about future conditions and courses of action. All statements and information other
than statements of historical fact may be forward looking statements. In some cases, forward-
looking statements can be identified by the use of words such as "seek", "expect", "anticipate",
"budget", "plan", "estimate", "continue", "forecast", "intend", "believe", "predict", "potential", "target",
"may", "could", "would", "might", "will" and similar words or phrases (including negative variations)
suggesting future outcomes or statements regarding an outlook.
Forward-looking statements in this news release include, but are not limited to: statements with
respect to the AGM LOM plan, including in respect of anticipated mine life, gold production,
anticipated resource and reserve levels and the evolving nature of the AGM LOM plan; statements
with respect to the estimated recoverable amount of the AGM and the assumptions applied in
assessing the recoverable amount of the AGM; estimates of the amount of gold production from
AGM in 2019; statements in respect of AGM's generation of free cash flow; statements regarding
our expectations to sweep cash from the joint venture and generating a return of invested capital;
Asanko's receipt of
$10 million
from Gold Fields Ltd. on or before
December 31, 2019
; statements
in respect of the future strength of Asanko's balance sheet; and cost estimates, including that
Asanko's AISC and stripping costs related to AGM will be reduced in Q4 2019. Such forward-
looking statements are based on a number of material factors and assumptions, including, but not
limited to: the accuracy of reserve and resource, grade, mine life, cash cost, net present value,
internal rate of return and production and processing estimates and other assumptions, projections
and estimates made in the technical reports for the AGM or in respect of AGM; the successful
completion of development and exploration projects, planned expansions or other projects within
the timelines anticipated and at anticipated production levels; that mineral resources can be
developed as planned; that the Company's relationship with joint venture partners will continue to
be positive and beneficial to the Company; interest and exchange rates; that required financing
and permits will be obtained; general economic conditions; that labour disputes or disruptions,
flooding, ground instability, geotechnical failure, fire, failure of plant, equipment or processes to
operate are as anticipated and other risks of the mining industry will not be encountered; that
contracted parties provide goods or services in a timely manner; that there is no material adverse
change in the price of gold or other metals; competitive conditions in the mining industry; title to
mineral properties; costs; taxes; the retention of the Company's key personnel; and changes in
laws, rules and regulations applicable to Asanko.
Forward-looking statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements to differ materially from those
anticipated in such forward-looking statements. The Company believes the expectations reflected
in such forward-looking statements are reasonable, but no assurance can be given that these
expectations will prove to be correct and you are cautioned not to place undue reliance on forward-
looking statements contained herein. Some of the risks and other factors which could cause actual
results to differ materially from those expressed in the forward-looking statements contained in this
news release, include, but are not limited to: mineral reserve and resource estimates may change
and may prove to be inaccurate; life of mine estimates are based on a number of factors and
assumptions and may prove to be incorrect; AGM has a limited operating history and is subject to
risks associated with establishing new mining operations; sustained increases in costs, or
decreases in the availability, of commodities consumed or otherwise used by the Company may
adversely affect the Company; actual production, costs, returns and other economic and financial
performance may vary from the Company's estimates in response to a variety of factors, many of
which are not within the Company's control; adverse geotechnical and geological conditions
(including geotechnical failures) may result in operating delays and lower throughput or recovery,
closures or damage to mine infrastructure; the ability of the Company to treat the number of tonnes
planned, recover valuable materials, remove deleterious materials and process ore, concentrate
and tailings as planned is dependent on a number of factors and assumptions which may not be
present or occur as expected; the Company's operations may encounter delays in or losses of
production due to equipment delays or the availability of equipment; the Company's operations are
subject to continuously evolving legislation, compliance with which may be difficult, uneconomic or
require significant expenditures; the Company may be unsuccessful in attracting and retaining key
personnel; labour disruptions could adversely affect the Company's operations; the Company's
business is subject to risks associated with operating in a foreign country; risks related to the
Company's use of contractors; the hazards and risks normally encountered in the exploration,
development and production of gold; the Company's operations are subject to environmental
hazards and compliance with applicable environmental laws and regulations; the Company's
operations and workforce are exposed to health and safety risks; unexpected costs and delays
related to, or the failure of the Company to obtain, necessary permits could impede the Company's
operations; the Company's title to exploration, development and mining interests can be uncertain
and may be contested; the Company's properties may be subject to claims by various community
stakeholders; risks related to limited access to infrastructure and water; the Company's exploration
programs may not successfully expand its current mineral reserves or replace them with new
reserves; the Company's common shares may experience price and trading volume volatility; the
Company's revenues are dependent on the market prices for gold, which have experienced
significant recent fluctuations; the Company may not be able to secure additional financing when
needed or on acceptable terms; Company shareholders may be subject to future dilution; risks
related to changes in interest rates and foreign currency exchange rates; changes to taxation laws
applicable to the Company may affect the Company's profitability and ability to repatriate funds; the
Company's primary asset is held through a joint venture, which exposes the Company to risks
inherent to joint ventures, including disagreements with joint venture partners and similar risks;
risks related to the Company's internal controls over financial reporting and compliance with
applicable accounting regulations and securities laws; the carrying value of the Company's assets
may change and these assets may be subject to impairment charges; the Company may be liable
for uninsured or partially insured losses; the Company may be subject to litigation; the Company
may be unsuccessful in identifying targets for acquisition or completing suitable corporate
transactions, and any such transactions may not be beneficial to the Company or its shareholders;
the Company must compete with other mining companies and individuals for mining interests; and
risks related to information systems security threats.
Although the Company has attempted to identify important factors that could cause actual results or
events to differ materially from those described in the forward-looking statements, you are
cautioned that this list is not exhaustive and there may be other factors that the Company has not
identified. Furthermore, the Company undertakes no obligation to update or revise any forward-
looking statements included in, or incorporated by reference in, this news release if these beliefs,
estimates and opinions or other circumstances should change, except as otherwise required by
applicable law.
Neither Toronto Stock Exchange nor the Investment Industry Regulatory Organization of
Canada
accepts responsibility for the adequacy or accuracy of this release.
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SOURCE
Asanko Gold Inc.
View original content:
http://www.newswire.ca/en/releases/archive/November2019/07/c6113.html
%SEDAR: 00015923E
For further information:
Enquiries: Lynette Gould - SVP Investor Relations, Toll-Free (N.America):
1-855-246-7341, Telephone: +1 778 729 0608, Email: [email protected]
CO: Asanko Gold Inc.
CNW 06:58e 07-NOV-19