Richmont Mines Reports Results for the Third Quarter of 2008
Richmont Mines Inc. (TSX: RIC)(NYSE-A: RIC), a gold exploration, development and production company with operations in North America, today announced financial and operational results for its third quarter ended September 30, 2008. Financial results are based on Canadian GAAP and dollars are reported in Canadian currency, unless otherwise noted.
Third Quarter Review of Operations
Revenue for the third quarter of 2008 was $16.5 million, a 245% increase compared with $4.8 million in the third quarter of 2007, when the Company’s Beaufor Mine was shut down for a five-week period during replacement of its headframe structure. Total precious metals revenue was up $10.9 million, or 245%, to $15.3 million in the third quarter of 2008 compared with $4.4 million in the third quarter of 2007, as a result of significantly more ounces of gold sold at a 28% higher selling prices per ounce, in Canadian dollars. In the 2008 quarter, 16,723 ounces of gold were sold at an average price of US$901 (CAN$918) per ounce, compared with 6,201 ounces of gold sold in the same period last year at an average price of US$666 (CAN$716) per ounce. Also, during the quarter sales from the Island Gold Mine, which commenced production during the fourth quarter of 2007, more than offset the loss of gold sales from the East Amphi Mine, which was sold in mid-2007.
Lower Costs on Growing Volume and Efficiencies
Operating costs, including royalties, for the third quarter of 2008 were $10.3 million, up from $3.9 million in the same period the prior year, but below $10.9 million in the trailing second quarter of 2008. Higher costs in the 2008 quarter reflect the operation of the Island Gold Mine and the shut-down of the Beaufor Mine for a portion of last year’s third quarter.
The average cash cost of production was lower at US$604 (CAN$615) per ounce of gold sold in the third quarter of 2008 compared with US$626 (CAN$638) in the trailing second quarter, and US$590 (CAN$634) in last year’s quarter, prior to the start of commercial production at Island Gold. The average cash cost per ounce in US dollars during the current quarter benefited from improved grade, higher volumes and was impacted by the stronger Canadian dollar when compared with the prior year’s period. Costs at the Beaufor Mine decreased to US$477 (CAN$485) from US$489 (CAN$498) in the trailing second quarter, also on improved grade and were significantly below the cash cost per ounce of US$597 (CAN$642) in last year’s third quarter, when the mine was shut down for part of the quarter. At the Island Gold Mine, cash production costs per ounce were US$720 (CAN$734) compared with US$768 (CAN$782) in this year’s trailing second quarter as the Company continues to ramp up production. Included in the gold sales for the third quarter of 2007 were 2,440 ounces from the East Amphi Mine produced at a cash cost of US$578 (CAN$621) per ounce.
Measurably higher exploration and project evaluation costs of $3.4 million in the third quarter of 2008 (see accompanying exploration cost summary table) reflect the Company’s efforts to grow its reserves and resources.
Approximately $0.8 million in exploration costs were incurred at the Beaufor Mine, $0.7 million at the Island Gold Mine and $1.8 million at the Golden Wonder project in the current quarter. During last year’s third quarter, approximately $0.5 million in exploration costs were incurred at the Beaufor Mine and $0.8 million at the Valentine Lake project.
Richmont recorded a net loss for the third quarter of 2008 of $0.9 million, or $0.04 per share, compared with a net loss of $1.5 million, or $0.06 per share, in the third quarter of 2007. Significantly higher revenue in this year’s third quarter more than offset increased exploration costs and resulted in the improvement in the net loss compared with last year’s quarter.
Balance Sheet Review
At September 30, 2008, cash and cash equivalents were $29.6 million, a $2.3 million increase from $27.3 million at December 31, 2007 and $1.1 million less than $30.7 million at June 30, 2008. Richmont Mines has no long-term debt obligations and has working capital of $35.4 million. The cash equivalents included $22.1 million of bankers acceptance and bank discount notes with high level credit ratings.
Island Gold Mine(1) ————————————————————————– ————————————————————————– Three months ended Nine months ended September September September September 30, 30, 30, 30, 2008 2007 2008 2007 ————————————————————————– Tonnes 41,916 – 113,422 – Head grade (g/t) 6.78 – 6.94 – Gold recovery (%) 95.39 – 95.36 – Recovered grade (g/t) 6.47 – 6.61 – Ounces sold 8,721 – 24,122 – Cash cost per ounce (US$) 720 – 758 – Investment in property, plant and equipment (thousands of CAN$) 447 1,286 1,488 2,841 Exploration expenses (thousands of CAN$) 658 39 1,425 266 Deferred development (metres) 87 – 351 – Diamond drilling (metres) Exploration 2,541 3,087 10,777 10,079 ————————————————————————– ————————————————————————– (1) Richmont Mines reports 100% of the consolidated results of the Island Gold Mine, in compliance with AcG-15, which stipulates that a holder of variable interests must consolidate the accounts if it intends to assume the majority of the expected losses and/or receive the majority of the residual returns of the variable interest entity (VIE). Richmont Mines holds a 55% stake in the unincorporated joint venture, and as its share of the earnings and/or losses will differ from the percentage that it owns, the Company is therefore considered the primary beneficiary of the VIE.
During the 2008 third quarter, 41,916 tonnes of ore from the Island Gold Mine were processed at an average recovered grade of 6.47 g/t, and 8,721 ounces of gold were sold at an average price of US$882 (CAN$898) per ounce. In the trailing second quarter of 2008, 39,818 tonnes of ore were processed at an average recovered grade of 6.57 g/t, and 8,409 ounces of gold were sold at an average price of US$885 (CAN$901) per ounce. The cash cost per ounce was US$720 (CAN$734) during the current quarter compared with US$768 (CAN$782) in the trailing second quarter of 2008. The Island Gold Mine began commercial production in October 2007.
During the nine-month period ended September 30, 2008, 113,422 tonnes of ore were processed at an average recovered grade of 6.61 g/t, and 24,122 ounces of gold were sold at an average price of US$894 (CAN$910) per ounce. The cash cost of production per ounce was US$758 (CAN$772) during the first nine months of the year as the mine produced at around 70% of its design capacity.
Mr. Martin Rivard, President and CEO of Richmont Mines, commented: “We made encouraging progress at Island Gold during the third quarter toward our quarterly production goal of 55,000 to 60,000 tonnes. As mine production began to build up through improved extraction, we brought online in September our second ball mill to run in parallel with the larger ball mill, and, we are beginning to see relief in the tight labour market we have experienced at the project thus far. We have enhanced our management team at the operation and believe we have overcome many of the operational challenges we encountered early in the project. More tangible improvements should be experienced in this year’s fourth quarter.”
Beaufor Mine ————————————————————————– ————————————————————————– Three months ended Nine months ended September September September September 30, 30, 30, 30, 2008 2007 2008 2007 ————————————————————————– Tonnes 25,572 13,934 85,331 83,508 Head grade (g/t) 9.88 8.57 9.16 8.51 Gold recovery (%) 98.55 97.95 98.37 98.77 Recovered grade (g/t) 9.73 8.40 9.01 8.41 Ounces sold 8,002 3,761 24,707 22,569 Cash cost of production per ounce (US$) 477 597 517 475 Investment in property, plant and equipment (thousands of CAN$) 6 762 112 843 Exploration expenses (thousands of CAN$) 803 502 2,214 1,350 Diamond drilling (metres) Definition 2,190 493 6,740 2,659 Exploration 9,028 6,658 24,467 18,848 ————————————————————————– ————————————————————————–
During the third quarter of 2008, 25,572 tonnes of ore from the Beaufor Mine were processed at an average recovered grade of 9.73 g/t, and 8,002 ounces of gold were sold at an average price of US$922 (CAN$939) per ounce. In the same quarter of 2007, 13,934 tonnes of ore were processed at an average recovered grade of 8.40 g/t, and 3,761 ounces of gold were sold at an average price of US$675 (CAN$726) per ounce. The cash cost per ounce was US$477 (CAN$485) during the current quarter compared with US$597 (CAN$642) in the same quarter last year, when the mine was shut down for a portion of the quarter, and is in line with the Company’s forecasted production cash cost of US$450 to US$500 per ounce. During the current quarter, Richmont processed 25,370 tonnes of custom milling ore at the Camflo Mill, and custom milling is expected to remain at a similar level during the fourth quarter of 2008. During the nine-month period ended September 30, 2008, 85,331 tonnes of ore were processed at an average recovered grade of 9.01 g/t, and 24,707 ounces of gold were sold at an average price of US$919 (CAN$936) per ounce. In the first nine months of 2007, 83,508 tonnes of ore were processed at an average recovered grade of 8.41 g/t, and 22,569 ounces of gold were sold at an average price of US$689 (CAN$740) per ounce. The cash cost per ounce was US$517 (CAN$526) during the current period up from US$475 (CAN$510) in last year’s comparable period, primarily due to higher mining and milling costs.
Exploration Efforts: As reported by the Company on October 1, 2008, the Beaufor Mine is conducting exploration drilling to identify opportunities to extend the mine below current mining operations, at a maximum depth of 630 metres. In the third quarter, 6,912 metres were added to the 9,871 metres of the first semester for a total of 16,783 metres drilled in 2008 in this area. The objective is to complete 22,000 metres this year, evaluate the potential of the zones discovered last year and identify new resources. At the beginning of the year 2009, an updated resource calculation for this area will be prepared with all the information available as of December 31, 2008.
Golden Wonder
On October 23, 2008, Richmont announced that results from diamond drilling activities at the Golden Wonder Mine in Colorado have failed to confirm the continuity of an economically viable ore zone below current infrastructures at the sixth level. In light of these results, Richmont Mines has informed LKA International, Inc. (“LKA”) that it has completed its “Initial Commitment Period” and that it will not exercise its option to the “Second Commitment Period” by notifying LKA of the termination of its option to proceed with the Joint Venture Agreement.
Valentine Lake Project
Richmont is currently focusing on access and logistics at Valentine Lake, where the Company has a joint venture agreement with Mountain Lake Resources. Its operations there currently are focused on developing road access to eliminate the high costs of flying personnel and equipment to the site. The Company is evaluating a 2009 drilling program at the project, where it has a 70% interest.
Nine-Month Review of Operations
For the nine-month period ended September 30, 2008, revenue was $47.7 million, or 71.8% above revenue of $27.8 million during the same period of 2007, reflecting increased gold sales at higher prices. In the 2008 nine-month period, 48,829 ounces of gold were sold at an average price of US$907 (CAN$924) per ounce, compared with 35,244 ounces of gold sold in the first nine months of 2007 at an average price of US$691 (CAN$743) per ounce.
Operating costs, including royalties, for the nine-month period ended September 30, 2008 were $31.6 million, compared with $18.2 million during the same period last year, primarily due to the costs associated with advancing the Island Gold Mine to projected production levels as well as higher operating costs at the Beaufor Mine and higher costs of maintaining the Camflo mill because of lower volume of ore processed in 2008. Island Gold began production during last year’s fourth quarter.
Exploration and project evaluation costs were $8.2 million during the first nine months of 2008 (see accompanying exploration cost summary table) compared with $2.8 million during the same period in 2007. This increase was mainly due to the exploration programs at the Golden Wonder project, Beaufor and Island Gold, which had exploration costs of $3.7 million, $2.2 million and $1.4 million, respectively, for the first nine months of 2008 and by an amount of $0.9 million which was included in exploration expenses as a result of a reclassification, for fiscal planning purposes, of exploration tax credits from previous years.
The net loss for the nine-month period was $0.5 million, or $0.02 per share, compared with net earnings of $7.7 million, or $0.32 per share, during the nine-month period ended September 30, 2007. Last year’s nine-month period included a $8.0 million gain on the sale of mining assets.
Outlook
As previously announced on October 27, 2008, Richmont Mines and Patricia Mining Corp. (“Patricia Mining”) have entered into a definitive agreement for Richmont Mines to acquire all of Patricia Mining’s outstanding shares through a combination of cash and stock. The transaction is expected to close in mid-December 2008 and would enable Richmont Mines to become the direct and indirect holder of a 100% interest in the Island Gold Mine which is currently the subject of a joint venture between Richmont Mines and Patricia Mining.
Mr. Rivard concluded: “We anticipate entering 2009 with a healthy balance sheet, a strongly-producing mine at Beaufor and an Island Gold Mine that is demonstrating continued production improvement. We intend to continue our exploration program as we advance our proven and probable reserve base, and will evaluate other opportunities to expand our reserve base to our goal of one million ounces.”
Upcoming Events
Mr. Martin Rivard, President and CEO, will present at the Rodman & Renshaw Annual Global Investment Conference at the New York Palace Hotel beginning at 12:00 p.m. ET on Monday, November 10, 2008. A live webcast of the presentation, along with presentation materials, will be available on the Company’s website at: www.richmont-mines.com. If you are unable to listen to the live presentation, an archive will be available on Richmont Mines’ website, in the Investor Relations section.
———————————————————————– — Event Approximate Date ————————————————————————– Rodman & Renshaw Global Investment Conference (New York) November 10, 2008 December 31, 2008 reserve and resource update Mid-first quarter 2009 2008 year-end Audited Financial results End of February 2009 ————————————————————————–
Martin Rivard
President and Chief Executive Officer
About Richmont Mines Inc.
Richmont produces gold from its operations in Canada and is focused on building its reserves in North America, and has extensive experience in gold exploration, development and mining. Since it began production in 1991, Richmont has produced more than one million ounces of gold from its holdings in Quebec, Ontario and Newfoundland. Richmont’s strategy is to cost-effectively develop its mining assets, exploit mineralized reserves on properties owned and acquired, or develop partnerships to expand its reserve base. Richmont routinely posts news and other important information on its website at: www.richmont-mines.com.
Forward-Looking Statements
This news release contains forward-looking statements that include risks and uncertainties. When used in this news release, the words “estimate”, “project”, “anticipate”, “expect”, “intend”, “believe”, “hope”, “may” and similar expressions, as well as “will”, “shall” and other indications of future tense, are intended to identify forward-looking statements. The forward-looking statements are based on current expectations and apply only as of the date on which they were made. The factors that could cause actual results to differ materially from those indicated in such forward-looking statements include changes in the prevailing price of gold, the Canadian-United States exchange rate, grade of ore mined and unforeseen difficulties in mining operations that could affect revenues and production costs. Other factors such as uncertainties regarding government regulations could also affect the results. Other risks may be set out in Richmont Mines’ Annual Information Form, Annual Reports and periodic reports.
EXPLORATION PROPERTIES ————————————————————————– ————————————————————————– Three months ended Nine months ended September September September September 30, 30, 30, 30, 2008 2007 2008 2007 $ $ $ $ ————————————————————————– Exploration costs — Mines Beaufor Mine 803 502 2,214 1,350 Island Gold Mine 658 39 1,425 266 East Amphi Mine – – – 18 ————————————————————————– 1,461 541 3,639 1,634 Exploration costs — Other properties Golden Wonder property 1,849 16 3,663 164 Francoeur / Wasamac properties 25 7 124 142 Valentine Lake property 194 780 194 1,019 Camflo Northwest property – 13 – 124 Other properties 6 – 16 24 Project evaluation 90 20 251 92 ————————————————————————– 3,625 1,377 7,887 3,199 Exploration tax credits (210) (75) (567) (368) Reclassification of exploration tax credits from previous years – – 850 – ————————————————————————– 3,415 1,302 8,170 2,831 ————————————————————————– ————————————————————————– FINANCIAL DATA ————————————————————————– ————————————————————————– Three-month period Nine-month period ended September 30, ended September 30, CAN$ 2008 2007 2008 2007 ————————————————————————– Results (in thousands of $) Revenue 16,495 4,777 47,683 27,750 Net earnings (loss) (894) (1,481) (451) 7,657 Cash flow from (used in) operations 820 (1,322) 4,689 6,743 Results per share ($) Net earnings (loss) basic and diluted (0.04) (0.06) (0.02) 0.32 Basic weighted average number of common shares outstanding (thousands) 23,924 24,108 24,002 24,191 Average selling price of gold per ounce 918 716 924 743 Average selling price of gold per ounce (US$) 901 666 907 691 ————————————————————————– ————————————————————————– ————————————————————————– September 30, 2008 December 31, 2007 ————————————————————————– Financial position (in thousands of $) Total assets 86,454 85,976 Working capital 35,375 33,970 Long-term debt – – ————————————————————————— SALES AND PRODUCTION DATA ————————————————————————– ————————————————————————– Three-month period ended September 30, ————————————————————————– Ounces of gold Cash cost Year Sales Production (per ounce sold) ————————————————————————– US$ CAN$ ————————————————————————– Island Gold Mine 2008 8,721 9,819 720 734 2007 – – – – ————————————————————————– Beaufor Mine 2008 8,002 6,326 477 485 2007 3,761 3,870 597 642 ————————————————————————– East Amphi Mine 2008 – – – – 2007 2,440 2,380 578 621 ————————————————————————– Total 2008 16,723 16,145 604 615 2007 6,201 6,250 590 634 ————————————————————————– ————————————————————————– ————————————————————————– Nine-month period ended September 30, ————————————————————————– Ounces of gold Cash cost Year Sales Production (per ounce sold) ————————————————————————– US$ CAN$ ————————————————————————– Island Gold Mine 2008 24,122 26,374 758 772 2007 – – – – ————————————————————————– Beaufor Mine 2008 24,707 26,725 517 526 2007 22,569 22,399 475 510 ————————————————————————– East Amphi Mine 2008 – – – – 2007 12,675 11,718 494 531 ————————————————————————– Total 2008 48,829 53,099 636 648 2007 35,244 34,117 482 518 ————————————————————————– Average exchange rate used for 2007: US$1 equals CAN$1.0748 2008 estimated exchange rate: US$1 equals CAN$1.0184 CONSOLIDATED STATEMENTS OF EARNINGS ————————————————————————– ————————————————————————– (in thousands of Canadian dollars) (Unaudited) Three months ended Nine months ended September September September September 30, 30, 30, 30, 2008 2007 2008 2007 $ $ $ $ ————————————————————————– REVENUE Precious metals 15,348 4,443 45,095 26,177 Other 1,147 334 2,588 1,573 ————————————————————————– 16,495 4,777 47,683 27,750 ————————————————————————– EXPENSES Operating costs 9,893 3,868 30,541 17,884 Royalties 389 56 1,097 338 Custom milling 620 – 978 – Administration 769 687 2,431 2,323 Exploration and project evaluation 3,415 1,302 8,170 2,831 Accretion expense – asset retirement obligations 44 45 130 134 Depreciation and depletion 1,507 618 4,146 4,551 Loss (gain) on disposal of mining assets 1 (554) 21 (8,029) ————————————————————————– 16,638 6,022 47,514 20,032 ————————————————————————– EARNINGS (LOSS) BEFORE OTHER ITEMS (143) (1,245) 169 7,718 MINING AND INCOME TAXES 549 350 34 43 ————————————————————————– (692) (1,595) 135 7,675 MINORITY INTEREST 202 (114) 586 18 ————————————————————————– NET EARNINGS (LOSS) (894) (1,481) (451) 7,657 ————————————————————————– ————————————————————————– NET EARNINGS (LOSS) PER SHARE basic and diluted (0.04) (0.06) (0.02) 0.32 BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (thousands) 23,924 24,108 24,002 24,191 ————————————————————————– See accompanying notes to consolidated financial statements available on SEDAR. CONSOLIDATED BALANCE SHEETS ————————————————————————– ————————————————————————– (in thousands of Canadian dollars) September 30, December 31, 2008 2007 $ $ ————————————————————————– (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash and cash equivalents 29,624 27,291 Short-term investments 298 1,826 Accounts receivable 3,848 2,859 Mining and income taxes receivable 1,682 1,677 Inventories 6,378 5,438 ————————————————————————– 41,830 39,091 ADVANCE TO A MINORITY PARTNER 750 1,875 PROPERTY, PLANT AND EQUIPMENT 43,874 45,010 ————————————————————————– 86,454 85,976————————————————————————– ————————————————————————– LIABILITIES CURRENT LIABILITIES Accounts payable and accrued charges 5,534 5,005 Mining and income taxes payable 921 116 ————————————————————————– 6,455 5,121 ASSET RETIREMENT OBLIGATIONS 3,488 3,358 MINORITY INTEREST 15,139 14,238 FUTURE MINING AND INCOME TAXES 1,112 1,446 ————————————————————————– 26,194 24,163 ————————————————————————– SHAREHOLDERS’ EQUITY Capital stock 60,431 61,016 Contributed surplus 5,487 5,092 Deficit (5,182) (4,647) Accumulated other comprehensive income (476) 352 ————————————————————————– 60,260 61,813 ————————————————————————– 86,454 85,976 ————————————————————————– ————————————————————————– Commitments and subsequent events See accompanying notes to consolidated financial statements available on SEDAR. CONSOLIDATED STATEMENTS OF CASH FLOW ————————————————————————– ————————————————————————– (in thousands of Canadian dollars) (Unaudited) Three months ended Nine months ended September September September September 30, 30, 30, 30, 2008 2007 2008 2007 $ $ $ $ ————————————————————————– CASH FLOW FROM (USED IN) OPERATING ACTIVITIES Net earnings (loss) (894) (1,481) (451) 7,657 Adjustments for: Depreciation and depletion 1,507 618 4,146 4,551 Stock-based compensation 108 129 384 411 Accretion expense – asset retirement obligations 44 45 130 134 Loss (gain) on disposal of mining assets 1 (554) 21 (8,005) Loss (gain) on disposal of short-term investments 53 – 11 (397) Minority interest 202 (114) 586 18 Future mining and income taxes 6 39 (333) (524) ————————————————————————– 1,027 (1,318) 4,494 3,845 Net change in non-cash working capital items (207) (4) 195 2,898 ————————————————————————– 820 (1,322) 4,689 6,743 ————————————————————————— CASH FLOW FROM (USED IN) INVESTING ACTIVITIES Acquisition of short-term investments – (261) (23) (346) Disposal of short-term investments 9 5,000 712 5,803 Disposal of mining assets 12 909 67 3,397 Property, plant and equipment – Island Gold Mine (447) (1,286) (1,488) (2,841) Property, plant and equipment – Beaufor Mine (6) (762) (112) (843) Property, plant and equipment – East Amphi Mine – – – (34) Other property, plant and equipment (1,069) 38 (1,604) 124 Cash received from an advance to a minority partner – 375 750 750 Trust account – 2,000 – – ————————————————————————– (1,501) 6,013 (1,698) 6,010 ————————————————————————– CASH FLOW FROM (USED IN) FINANCING ACTIVITIES Issue of common shares – – 25 183 Redemption of common shares (419) (325) (683) (658) Contribution from a minority partner – 765 – 900 ————————————————————————– (419) 440 (658) 425 ————————————————————————– Net increase (decrease) in cash and cash equivalents (1,100) 5,131 2,333 13,178 Cash and cash equivalents, beginning of period 30,724 24,173 27,291 16,126 ————————————————————————– Cash and cash equivalents, end of period 29,624 29,304 29,624 29,304 ————————————————————————– ————————————————————————– See accompanying notes to consolidated financial statements available on SEDAR.
Contacts: Richmont Mines Inc. Kei Advisors LLC James Culligan, Investor Relations 716-843-3874 jculligan@keiadvisors.comwww.richmont-mines.com
SOURCE: Richmont Mines Inc.