Jaguar Mining Announces Second Quarter 2013 Financial Results
PRESS RELEASE
August 7, 2013 2013-11 For Immediate Release TSX: JAG
Jaguar Mining Announces Second Quarter 2013 Financial Results
Toronto, Ontario, Canada, August 7, 2013 - Jaguar Mining Inc. ("Jaguar" or the "Company") (TSX: JAG) today reported a net loss of $64.0 million or $0.74 per fully diluted share for the quarter ended June 30, 2013. This result compares to a net loss of $16.4 million or $0.19 per fully diluted share in the second quarter of 2012. The second quarter 2013 result includes an impairment charge of $46.8 million, an interest expense of $8.1 million, a foreign exchange loss of $4.7 million, and a $3.0 million unrealized non-cash gain on the conversion option embedded in convertible debt (see note 1). Excluding these nonoperating items, Jaguar’s second quarter result was a net loss of $7.4 million or $0.09 per fully diluted share.
Second Quarter Highlights
- Management’s proposed slate of directors was elected on June 10, 2013 at the annual general and special meeting of the shareholders (AGM);
- Delisted from the NYSE on June 17, 2013;
- New head of Human Resources appointed;
- 12% decline in gold prices in Q2 2013 which averaged $1,415 per ounce compared to $1,608 per ounce in Q2 2012;
- 7% decline in gold production totaling 22,503 ounces in Q2 2013 compared to 24,239 ounces in Q2 2012 (excluding Paciência);
- 9% decline in cash operating cost reaching $931 per ounce in Q2 2013 versus $1,027 per ounce in Q2 2012 (excluding Paciência);
- 14% reduction in Corporate Lost Time Injury (LTI) in Q2 2013 compared to Q2 2012;
- 88% reduction in LTI severity rate in the six months ended June 30, 2013 2013 compared to the year ended December 31, 2012;
- Capital spending guidance reduced from $36.6 million to $28.9 million for 2013;
- Drawdown of the remaining $25.0 million from the Renvest Credit Facility.
During the second quarter 2013, Jaguar sold 22,920 ounces of gold at an average realized price of $1,415 per ounce. This compared to sales of 28,933 ounces of gold at an average realized price of $1,608 per ounce in the three months ended June 30, 2012. Average cash operating cost per ounce was $931 in the second quarter 2013 compared to $1,162 in the second quarter 2012 ($1,027 excluding Paciência). Cash operating margin was $484 per ounce in the second quarter 2013 compared to $446 per ounce in the second quarter 2012. The decrease in the Company’s average cash operating cost per ounce during the second quarter 2013 as compared to the second quarter 2012 was attributable to Jaguar’s on-going cost reduction and operational improvement program which included placing the Paciência operation on care and maintenance beginning in May 2012, reduced headcount at the mining operations and continued focus on reducing dilution and improving safety and productivity.
Gold production for the quarter ended June 30, 2013 totaled 22,503 ounces compared to 26,888 ounces of gold in the second quarter of 2012 (24,239 ounces excluding Paciência). The decline in comparative quarterly production levels was the result of the Company’s decision to place the Paciência operation on care and maintenance beginning in May 2012 and due primarily to mill liner failures requiring many stop and starts for maintenance, lower head grade mill feed due to the unavailability of Caeté’s Pilar mine run muck and primarily issues in transportation from the Pilar mine to the Caeté plant due to road conditions from Cambota to the Vale Gongo Soco pit area. A production recovery plan is in place for next quarter.
Commenting on the Company’s results, David Petroff, Jaguar’s President and CEO stated: “The operating team is continuing to deliver on the target set in December 2012. Production targets are being met. The focus remains on stabilizing operations, to ensure safety is a priority and that the gains made in the first half of 2013 can be continued during the balance of the year. The $25.0 million drawdown from Renvest was completed on June 26, 2013 to ensure we are able to continue executing our business in a timely and efficient manner. Nonetheless, the reduction in the price of gold in Q2 2013 and its continuing weakness has caused the Company to double our efforts in examining all sources and uses of cash with a view to reducing net cash outlays while maintaining the turnaround efforts. The support from all levels of Jaguar’s employees, management and other service providers has been crucial in delivering these results and we believe we will be successful going forward. Their efforts are much appreciated and we look forward to building on them”.
Summary of Key Operating Results – Consolidated
Three Months Ended June 30, Six Months Ended June 30, 2013 2012 2013 2012 ($ in 000s, except per share amounts)
Gold sales $ 32,427 $ 46,535 $ 73,597 $ 97,507 Ounces sold 22,920 28,933 48,236 59,071 Average sales price $ / ounce 1,415 1,608 1,526 1,651 Cash operating cost $ / ounce 931 1,162 919 1,128 Gross profit (loss) 336 (5,044) 10,717 (8,722) Net loss (64,041) (16,350) (70,967) (13,541) Basic loss per share (0.74) (0.19) (0.83) (0.16) Diluted loss per share (0.74) (0.19) (0.83) (0.16) Weighted avg. # of shares outstanding - basic 86,099,006 84,409,648 85,030,324 84,409,648 Weighted avg. # of shares outstanding - diluted 86,099,006 84,409,648 85,030,324 84,409,648
Key Operating Statistics by Operation
| Three Months Ended June 30, 2013 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Caeté | 123 148 | 3.00 2.96 | 88% 88% | 10,345 12,158 | $ 78.30 83.80 | $ 9 23 938 |
| Total | 271 | 2.98 | 88% | 22,503 | $ 81.30 | $ 9 31 |
| Six Months Ended June 30, 2013 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Caeté | 231 305 | 3.15 3.12 | 88% 88% | 20,666 26,674 | $ 80.30 $ 78.40 | $ 8 93 $ 8 63 |
| Total | 536 | 3.13 | 88% | 47,340 | $ 79.20 | $ 8 76 |
| Three Months Ended June 30, 2012 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Caeté Paciência | 154 160 37 | 2.35 3.05 1.91 | 90% 90% 87% | 10,435 13,804 2,649 | $ 73.70 $ 81.10 $ 140.00 | $ 1 ,125 $ 9 53 $ 2 ,219 |
| Total | 351 | 2.62 | 89% | 26,888 | $ 84.00 | $ 1 ,162 |
| Six Months Ended June 30, 2012 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Caeté Paciência | 312 315 170 | 2.18 3.06 2.15 | 90% 90% 90% | 20,448 27,685 9,987 | $ 79.50 $ 88.20 $ 92.30 | $ 1 ,232 $ 1 ,036 $ 1 ,536 |
| Total | 797 | 2.52 | 90% | 58,120 | $ 85.70 | $ 1 ,191 |
2013 Outlook
The Company reiterates 2013 gold production guidance between 85,000 to 95,000 ounces and cash operating costs are expected to be in the range of $950 to $1,100 per ounce (based on an assumed exchange rate of R$2.0 per US$1.0). Capital expenditures for 2013 are anticipated to be reduced by approximately $7.7 million (by way of deferred capital expenditures to conserve cash), for a revised total of $28.9 million, of which $12.1 million is expected to be spent at Turmalina (previously targeted $12.7 million) and $15.7 million at Caeté (previously targeted $21.7 million). A Company wide effort has been made to reduce operating costs and capital costs to reflect current market conditions. The capital reductions were structured to not jeopardize operations production requirements in 2014.
Conference Call Details
Members of the Jaguar senior management team will hold a conference call to discuss the second quarter results and operations on Thursday, August 8, 2013 at 1:00 p.m. ET. The call can be accessed via telephone or webcast.
Live Teleconference Access:
US/Canada Toll-Free Dial-In Number: (877) 201-0168 with Conference ID: 15983800 International Dial In: (647) 788-4901 with Conference ID: 15983800
Live audio webcast:
www.snwebcastcenter.com/webcast/jaguarmining/2013q2
Replay:
US/Canada Dial-In: (855) 859-2056 with Conference ID: 68812305 International Dial-In: (404) 537-3406 with Conference ID: 68812305
About Jaguar Mining
Jaguar is a junior gold producer in Brazil with operations in a prolific greenstone belt in the state of Minas Gerais and owns the Gurupi Project in Northern Brazil in the state of Maranhão. The Company also owns additional mineral resources at its approximate 210,000-hectare land base in Brazil. Additional information is available on the Company’s website at www.jaguarmining.com.
Company Contacts
Douglas Willock Chief Financial Officer (647) 494-5524 [email protected]
Forward Looking Statements
Certain statements in this press release constitute “Forward-Looking Statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. These Forward-Looking Statements include, but are not limited to, statements concerning the Company’s 2013 estimated gold production and cash operating cost. Forward-Looking Statements can be identified by the use of words, such as “are expected”, “is forecast”, “is targeted”, “approximately” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, or “will” be taken, occur or be achieved. Forward-Looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results or performance expressed or implied by the Forward-Looking Statements.
These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating gold prices and monetary exchange rates, the possibility of project cost delays and overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, uncertainties related to production rates, timing of production and the cash and total costs of production, changes in applicable laws including laws related to mining development, environmental protection, and the protection of the health and safety of mine workers, the availability of labor and equipment, the possibility of labor strikes and work stoppages and changes in general economic conditions. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in Forward-Looking Statements, there may be other factors that could cause actions, events or results to differ from those anticipated, estimated or intended.
These Forward-Looking Statements represent the Company’s views as of the date of this press release. The Company anticipates that subsequent events and developments may cause the Company’s views to change. The Company does not undertake to update any forward-looking statements, either written or oral, that may be made from time to time by or on behalf of the Company subsequent to the date of this discussion except as required by law. For a discussion of important factors affecting the Company, including fluctuations in the price of gold and exchange rates, uncertainty in the calculation of mineral resources, competition, uncertainty concerning geological conditions and governmental regulations and assumptions underlying the Company's forward-looking statements, see the "CAUTIONARY NOTE" regarding forward-looking statements and "RISK FACTORS" in the Company's Annual Information Form for the year ended December 31, 2012 filed on SEDAR and available at http://www.sedar.com and the Company's Annual Report on Form 40-F for the year ended December 31, 2012 filed with the United States Securities and Exchange Commission and available at www.sec.gov.
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Note: As required by applicable Canadian rules, effective the first quarter of 2011, Jaguar has prepared its financial statements in accordance with International Financial Reporting Standards (“IFRS”).
Additional details are available in the Company’s filings on SEDAR and EDGAR, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements for the period ended June 30, 2013.
The following tables contain information for the quarter ended June 30, 2013. The data presented are subject to final adjustment, but are believed to be materially accurate. Jaguar's unaudited interim financial statements for the period ended June 30, 2013 were filed on SEDAR and EDGAR on August 7, 2013. Readers should refer to those filings for the final unaudited interim financial statements and the associated footnotes which are an integral part of the tables.
Condensed Interim Consolidated Balance Sheets (Expressed in thousands of U.S. dollars)
(Unaudited)
June 30, December 31, 2013 2012
Assets Current assets:
Cash and cash equivalents $ 29,061 $ 13,856
| Accounts receivable | 1,025 | - | |
| Inventory | 23,071 | 26,342 | |
| Other accounts receivable | 8,966 | 7,983 | |
| Recoverable taxes | 6,033 | 9,031 | |
| Prepaid expenses and sundry assets | 2,605 | 3,055 | |
| Derivatives | - | 43 |
70,761 60,310
| Prepaid expenses and sundry assets | 3,473 | 2,428 |
| Restricted cash | 109 | 609 |
| Assets held for sale | 1,802 | 612 |
| Recoverable taxes | 50,956 | 54,458 |
| Property, plant and equipment | 263,278 | 301,383 |
| Mineral exploration projects | 67,750 | 84,075 |
$ 458,129 $ 503,875
Liabilities and Shareholders' Equity Current liabilities:
Accounts payable and accrued liabilities $ 25,135 $ 29,745
| Notes payable | 25,263 | 27,388 |
| Income taxes payable | 15,769 | 15,451 |
| Reclamation provisions | 3,872 | 4,124 |
| Other provisions | 8,245 | 4,796 |
| Deferred compensation liabilities | 39 | 105 |
| Other liabilities | - | 20 |
78,323 81,629
| Notes payable | 275,417 | 240,158 |
| Option component of convertible notes | 294 | 4,458 |
| Deferred income taxes | 5,463 | 6,624 |
| Reclamation provisions | 14,345 | 16,927 |
| Deferred compensation liabilities | 100 | 216 |
| Other liabilities | 57 | 60 |
| Total liabilities | 373,999 | 350,072 |
Shareholders' equity:
| Share capital | 371,077 | 370,043 |
| Stock options | 1,233 | 2,137 |
| Contributed surplus | 17,179 | 16,015 |
| Deficit | (305,359) | (234,392) |
| Total equity attributable to equity shareholders o | 84,130 | 153,803 |
$ 458,129 $ 503,875
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss (Expressed in thousands of U.S. dollars, except per share amounts)
(Unaudited)
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012
Gold sales $ 32,427 $ 46,535 $ 73,597 $ 97,507
| Production costs | (23,969) | (41,250) | (46,789) | (82,650) |
| Stock-based compensation | 9 | 301 | 9 | 343 |
| Depletion and amortization | (8,131) | (10,630) | (16,100) | (23,922) |
| Gross profit (loss) | 336 | (5,044) | 10,717 | (8,722) |
Operating expenses:
| Exploration | 274 | 26 | 601 | 71 |
| Paciência care and maintenance | 746 | - | 1,454 | - |
| Stock-based compensation (recoveries) | 68 | (1,487) | 291 | (2,295) |
| Administration | 4,759 | 2,601 | 8,973 | 8,946 |
| Amortization | 288 | 292 | 580 | 581 |
| Other | 1,629 | 590 | 4,612 | 991 |
| Total operating expenses | 7,764 | 2,022 | 16,511 | 8,294 |
| Loss before the following | (7,428) | (7,066) | (5,794) | (17,016) |
| Loss (gain) on derivatives | 3 | (114) | (479) | (114) |
| Gain on conversion option embedded in convertible debt | (3,041) | (57,427) | (4,164) | (71,752) |
| Foreign exchange loss | 4,683 | 7,685 | 4,037 | 4,511 |
| Accretion expense | 435 | 537 | 892 | 1,133 |
| Interest expense | 8,072 | 7,077 | 16,246 | 14,201 |
| Interest income | (253) | (566) | (514) | (2,424) |
| Loss (gain) on disposition of property | 556 | (90) | 2,291 | (368) |
| Impairment of properties | 46,834 | 47,692 | 46,834 | 47,692 |
| Other non-operating expenses (recoveries) | (826) | 566 | (325) | 534 |
| Total other expenses (income) | 56,463 | 5,360 | 64,818 | (6,587) |
| Loss before income taxes | (63,891) | (12,426) | (70,612) | (10,429) |
Income taxes
| Current income taxes | 661 | 302 | 1,001 | 621 |
| Deferred income taxes (recovery) | (511) | 3,622 | (646) | 2,491 |
| Total income taxes | 150 | 3,924 | 355 | 3,112 |
Comprehensive loss for the period $ (64,041) $ (16,350) $ (70,967) $ (13,541)
Condensed Interim Consolidated Statements of Shareholders' Equity (Expressed in thousands of U.S. dollars)
Common Shares Stock Options Contributed Deficit Total Surplus # $ # $ $ $ $
Balance, January 1, 2012 84,409,648 $ 370,043 4,005,000 $ 14,207 $ 3,414 $ (149,855) $ 237,809
| Vested options expired | - | - | (10,000) | (35) | 35 | - | - |
| Vested options expired upon termination | - | - | (610,000) | (2,017) | 2,017 | - | - |
| Net loss | - | - | - - - (13,541) (13,541) | ||||
| Balance, June 30, 2012 | 84,409,648 | 3,385,000 |
$ 370,043 $ 12,155 $ 5,466 $ (163,396) $ 224,268
Balance, January 1, 2013 84,409,648 $ 370,043 1,836,250 $ 2,137 $ 16,015 $ (234,392) $ 153,803
| Shares issued | 1,986,708 | 1,034 | - | - | - | - | 1,034 | |
| Stock options granted | - | - | 277,778 | 260 | - | - | 260 | |
| Vested options forfeited | - | - | (70,000) | (231) | 231 | - | - | |
| Vested options expired upon termination | - | - | (300,000) | (933) | 933 | - | - | |
| Net loss | - | - | - | - | - (70,967) (70,967) |
Balance, June 30, 2013 86,396,356 $ 371,077 1,744,028 $ 1,233 $ 17,179 $ (305,359) $ 84,130 Condensed Interim Consolidated Statements of Cash Flows (Expressed in thousands of U.S. dollars)
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2013 2012 2013 2012
Cash provided by (used in):
Operating activities:
Net loss and comprehensive loss for the period $ (64,041) $ (16,350) $ (70,967) $ (13,541) Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
| Unrealized foreign exchange loss (gain) | 1,666 | 3,318 | 464 | (1,734) |
| Stock-based compensation expense (recovery) | 59 | (1,788) | 281 | (2,638) |
| Interest expense | 8,072 | 7,077 | 16,246 | 14,201 |
| Accretion expense | 435 | 537 | 892 | 1,133 |
| Deferred income taxes | (511) | 3,622 | (646) | 2,491 |
| Depletion and amortization | 8,419 | 10,922 | 16,680 | 24,503 |
| Loss on disposition of property, plant and equipment | - | 532 | - | 547 |
| Write-down of Paciência inventory | - | 3,222 | - | 2,394 |
| Impairment of properties | 46,834 | 47,692 | 46,834 | 47,692 |
| Unrealized loss (gain) on derivatives | 141 | (114) | 43 | (114) |
| Unrealized gain on option component of convertible note | (3,041) | (57,427) | (4,163) | (71,752) |
| Provision and loss on disposition of property, plant and equipment | - | - | 2,224 | - |
| Reclamation expenditure | (71) | (10) | (83) | (113) |
| (2,038) | 1,233 | 7,805 | 3,069 |
Change in non-cash operating working capital:
| Accounts receivable | (1,025) | - | (1,025) | - |
| Inventory | 2,758 | 5,844 | 3,194 | 3,732 |
| Other accounts receivable | 1,577 | (789) | (982) | (1,285) |
| Recoverable taxes | 1,358 | (4,036) | 4,375 | (5,994) |
| Prepaid expenses and sundry assets | (1,244) | 460 | (1,286) | 131 |
| Accounts payable and accrued liabilities | (1,736) | (863) | (4,831) | (2,241) |
| Income taxes payable | (246) | (917) | 318 | (1,325) |
| Other provisions | 478 | 296 | 3,449 | 613 |
| Deferred compensation liabilities | (13) | (656) | (77) | (2,268) |
| (131) | 572 | 10,940 | (5,568) |
Financing activities:
| Repayment of debt | (6,588) | (1,119) | (13,686) | (2,218) |
| Increase in debt | 28,750 | 1,000 | 40,512 | 7,000 |
| Increase in restricted cash | - | - | 500 | - |
| Interest paid | (4,515) | (3,841) | (8,478) | (6,994) |
| Other liabilities | (35) | (1,630) | (24) | (1,709) |
| 17,612 | (5,590) | 18,824 | (3,921) |
Investing activities:
| Mineral exploration projects | (341) | (1,800) | (708) | (6,963) |
| Purchase of property, plant and equipment | (6,564) | (12,029) | (13,880) | (31,017) |
| Proceeds from disposition of property, plant and equipment | 254 | 659 | 481 | 684 |
| (6,651) | (13,170) | (14,107) | (37,296) |
Effect of foreign exchange on non-U.S. dollar denominated
| cash and cash equivalents | (154) | 269 | (452) | 4,254 |
| Increase (decrease) in cash and cash equivalents | 10,676 | (17,919) | 15,205 | (42,531) |
| Cash and cash equivalents, beginning of period | 18,385 | 49,863 | 13,856 | 74,475 |
Cash and cash equivalents, end of period $
Note 1 - Fair Valuation of Derivative Financial Instruments - Option Component of Convertible Notes
IFRS requires that derivative financial instruments be valued on a periodic basis. The option components of the Company's convertible notes are considered derivative financial instruments and are fair valued using the Crank-Nicolson valuation model using inputs, such as volatility and credit spread.
The carrying amount of the option components of the convertible notes was $294,000 at June 30, 2013 (December 31, 2012 - $4.5 million). The change in fair value of $3.0 million for the threemonths ended June 30, 2013 is shown as a gain on conversion option embedded in convertible debt in the statements of operations and comprehensive loss (period ended June 30, 2012 - $57.4 million gain).