Atlantic Reports Q4 & Full Year 2018 Financial Results

 

EXCEEDED PRODUCTION GUIDANCE AND MET COST GUIDANCE

CLEAR FOCUS ON MARGIN:

2018 AVERAGE REALIZED AISC MARGIN OF CAD $857/OZ (USD $651/OZ @ 0.76 USD/CAD)

CASH COSTS CAD $558/OZ (USD $424/OZ @ 0.76 USD/CAD) AND AISC CAD $731/OZ (USD $556/OZ)

FIRST YEAR OPERATING CASH FLOW OVER 10 MONTHS OF COMMERCIAL OPERATIONS OF CAD $69.6 MILLION ($0.32 PER SHARE)

STRONG BALANCE SHEET: CASH BALANCE OF $50.3 MILLION, NET DEBT OF $63.7 MILLION

WORKING CAPITAL OF $44.3 MILLION WITH $35.6 MILLION OF UNDRAWN DEBT FACILITY

Canadian dollars unless otherwise noted

VANCOUVER, March 5, 2019 /CNW/ - Atlantic Gold Corporation (TSX-V: AGB) ("Atlantic" or the "Company") is pleased to announce its operational and financial results for the fourth quarter and full year 2018.

Safety and Sustainability:
Atlantic Gold is pleased to announce that during its first year of operations at its Moose River Consolidated Gold Mine ("MRC") in Nova Scotia, Canada, the Company had an excellent safety record. In particular, the Company maintains the lowest industrial lost time frequency rate in the province of Nova Scotia. The Company has been nominated by the Labour and Advanced Education OHS Division of Nova Scotia for the John T. Ryan Safety Trophies Competition, sponsored by CIM, for the second consecutive year.

Successful First Year of Operations: Exceeded Production Guidance and Costs within Guidance:

• The Company exceeded its 2018 production guidance with gold production of 90,531 ounces (2018 guidance of 82,000 to 90,000 ounces).
• Achieved four quarters of steady-state production in the first year of mining. Processing operations exceeded design levels in both material milled (2.1 Mt versus design of 2.0Mt) and recovery (95.0% recovery versus design recovery of 94.0%) and achieved full year production at average reserve grade with good resource model to production reconciliation.
• Annual cash costs of CAD $558 per ounce was within 2018 guidance of CAD $500 to CAD $560 per ounce.
• Annual AISC of CAD $731 per ounce was within 2018 guidance of CAD $675 to CAD $735 per ounce.

Generating Cash Flow and EBITDA Margin: Production and AISC Set the Foundation:

• $128 million in 2018 annual net revenue (2017: $nil)*.
• Annual Adjusted EBITDA** was $77.5 million for 10 months of commercial operations representing an EBITDA margin earned of 60%. Cash flow from operations of $69.6 million for 10 months of commercial operations ($0.32 per share).
• Net income was $27.9 million ($0.13 per share).

Balance Sheet Strengthening, Working Capital Improvement: Capital Discipline and Strategic Spending:

• The Company successfully refinanced its Project Loan Facility into a CAD $150 million revolving credit facility during the year. This provides the Company with greater flexibility with respect to debt management and eliminated certain requirements around restricted cash maximizing the Company's available working capital.
• Strong operating cash flow coupled with capital discipline has resulted in the total cash balance growing to $50.3 million at December 31, 2018 ($32.7 million in 2017***).
• Total debt has been reduced from $137.8 million at December 31, 2017 to $114.0 million at December 31, 2018.
• Net debt reduced to $63.7 million at December 31, 2018 from $105.1 million at December 31, 2017 (39% decrease).

Capital spending focused on productivity improvements at MRC, further development and exploration at Fifteen Mile Stream, Cochrane Hill and Beaver Dam, as well as ongoing exploration activities as part of the Company's Phase 4 Corridor Regional Program.

 

Summary of 2018 Quarterly and Annual Results:

 

Outlook for 2019
In 2019 the Company will continue to focus on the following:

• Producing 92,000 - 98,000 ounces of gold at Touquoy at a cash cost of CAD$560 - $610 per ounce (US$420 – US$458 per ounce at an exchange rate of CAD$0.75), and an AISC between CAD$695 and $755 per ounce (US$521 – US$566 per ounce at an exchange rate of CAD$0.75).
• Releasing updated resource / reserve estimates for the Touquoy, Fifteen Mile Stream and Cochrane Hill deposits, along with an updated Life of Mine plan for the Phase 2 Expansion.
• Prioritize targets for further exploration, including drill-testing, on the Phase 4 Corridor Regional Program. (Please refer to Phase 4 and next steps sections below).
• Completion of the Fifteen Mile Stream and Cochrane Hill Environmental Impact Statements, targeted submission in Q2 and Q3 2019, respectively.
• Progressing and seeking final approval of the Environmental Impact Statement for Beaver Dam.
• Completion of a $9,000,000 strategic investment in Velocity Minerals Ltd.

Q4 and Full Year 2018 Operating Results**:

 

Gold production and sales
In the fourth quarter of 2018, Phase 1 operations at MRC produced 22,509 ounces of gold, and sold 23,405 ounces of gold.

In the full 2018 year, the Company produced 90,531 ounces of gold, which included 9,373 ounces of gold produced during operational ramp up in January and February 2018, prior to commencement of commercial production. Gold sales during the year were 90,346 ounces, which includes 9,432 ounces of gold sold during the period of operational ramp up.

Mining
During the fourth quarter of 2018, a total of 1,069,008 tonnes of ore were mined, at a waste to ore ratio of 0.57:1 with a total of 1,677,985 tonnes of material mined. 

During the 2018 year, a total of 3,972,813 tonnes of ore were mined, at a waste to ore ratio of 0.71:1 with a total of 6,800,668 tonnes of material mined.  Approximately 46% of the ore mined in the 2018 year was stockpiled as medium and low-grade material averaging 0.52 g/t Au for processing later in the mine life. This material was assumed to be waste in the 2015 Feasibility Study.

Processing
During the fourth quarter of 2018, a total of 540,903 tonnes of ore was processed at an average grade of 1.37 g/t Au at an average process recovery of 94.7% which exceeds the plant design recovery of 94.0%. Mill throughput averaged approximately 5,879 tonnes per day, which exceeds design throughput. A total of 2,108,420 tonnes of ore was processed during the full 2018 year, at an average grade of 1.41 g/t Au with a recovery of 95.0%. Ore processed exceeded plant design by 108,420 tonnes although the mill was only operating at commercial production levels for 10 months of the year (commercial production was achieved on March 1, 2018). The average feed grade of 1.41 g/t Au approximated the anticipated feed grades per the Feasibility Study (1.44 g/t Au).

Throughout 2018, the Company has continued its efforts to optimize certain areas of the plant including the crushing circuit, reagents consumption and overall energy management.

Sustaining capital
The Company incurred a total of $1,947,004 and $9,098,691 in sustaining capital expenditures during the three and 12 months ended December 31, 2018, respectively.  The majority of the expenditures relate to the scheduled Tailings Management Facility Stage 2 raise which was completed by Q4 2018.

Growth capital

The Company incurred a total of $2,279,348 and $9,325,368 in growth capital expenditures during the three and 12 months ended December 31, 2018, respectively. The majority of the expenditures relate to development of the waste dump area (considered as deferred initial capital), removal of historic tailings and deferred costs associated with initial fit-out of site infrastructure, as well as costs incurred due to design and commissioning issues identified as part of the ramp-up process in Q1 2018. Work associated with the removal of the historic tailings is classified as growth capital as it was part of the original plan in respect of pre-production stripping to access ore at that section of the pit.

Further, in Q4 2018 the Company capitalized $825,910 of expenditures related to the Touquoy resource expansion drilling.

Q4 & Annual 2018 Financial Results

 

Net income (loss) for the three months ended December 31, 2018 and 2017 is comprised of the following items:

 

Net income (loss) for the years ended December 31, 2018 and 2017 is comprised of the following items:

 

Mine operating earnings

The mine operating earnings for the three months ended December 31, 2018 and 2017 are comprised of the following.

 

During the three months ended December 31, 2018, the Company sold 23,405 ounces of gold at an average price of $1,612 resulting in net revenue of $37,643,686.  The Company delivered 8,193 ounces into fixed price contracts and the remaining 15,212 ounces were sold at spot price. Revenue is net of treatment and refining costs which were $75,341 for the three months ended December 31, 2018.

Depreciation and depletion was $7,865,312.  Most assets are depreciated or depleted on a units-of-production basis over the reserves to which they relate.

The mine operating earnings for the years ended December 31, 2018 and 2017 is comprised of the following.

 

Since commercial production started on March 1, 2018 the company sold 80,914 ounces of gold at an average price of $1,589 resulting in net revenue of $128,327,363.  The Company delivered 50,193 ounces into fixed price contracts and the remaining 30,721 ounces were sold at spot price. Revenue is net of treatment and refining costs which were $202,558 for the year ended December 31, 2018.

Depreciation and depletion was $26,538,862 since the start of commercial production.  Most assets are depreciated or depleted on a units-of-production basis over the reserves to which they relate.

Working Capital and Liquidity

The Company has a working capital surplus position as at December 31, 2018 of $44,297,062. Included in this surplus position is $3,327,088 related to the current portion of the Company's debt.

Permitting and Development Status

The Project Descriptions ("PD") for the FMS and CH Gold Projects were filed with the Canadian Environmental Assessment Agency ("CEAA") in 2018 and, after review and public comment, CEAA issued the EIS federal guidelines for each of the projects.  Baseline environmental studies, were completed in Fall 2018, to allow for the collection of seasonal data and modelling which are requirements of the EIS guidelines.  The results of those studies are being incorporated into two environmental impact statements ("EIS") for the FMS and CH Gold Projects currently in preparation for submission and approval to the federal (CEAA) and provincial regulators, and to the public.  FMS and CH EIS submissions are targeted for Q2 and Q3, 2019 respectively.

Once the Company submits the FMS and CH environmental impact statements, and CEAA concludes that they conform to the EIS guidelines, the 365-day federal review period commences. Consultation with Indigenous Peoples, who are considered rightsholders, is integrated into the EA process.  The 365-day federal review period for the EIS pauses when CEAA submits periodic information requests ("IR") to the Company that originate from interested rightsholders, stakeholders, and regulators.  Typically, these information requests result in pauses to the federal review process of between one and two months, while the proponent carefully prepares and submits its responses, after which the review process recommences.  It is typical for the proponent to receive two or three rounds of IRs during the 365-day federal review process.  

To support our community engagement efforts for CH and FMS, local offices (Sherbrooke and Sheet Harbour NS) will soon be opened and members of those communities who have questions or concerns about the project can meet, ask questions directly to Company representatives, and receive technical information.  The local offices will also provide centres where community members can enquire about jobs and economic opportunities.

Regarding the Beaver Dam Mine Project, the CEAA 365-day federal review process remains in progress and approvals are anticipated by the end of 2019, or early 2020.

Exploration Update

Phase 3 Expansion Drilling Program

The Company has completed its Phase 3 Expansion Program at Fifteen Mile Stream, Cochrane Hill and Touquoy with a total of 64,116 metres of resource expansion drilling. The objectives of the Phase 3 Expansion Drilling Program were to:

• tighten drill spacing within the designed pit limits;
• identify additional mineralization immediately peripheral to the estimated Mineral Resources at FMS and CH;
• potentially support upgrade of some or all of the previously-estimated Inferred Mineral Resources to higher-confidence categories at CH and at FMS – particularly at the Hudson and Plenty zones;

The Phase 3 Resource Expansion Drill Programs at the Fifteen Mile Stream and Cochrane Hill Gold Deposits between September 2017 and February 2018 successfully identified additional gold mineralization immediately adjacent to previously defined mineral resources at both locations. Compilation and analysis of the results of these programs determined that in the Egerton-MacLean Zone at Fifteen Mile Stream and at Cochrane Hill there remained potential to extend known mineralization.

Drill programs totaling 11,385 m in 69 drill holes and 16,242 m in 70 drill holes were completed at Fifteen Mile Stream and Cochrane Hill, respectively, between mid-September and mid-December 2018 to test interpreted extensions to the known resources. Results for these drill campaigns were announced in earlier press releases (See News Releases dated December 5, 2018; January 21, 2019; and, February 6, 2019, and February 21, 2019).

At Touquoy, 44 drillholes for 5,264 m were completed to the south and south-west of the current resources, as reported in the News Release of December 5, 2018.

The Company expects to issue updated Mineral Resource estimates for all deposits in early March 2019. Those new Resource estimates will form the basis of new Mineral Reserve estimates and a life of mine plan for all deposits which are expected to be released later in Q1 2019

Phase 4 Corridor Regional Program

The Phase 4 Corridor Regional Program was initiated late April 2018 to evaluate the corridor which extends northeast from the Touquoy Gold Deposit at MRC, to the Beaver Dam Gold Deposit and through to the Fifteen Mile Stream Gold Deposits in the northeast. This corridor is considered to be highly prospective for the same style of argillite-hosted mineralization that comprises the known deposits, as it is underlain by the same rock sequence (The Moose River Formation) and shows the same structural features. Historically this area has seen comparatively little exploration, due to a poor understanding of argillite-hosted deposits, and lack of bedrock exposure due to thick till cover. Fifteen drill traverses were located along the 45km target area based on geological interpretation of proprietary airborne geophysical data. The program consisted of 199 diamond drill holes for 28,650m of drilling, targeting areas with previous indications of mineralization, as well as providing geological information in this area of poor exposure.

The 149 Deposit was the first discovery of the Corridor Regional Program, and encouraging results were also obtained from the Seloam Brook, Mill Shaft and Cameron Flowage traverses.

149 Deposit

Encouraging initial results at the 149 Deposit were followed-up and shallow mineralization was intersected over a strike length of 350m (See News Release dated June 28, 2018). Additional infill drilling identified two zones of gold mineralization: a shallow, generally higher grade "Axis Zone" in the core of a tight anticlinal fold which dips 60-75° to the north and a thicker, but lower grade, "Limb Zone" on the over-turned limb of the anticline. The mineralized zones were extended to over 475m in strike length and were still open to the east (See news release dated September 19, 2018). In November-December 2018, additional drilling was completed to extend the higher grade "Axis Zone" to depth and to follow the "Limb Zone" closer to surface. A total of 2,497m of diamond drilling was completed in 21 drill holes. The mineralized zone has now been traced over approximately 500m, with closely spaced 25m fences of diamond drilling over a strike length of 300m between Section 14400E to 14700E and further wider spaced drilling which has intersected mineralization over an additional 200m to Section 14900E (See News Release dated January 22, 2019). Drill results have confirmed that the "Axis Zone" mineralization continues from surface to depths of approximately 125m vertical and remains open at depth. The final phase of the 2018 drilling program focused on evaluating the strike continuity of the "Limb Zone" and its projection both up-dip to surface and at depth. Assay results received have confirmed that the lower grade, disseminated Limb Zone mineralization extends to surface and is also open at depth. 

Additional drilling is planned to test the eastward continuation of the 149 Deposit mineralization, particularly between Sections 14700E – 14900E where some significant intersections have been previously reported in holes 364 (16m @ 1.05g/t Au from 154m), 365 (5m @ 1.12g/t Au from 62m and 3m @ 1.55g/t Au from 71m) and 366 (1m @ 17.85g/t Au from 121m) (See news release dated September 19, 2018). Additional drilling is also required to better evaluate the eastern end of both the Axis and Limb Zones of mineralization and to continue to test their down dip extensions.  Interpretation of high-resolution aeromagnetic data indicates the potential for similar geological settings to be repeated further to the east and additional reconnaissance-spaced drilling will be undertaken to test these zones.

Next Steps

All deposits remain open along strike and/or at depth and further drilling may be undertaken around the designed pit limits in 2019. An exploration review program is currently underway to identify, rate and rank targets across Atlantic Gold's project portfolio to prioritize targets for further exploration, including drill-testing, in 2019.  The 2019 program will include the following:

• At Cochrane Hill the program will focus on further testing of the robust zone of mineralization which is interpreted to be open at depth and to the east. In addition, improved structural understanding of the Cochrane Hill deposit will be utilized to identify further prospective zones in the area.
• Follow-up diamond drilling is underway to test the easterly extension of the 149 Gold Deposit. This was the first discovery of the Corridor Regional Program, and an initial program of 6,000m is planned.
• Encouraging early results from the Seloam Brook, Mill Shaft, and Cameron Flowage traverses in the Corridor Regional Program already warrant additional exploration, including drill testing. Elsewhere in the Corridor results obtained during 2018 are being used to develop a focused exploration program to make further discoveries in this highly prospective ground.
• Initial geological interpretation of Atlantic Gold's extensive land package in SW Nova Scotia will be used to develop an exploration strategy tailored to this region that is under-explored for disseminated gold deposits.

Qualified Persons

Kodjo Afewu, PhD, SME (CP), Plant Manager for the Company and a Qualified Person as defined by NI 43-101, has approved the scientific and technical information related to operations matters contained in this news release.

Doug Currie, P. Geo., MAusIMM (CP), General Manager of Exploration for the Company and a Qualified Person as defined by NI 43-101, has approved the scientific and technical information related to exploration matters contained in this news release.

Conference Call Details

Atlantic Gold Corporation is hosting a live Q&A conference call to discuss the results on March 5th, 2019 at 2:00 pm Eastern time (11:00 am Pacific time) with the Atlantic executive team.  Participants may join the call by dialing:

Participant Dial-in Numbers: 

 

Additional International Dial-in Numbers: UK: 08006522435, Switzerland: 0800312635, Germany: 08007240293, Hong Kong: 800962712

Please provide the company name (Atlantic Gold Corporation) to the operator.  A recorded playback of the call will be available one hour after the call's completion until April 5^th, 2019 by dialing:

 

Enter the playback passcode: 343928#, an MP3 recording will also be available on the Atlantic website.

Further updates will be provided in due course.

On behalf of the Board of Directors,

Steven Dean
Chairman and Chief Executive Officer

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

About Atlantic:

Atlantic is a well-financed, growth-oriented gold development group with a long-term strategy to build a mid-tier gold production company focused on manageable, executable projects in mining-friendly jurisdictions.

Atlantic is focused on growing gold production in Nova Scotia beginning with its MRC phase one open-pit gold mine which declared commercial production in March 2018, and its phase two Life of Mine Expansion at industry lowest decile cash and all-in-sustaining-costs (as stated in the Company's news releases dated January 16, 2019 and January 29, 2018).

Atlantic is committed to the highest standards of environmental and social responsibility and continually invests in people and technology to manage risks, maximize outcomes and returns to all stakeholders.

Forward-Looking Statements:

This release contains certain "forward looking statements" and certain "forward-looking information" as defined under applicable Canadian and U.S. securities laws. Forward-looking statements and information can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans" or similar terminology. Forward-looking statements and information are not historical facts, are made as of the date of this press release, and include, but are not limited to, statements regarding discussions of future plans, guidance, projections, objectives, estimates and forecasts and statements as to management's expectations with respect to, among other things, the activities contemplated in this news release and the timing and receipt of requisite regulatory, and shareholder approvals in respect thereof. Forward looking information, including future oriented financial information (such as guidance) provide investors an improved ability to evaluate the underlying performance of the Company.  Forward-looking statements in this news release include, without limitation, statements related to proposed exploration and development programs, grade and tonnage of material and resource estimates. These forward looking statements involve numerous risks and uncertainties and actual results may vary. Important factors that may cause actual results to vary include without limitation, the timing and receipt of certain approvals, changes in commodity and power prices, changes in interest and currency exchange rates, risks inherent in exploration estimates and results, timing and success, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), changes in development or mining plans due to changes in logistical, technical or other factors, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications, cost escalation, unavailability of materials, equipment and third party contractors, delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets. In making the forward-looking statements in this press release, the Company has applied several material assumptions, including without limitation, the assumptions that: (1) market fundamentals will result in sustained gold demand and prices; (2) the receipt of any necessary approvals and consents in connection with the development of any properties; (3) the availability of financing on suitable terms for the development, construction and continued operation of any mineral properties; and (4) sustained commodity prices such that any properties put into operation remain economically viable. Information concerning mineral reserve and mineral resource estimates also may be considered forward-looking statements, as such information constitutes a prediction of what mineralization might be found to be present if and when a project is actually developed. Certain of the risks and assumptions are described in more detail in the Company's audited financial statements and MD&A for the year ended December 31, 2018 on the Company's SEDAR profile at www.sedar.com. The actual results or performance by the Company could differ materially from those expressed in, or implied by, any forward-looking statements relating to those matters. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company. Except as required by law, the Company is under no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Non-IFRS Performance Measures 

The Company has included certain non-IFRS measures in this news release.  The company believes that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the company. The non-IFRS 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 IFRS. These measures do not have any standardized meaning prescribed under IFRS and therefore may not be comparable with other issuers.  Readers should refer to the Company's management discussion and analysis, available on the Company's profile on SEDAR and on the Company's website, under the heading "Non-IFRS Performance Measures" for a more detailed discussion of how the Company calculates certain such measures and reconciliation of certain measures to IFRS terms.

Cash costs

Cash costs are a common financial performance measure in the gold mining industry but with no standard meaning under IFRS. Atlantic reports total cash costs on a sales basis. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, such as sales, certain investors use this information to evaluate the Company's performance and ability to generate operating earnings and cash flow from its mining operations. Management uses this metric as an important tool to monitor operating cost performance.

Cash costs include production costs such as mining, processing, refining and site administration, less non-cash share-based compensation divided by gold ounces sold to arrive at total cash costs per gold ounce sold. Costs include royalty payments and permitting costs Production costs are exclusive of depreciation. Other companies may calculate this measure differently.

All-in sustaining costs

The Company believes that AISC more fully defines the total costs associated with producing gold. The company calculates all-in sustaining costs as the sum of total cash costs (as described above), corporate general and administrative expense (net of stock-based compensation), reclamation cost accretion and amortization and sustaining capital, all divided by the gold ounces sold to arrive at a per ounce figure.

Other companies may calculate this measure differently as a result of differences in underlying principles and policies applied. Differences may also arise due to a different definition of sustaining versus growth capital.

Adjusted EBITDA

The Company defines adjusted EBITDA as net earnings/loss before finance costs, finance income, income taxes, capital asset depreciation and amortization, equity-settled share-based compensation expense and gains/ losses on assets, liabilities and investment dispositions. Adjusted EBITDA is a common financial measure used by investors, analyst and lenders as an indicator of cash operating performance, as well as a valuation metric and as a measure of a company's ability to incur and service debt. Our calculation of adjusted EBITDA excludes items that do not reflect our ongoing cash operations, including equity-settled share-based compensation and charges related to investing decisions, and that we believe should not be reflected in a metric used for valuation and debt servicing evaluation purposes.

While adjusted EBITDA is a common financial measure widely used by investors to facilitate an "enterprise level" valuation of an entity, they do not have standardized definition prescribed by IFRS and therefore, other issuers may calculate adjusted EBITDA differently.

SOURCE Atlantic Gold Corporation

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