Rusoro Mining News
| ||December 01, 2008|
Rusoro Mining reports Q3 2008 financial results, record low cash costs of US$247 per ounce achieved from September 2008, Rusoro's first full month of gold production at the newly acquired Isidora Mine
| ||Rusoro Mining Ltd. ("Rusoro" or the "Company"), is pleased to report its financial results for the quarter ended September 30, 2008 ("Q3"). The Company's Q3 consolidated financial statements and management's discussion and analysis (MD&A) for the three and nine months periods ended September 30, 2008 have been filed on SEDAR (www.sedar.com).|
All amounts set out in this news release and in the Company's financial statements and MD&A are unaudited and in United States dollars, unless otherwise stated.
Q3 2008 Highlights
- Commercial gold production officially commenced during Q3 at the Company's newly acquired Isidora gold mine, situated in Bolívar State, Venezuela. From start-up, the Company achieved a total of 4,722 ounces of gold production in September at a cash cost per ounce of $247. Management is encouraged by this lower than expected initial cash cost estimate from its first gold production at the mine and believes this low cost trend can be maintained for the near to medium term, with production levels expected to be ramped up considerably from the levels achieved in September. The financial results from Isidora production could not be consolidated in Rusoro's Q3 financial statements, given that the agreements officially finalizing the acquisition will not be concluded until December 2008.
- Production from Choco 10 mine continued, with 22,082 ounces of gold produced from the mine during Q3 at an average cash cost per ounce of $713. The Q3 was impacted by lower than forecasted production in August caused by a delay in import deliveries of key consumables and equipment at the mine. The Q3 financial statements also continued to be impacted by Venezuelan in-country financial volatility. The outlook for improvements in in-country financial volatility impacting mine costs is, in Rusoro management's view, improving steadily.
- On July 4, 2008 the Company entered into an agreement with the Venezuelan Ministry of Mines and Basic Industries ("MIBAM") to establish a joint venture (the "Mixed Enterprise") to carry on with gold exploration, development and mining of the Hecla-Venezuela assets. The Mixed Enterprise will be owned 50% by the Company and 50% by Empresa Basica Minera Nacional ("EMN"), a company owned by MIBAM. The Mixed Enterprise is expected to be created within 6 months of the date of the agreement with MIBAM. None of the Company's existing assets, such as the Choco 10 mine, are to be contributed to the Mixed Enterprise.
- On July 8th, 2008, Rusoro reported news of high grade intercepts of gold from its Yuruan property, grading up to 39.1 g/t over 5.7 meters (see July 8th news release).
- On July 8, 2008, the Company closed the acquisition of 100% of the outstanding shares of El Callao Gold Mining Ltd. and Drake-Bering Holdings B.V. including their wholly-owned subsidiaries Minera Hecla Venezolana, C.A. ("Minera Hecla") and El Callao Gold Mining Company de Venezuela, SCS ("El Callao Gold Mining") (the "Hecla-Venezuela Acquisition").
- On September 5, 2008, the Company announced that it had formally completed agreements with MIBAM to custom mill ore from various CVG Minerven, C.A. ("CVG Minerven") operations in Venezuela.
Results of Operations and Financial Position:
During the three months ended September 30, 2008, the Company sold 21,755 ounces of gold for a total amount of revenue of $14,716,982. Net loss for the three months ended September 30, 2008 was $12,490,285, which includes non-cash expenses such as amortization of $7,562,389, stock based compensation of $1,699,049, an impairment adjustment of $1,911,444 to write down gold inventories to net realizable value and accretion of long-term debt of $1,199,801. Also includes non-cash gains such as unrealized foreign exchange gain of $5,604,031 and future income tax recovery of $5,449,517.
Net cash generated in operating activities during the three months period ended September 30, 2008 was $3,065,567, cash used in financing activities was $1,379,957 and cash used in investing activities amounted $43,441,454. As at September 30, 2008 the Company had a cash position of $19,968,965 to be used to fund on-going production expansion initiatives.
Commentary and Outlook:
The Choco 10 mine produced 22,082 ounces of gold during the Q3 at an average cash cost per ounce of $713. The quarter was impacted by lower than forecasted production in September caused by a delay in import deliveries of key consumables and equipment to the mine. Key mine consumables, especially those related to ore milling, need to be imported into Venezuela and cleared through customs. Given the recent tightening of measures on import and exchange controls, this process temporarily impeded the arrival of these key consumables, leading to sporadic mill shut-downs and reductions in mill availabilities throughout September and into early October. The Company is pleased to report that the mine has finally received these key consumables and that the mill availability levels have reestablished themselves.
The Q3 financials also continued to be impacted by Venezuelan in-country financial volatility. The outlook for improvements in in-country financial volatility impacting mine costs is, in Rusoro management's view, improving steadily and it is expected to have a positive effect on future cash-flows from the mine.
During Q3, 7 new Terex TR100 trucks were commissioned in addition to 2 new Komatsu excavators, 3 new Komatsu front end loaders and 1 new grader.
The Company has recently negotiated a new contract with its primary ore and waste haulage contractor, Ramel, with new pricing terms put into effect in September. These new pricing terms, calculated on a "Bench-Cubic Meter" basis, are better suited to the style of mining that is being conducted at Choco 10 mine and should result in a measurable cost savings in the near future for the Company. Improvements have already been noted in this arrangement, most notably with truck and shovel fleet availabilities trending above 80% (historically, less than 50% availability).
With most major equipment and haulage fleet issues resolved, in-country financial volatility narrowing and minor enhancements made to the ore handling and milling process, the Company expects measurable improvements to its gold production and cost profile in the very near term from Choco 10 mine.
The transition of the Isidora Mine (formerly owned by Hecla) to Rusoro's management and operational control occurred in mid-July of this year, following months of negotiations with its former owners and the underlying concession holders, CVG Minerven. As part of the transition, site crews and managers worked quickly in July and August to re-establish the mine into working order, given that it had been under care and maintenance for many months prior to its acquisition.
Ore from Isidora, averaging in excess of 30 g/t is being mined at an average rate of 500 to 800 tonnes per day. Once hauled from underground, the ore is stockpiled on surface, sampled, and then trucked a short distance to Rusoro's near-by Choco 10 gold processing plant. Currently, the Choco 10 plant has a production capacity of over 8000 tonnes per day, and thus can accommodate the milling of Isidora ore with ease. In our first full month of operation, the mine produced 4,722 ounces at an estimated cash cost of $247. Gold recoveries from the processing of Isidora ore at the Choco 10 plant have been averaging 90% during the first month of production.
Management is encouraged by this lower than expected initial cash cost estimate from its first month of gold production at the Isidora mine and believes that this low cost trend can be maintained for the near to long term. Gold production levels are being ramped up considerably up from the levels achieved in September, with a steady-state production level of 6000 to 7000 ounces per month established as a target.
In light of the down-turn in the financial markets and related budgetary constraints, the Company has initiated a number of measures to cut operating costs, expenses and overheads where applicable. As a starting measure, senior executive fees, in-country senior management fees and board fees have been reduced, in some cases by up to 50%. Employee rationalization and expatriate work-force reduction initiatives have also commenced at all operating and administrative sites. Active exploration, including drilling activities, has also been drastically reduced.
ON BEHALF OF THE BOARD
George Salamis, President
Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.
"The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release."
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