Third Quarter 2013 - A Word from the CEO
We are pleased to announce today that the Corporation has received authorization for development of our high-grade Siou deposit as well as the Fofina deposit. Now that we have received the authorization ? the penultimate step in the mining permit extension process ? we can commence pre-stripping and road construction work at Siou in the coming months and start production in the second quarter of 2014. This places us at least six months ahead of our most recent schedule, a real accomplishment given Siou’s two-year timeline from discovery to production. In addition, the accelerated permitting process allows us to forecast production start-up at Fofina in 2015, instead of in 2016 as originally planned.
Since the Siou deposit is located a mere 15 kilometers from the Mana processing plant and ore from Siou will be trucked to the plant, capital expenditures required to bring Siou into production are minimal. There is no need to relocate villages, invest in new infrastructure or other significant ancillaries. We have therefore halved the capital expenditures needed in 2014 to bring Siou to production, to $12.5 million from the $25.0 million initial budget.
The Siou deposit remains open laterally and at depth. Significant inferred resources located approximately 180 meters below the surface require additional tighter-spaced drilling in order to bring them to mineral reserves. This is scheduled for 2015-2016.
For the fourth quarter, we have allocated the $3.5 million remaining in our 2013 exploration budget for activities in the Siou vicinity in order to find and define new drill targets for 2014. Exploration will consist mainly of 120,000 meters of auger drilling, geochemical surveys and field proofing as well as 8,500 additional soil samples.
During the quarter, we delivered on our promise and announced Mana’s mineral reserves and resources estimation as at June 30, 2013. Mineral reserves and inferred resources1 at our high-grade Siou deposit totalled 769,300 and 795,300 ounces of gold, respectively. Proven and probable reserves of 4,842,900 tonnes at 4.94 g/t Au were calculated using a conservative gold price of $1,100 per ounce, demonstrating the robustness of the deposit. Siou has effectively increased the average reserve grade at Mana by 20%. Moreover, when Siou begins production, it will bring quality ounces to Mana’s processing plant, ultimately leading to increased production and lower total cash cost per ounce. Once full production is attained, we estimate that Siou will account for approximately 30% of the ore mix at the processing plant. This is a perfect example of the implementation of our strategy to increase shareholder value.
In the third quarter of 2013, Mana produced 38,700 ounces of gold at a total cash cost of less than $800 per ounce. For the nine-month period ended September 30, 2013, production totalled 122,900 ounces at a total cash cost of $725 per ounce. Third-quarter net income from continuing operations attributable to equity shareholders totalled $1.7 million or $0.01 per share, and cash flow from operating activities from continuing operations amounted to $15.6 million or $0.06 per share.
Early in 2013, we made reference to the consideration of strategic alternatives for our two non-core assets due to their extreme sensitivity to downturns in the price of gold. In this regard, during the year we recorded impairments for the Samira Hill and Kiniero Mines. Consequently, during the third quarter, we placed the Samira Hill Mine on care and maintenance and will wind down operations at the Kiniero Mine to an eventual care and maintenance status in the coming months. Both properties are available for sale and in this third quarter 2013 MD&A, we consider these two assets as discontinued operations as at September 30, 2013 and present gold sales, costs, profits and cash flow from operations for the Mana property only.
In light of the uncertainty and ongoing volatility in the price of gold and considering that bringing Siou into production and continuing exploration are the key to value creation and constitute a priority, we decided not to declare a semi-annual dividend at this time. In addition, we took additional steps to further reduce capital expenditures and administrative costs. We should begin to reap the results of the latter in the fourth quarter, with a more significant impact in 2014.
Benoit Desormeaux, CPA, CA
President and Chief Executive Officer
November 12, 2013
1 Resources are exclusive of reserves.
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