Jaguar Mining Reports Second Quarter 2012 Financial Results, Cash Costs Improving at Continuing Operations
PRESS RELEASE
August 14, 2012 2012-24 For Immediate Release JAG - TSX/NYSE
Jaguar Mining Reports Second Quarter 2012 Financial Results, Cash Costs Improving at Continuing Operations
Belo Horizonte, Brazil, August 14, 2012 - Jaguar Mining Inc. (“Jaguar” or the “Company”) (JAG: TSX/NYSE) today reported a net loss of $16.4 million or $0.19 per fully diluted share for the quarter ended June 30, 2012. This result compares to net income of $15.6 million or $0.18 per fully diluted share in the second quarter of 2011. The second quarter 2012 result includes a $57.4 million unrealized non-cash gain on the conversion option embedded in convertible debt (see note 1), a $7.7 million loss from changing foreign exchange rates and a $47.7 million impairment charge on the assets at Paciência (see note 2). Excluding these items, Jaguar’s second quarter result was a net loss of $18.4 million or $0.22 per fully diluted share.
For the six month period ended June 30, 2012, Jaguar reported a net loss of $13.5 million or $0.16 per fully diluted share. This compares to net income of $19.3 million or $0.23 per fully diluted share in the six month period ended June 30, 2011.
Jaguar sold 28,933 ounces of gold at an average realized price of $1,608 per ounce in the three months ended June 30, 2012 compared to 40,184 ounces of gold at an average realized price of $1,507 per ounce in the three months ended June 30, 2011. Average cash operating cost per ounce was $1,162 in the second quarter 2012 compared to $1,268 in the first quarter 2012 and $799 in the second quarter 2011. Cash operating margin was $446 in the second quarter 2012 compared to $423 per ounce in the first quarter 2012 and $708 per ounce in the second quarter 2011. Excluding the limited production and sales from Paciência, the average cash operating cost in the second quarter 2012 was $1,027 per ounce.
The decrease in the Company’s average cash operating cost per ounce during the second quarter 2012 as compared to the first quarter 2012 was attributable to Jaguar’s on-going cost reduction program which included placing the Paciência operation on care and maintenance beginning in May 2012. The increase in average cash operating cost per ounce as compared to the second quarter of 2011 was attributable to higher mining dilution, lower total production which resulted in higher fixed cost absorption per ounce, and increased costs for labor, services, equipment maintenance and mining materials.
Commenting on the Company’s results and operations, John Andrews, Jaguar’s Interim CEO stated, “We are beginning to see some positive results from our cost reduction program. At our continuing operations, Turmalina and Caeté, average cash cost per ounce improved by 16% and 15%, respectively, when compared to the first quarter of 2012. We believe this is a good start but we recognize that we have much more work ahead of us before we reach our objectives for improved productivity and profitability.”
Summary of Key Operating Results – Consolidated
Three months ended June 30 Six months ended June 30 2012 2011 2012 2011
($ in 000s, except per share amounts)
Gold sales $ 46,535 $ 60,557 $ 97,507 $ 115,697 Ounces sold 28,933 40,184 59,071 79,978 Average sales price $ / ounce 1,608 1,507 1,651 1,447 Gross profit (loss) (5,044) 12,849 (8,722) 23,818 Net income (loss) (16,350) 15,586 (13,541) 19,310 Basic income (loss) per share (0.19) 0.18 (0.16) 0.23 Diluted income (loss) per share (0.19) 0.18 (0.16) 0.23 Weighted avg. # of shares outstanding - basic 84,409,648 84,373,648 84,409,648 84,373,648 Weighted avg. # of shares outstanding - diluted 84,409,648 84,376,376 84,409,648 84,377,786
Key Operating Statistics – By Operation
| 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 Paciência Caeté | 154 37 160 | 2.35 1.91 3.05 | 90% 87% 90% | 10,435 2,649 13,804 | $ 7 3.70 140.00 81.10 | $ 1 ,125 2,219 953 |
| Total | 351 | 2.62 | 89% | 26,888 | $ 8 4.00 | $ 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 Paciência Caeté | 312 170 315 | 2.18 2.15 3.06 | 90% 90% 90% | 20,448 9,987 27,685 | $ 7 9.50 92.30 88.20 | $ 1 ,232 1,536 1,036 |
| Total | 797 | 2.52 | 90% | 58,120 | $ 8 5.70 | $ 1 ,191 |
| Three Months Ended June 30, 2011 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Paciência Caeté | 158 116 161 | 3.30 3.39 2.83 | 90% 92% 86% | 15,872 12,263 12,122 | $ 7 5.40 66.70 71.00 | $ 8 00 637 961 |
| Total | 435 | 3.15 | 89% | 40,257 | $ 7 1.60 | $ 7 99 |
| Six Months Ended June 30, 2011 Operating Data | ||||||
|---|---|---|---|---|---|---|
| Ore Processed (t000) | Feed Grade (g/t) | Plant Recovery Rate (%) | Production (ounces) | Cash Operating Cost/t | Cash Operating Cost/ounce | |
| Turmalina Paciência Caeté | 294 234 327 | 3.63 3.32 2.86 | 90% 93% 87% | 31,727 24,378 25,601 | $ 7 4.90 61.00 70.00 | $ 7 78 596 903 |
| Total | 855 | 3.25 | 90% | 81,706 | $ 6 9.30 | $ 7 63 |
2012 Estimated Production and Cash Operating Cost
Based on the first half operating results and the continuing implementation of its restructuring and cost reduction program, Jaguar is revising its outlook for both production and cash operating costs in 2012. The Company now expects 2012 gold production in the range of 110,000 to 120,000 ounces. On this new volume, cash operating costs are expected to be in the range of $900 to $1,000 per ounce (based on an assumed exchange rate of R$2.00 per US$) as the planned benefits of the turnaround plan will not be fully realized until 2013. The Company’s revised preliminary annual targets for its Southern operations is 105,000 to 115,000 ounces in 2013 at cash operating costs in the range $600 to $700 per ounce.
Conference Call Details
Members of the Jaguar senior management team will hold a conference call to discuss the second quarter results and operations on Wednesday, August 15, 2012 at 12:00 p.m. ET. The call can be accessed via telephone or webcast.
Conference call access details:
Live teleconference access:
US Dial In (Toll Free): 1-866-524-3160 International Dial In: 1-412-317-6760
Live audio webcast: www.jaguarmining.com
Replay:
US Toll Free: 1-877-344-7529 International Toll: 1-412-317-0088 Conference Number: 10016976
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 is developing the Gurupi Project in Northern Brazil in the state of Maranhão. The Company is actively exploring and developing additional mineral resources at its approximate 220,000-hectare land base in Brazil. Additional information is available on the Company’s website at www.jaguarmining.com.
Company Contacts
Roger Hendriksen Vice President, Investor Relations 603-410-4888 [email protected]
Valéria Rezende DioDato Director of Communication 011-55-31-4042-1249 [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. 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 forwardlooking statements and "RISK FACTORS" in the Company's Annual Information Form for the year ended December 31, 2011 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, 2011 filed with the United States Securities and Exchange Commission and available at www.sec.gov.
[###]
Note: As required by applicable Canadian rules, effective Q1 2011, Jaguar has prepared its financial statements in accordance with International Financial Reporting Standards (“IFRS”).
Additional details will be 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, 2012.
The following tables contain unaudited information for the quarter and six month period ended June 30, 2012. The data presented are subject to final adjustment, but are believed to be materially accurate. Jaguar’s financial statements for the period ended June 30, 2012 are expected to be filed on SEDAR and EDGAR on August 15, 2012. Readers should refer to those filings for the final 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, 2012 | December 31, 2011 | |
|---|---|---|
| Assets Current assets: Cash and cash equivalents Inventory Prepaid expenses and sundry assets Derivatives | $ 3 1,944 27,921 31,550 114 | $ 74,475 34,060 25,541 - |
| Prepaid expenses and sundry assets Restricted cash Property, plant and equipment Mineral exploration projects | 91,529 42,039 909 352,486 94,743 | 134,076 48,068 909 388,675 88,938 |
| $ 581,706 | $ 6 60,666 | |
| Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities Notes payable Income taxes payable Reclamation provisions Other provisions Deferred compensation liabilities Other liabilities | $ 3 3,133 29,138 17,628 1,877 4,960 59 - | $ 34,922 22,517 18,953 2,082 4,347 2,953 1,475 |
| Notes payable Option component of convertible notes Deferred income taxes Reclamation provisions Deferred compensation liabilities Other liabilities | 86,795 233,844 8,179 10,504 17,522 489 105 | 87,249 228,938 79,931 8,635 15,495 2,270 339 |
| Total liabilities Shareholders' equity: Share capital Stock options Contributed surplus Deficit | 357,438 370,043 12,155 5,466 (163,396) | 422,857 370,043 14,207 3,414 (149,855) |
| Total equity attributable to equity shareholders of the Company Contingent liability Subsequent event | 224,268 | 237,809 |
| $ 581,706 | $ 6 60,666 |
Condensed Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in thousands of U.S. dollars, except per share amounts)
| Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |
|---|---|---|---|---|
| Gold sales Production costs Stock-based compensation Depletion and amortization | $ 46,535 (41,250) 301 (10,630) | $ 60,557 (36,837) (28) (10,843) | $ 97,507 (82,650) 343 (23,922) | $ 1 15,697 (69,893) (23) (21,963) |
| Gross profit (loss) | (5,044) | 12,849 | (8,722) | 23,818 |
| Operating expenses: Exploration Stock-based compensation Administration Management fees Amortization Other | 26 (1,487) 2,601 - 292 590 | 717 (393) 5,419 363 313 234 | 71 (2,295) 8,946 - 581 991 | 1,051 (3,084) 10,674 524 670 1,071 |
| Total operating expenses | 2,022 | 6,653 | 8,294 | 10,906 |
| Income (loss) before the following | (7,066) | 6,196 | (17,016) | 12,912 |
| Gain on derivatives Gain on conversion option embedded in convertible debt Foreign exchange loss (gain) Accretion expense Interest expense Interest income Gain on disposition of property Impairment of Paciência property Other non-operating expenses (income) | (114) (57,427) 7,685 537 7,077 (566) (90) 47,692 566 | (126) (9,180) (6,527) 624 7,074 (2,867) (472) - (128) | (114) (71,752) 4,511 1,133 14,201 (2,424) (368) 47,692 534 | (413) (7,840) (9,616) 1,194 12,757 (4,332) (998) - (321) |
| Total other expenses (income) Income (loss) before income taxes | 5,360 (12,426) | (11,602) 17,798 | (6,587) (10,429) | (9,569) 22,481 |
| Income taxes Current income taxes Deferred income taxes | 302 3,622 | 1,428 784 | 621 2,491 | 1,933 1,238 |
| Total income taxes | 3,924 | 2,212 | 3,112 | 3,171 |
| Net income (loss) and comprehensive income (loss) for the period | $ (16,350) | $ 15,586 | $ (13,541) | $ 19,310 |
Basic and diluted earnings (loss) per share $ (0.19) $ 0.18 $ (0.16) $ 0.23
Weighted average number of common shares outstanding - basic 84,409,648 84,373,648 84,409,648 84,373,648 Weighted average common shares outstanding - diluted 84,409,648 84,376,376 84,409,648 84,377,786 Condensed Interim Consolidated Statements of Cash Flows (Expressed in thousands of U.S. dollars)
(Unaudited)
| Three Months Ended June 30, 2012 | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 | |
|---|---|---|---|---|
| Cash provided by (used in): Operating activities: Net income (loss) and comprehensive income (loss) for the period Adjustments to reconcile net earnings to net cash provided from (used in) operating activities: Unrealized foreign exchange loss (gain) Stock-based compensation expense recovered Interest expense Accretion of interest income Accretion expense Income taxes recovery Deferred income taxes Depletion and amortization Loss on disposition of property, plant and equipment Write-down of Paciência inventory Impairment of Paciência property Unrealized gain on derivatives Unrealized gain on option component of convertible note Reclamation expenditure | $ (16,350) 3,318 (1,788) 7,077 - 537 - 3,622 10,922 532 3,222 47,692 (114) (57,427) (10) | $ 15,586 (3,955) (365) 7,074 (94) 624 (104) 784 11,156 - - - (28) (9,180) (8) | $ (13,541) (1,734) (2,638) 14,201 - 1,133 - 2,491 24,503 547 2,394 47,692 (114) (71,752) (113) | $ 19,310 (6,749) (3,061) 12,757 (188) 1,194 (104) 1,238 22,633 - - - (29) (7,840) (26) |
| Change in non-cash operating working capital Inventory Prepaid expenses and sundry assets Accounts payable and accrued liabilities Income taxes payable Provisions Deferred compensation liabilities | 1,233 5,844 (4,365) (863) (917) 296 (656) | 21,490 (1,334) (5,420) 4,697 2,315 - (83) | 3,069 3,732 (7,148) (2,241) (1,325) 613 (2,268) | 39,135 933 (7,476) 5,380 3,325 - (244) |
| Financing activities: Repayment of debt Increase in debt Interest paid Other liabilities | 572 (1,119) 1,000 (3,841) (1,630) | 21,665 (4,117) - (4,254) 7 | (5,568) (2,218) 7,000 (6,994) (1,709) | 41,053 (7,935) 99,313 (4,615) (55) |
| Investing activities: Mineral exploration projects Purchase of property, plant and equipment Proceeds from disposition of property | (5,590) (1,800) (12,029) 659 | (8,364) (2,266) (23,735) - | (3,921) (6,963) (31,017) 684 | 86,708 (4,611) (41,602) - |
| Effect of foreign exchange on non-U.S. dollar denominated cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period | (13,170) 269 (17,919) 49,863 | (26,001) 2,557 (10,143) 135,543 | (37,296) 4,254 (42,531) 74,475 | (46,213) 4,629 86,177 39,223 |
| Cash and cash equivalents, end of period | $ 31,944 | $ 125,400 | $ 31,944 | $ 125,400 |
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 $8.2 million at June 30, 2012 (December 31, 2011 - $79.9 million). The change in fair value of $57.4 million and $71.8 million for the three and six month periods ended June 30, 2012, respectively, is shown as a gain on conversion option embedded in convertible debt in the Statements of Operations and Comprehensive Income (three and six month periods ended June 30, 2011 - $9.2 million gain and $7.8 million gain, respectively).
Note 2 – Impairment on Paciência Property
Over the past year the Paciência (CPA) operations have faced significant and increasing challenges. Recent reviews determined that a complete remediation plan would best be accomplished by placing the operations on a temporary care and maintenance program until the necessary design and structural changes have been implemented in the mines. The remediation plans for CPA include an adaptation of the narrow vein overhand stoping methods, a changeover to smaller scale equipment, smaller development headings, reduced stope dimensions and building the developed reserve inventory prior to restarting the plant. Implementation of the plan is expected to result in improved productivity per ounce, reduced mining dilution, reliable and predictable production forecasts, and significant reductions in cash costs per ounce when the mines return to production. As a result of the temporary shutdown the company considered this an indicator of impairment and prepared an impairment test on the Paciência operation.
The impairment test resulted in an impairment loss of $47.7 million during the second quarter of 2012 and is recorded in ‘Impairment of Paciência property” in the Interim Consolidated Statements of Operations and Comprehensive Income (Loss), (three and six months ended June 2011 - $nil). The Paciência property is a cash generating unit (“CGU”) which includes Property, plant and equipment assets including land, and plant, mineral rights, deferred exploration costs, and asset retirement obligations net of amortization relating to properties formerly in production. The CGU also includes Mineral exploration project assets relating to properties not in production such as mineral rights and deferred exploration costs. $46.3 million of the loss was taken against assets in Property, plant and equipment and $1.4 million of the loss was recognized relating to assets included in Mineral exploration projects. The recoverable amount of the project is the cash generating unit’s fair value less costs to sell. The following assumptions were used to value the property:
Discount Rate: 8% Gold price: $1,275 – 1,600
Non IFRS Reconciliations
Summary of Cash Operating Cost per Ounce of Gold Produced Three months ended Six Months ended June 30, 2012 June 30, 2012 Production costs per statement of operations $ 33,786,000 $ 71,384,000 Change in inventory (4,209,493) (2,162,606) Operational cost of gold produced 29,576,507 69,221,394 divided by Gold produced (oz) 26,888 58,120 equals Cost per oz of gold produced $ 1,162 $ 1,191
Cash Operating Margin Per Ounce of Gold Three months ended Six months ended June 30, 2012 June 30, 2012
Average sales price per oz of gold $ 1,608 $ 1,651 less Cash operating cost per oz of gold produced 1,162 1,191 equals Cash operating margin per oz of gold $ 446 $