Alio Gold reports Q3 results

Thursday, November 9, 2017


(This is an abridged version of the press release. For the full version click here)

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November 9, 2017, Vancouver, BC - Alio Gold Inc. (TSX, NYSE AMERICAN: ALO) ("Alio Gold" or the "Company"), today reported its third quarter 2017 results. Production results were previously released on October 5, 2017. The Company will host a conference call at 11:00am ET today to discuss the results and the details of the call can be found at the end of the release.

Third Quarter Highlights and Recent Developments

  • Gold production of 19,429 ounces at an all-in sustaining cost1 ("AISC") of $1,104 per ounce.
  • Completed bought deal equity financing of C$50.4 million.
  • Received formal Change of Land Use Permit at Ana Paula Project ("Ana Paula").
  • Advanced underground decline at Ana Paula:

    • Permit approved
    • Contracts awarded
    • Underground exploration program to start mid-2018

  • Initiated surface exploration program targeting a zone north of the proposed pit at Ana Paula.
  • Drill results from first two twinned holes at Ana Paula confirm the presence of high-grade mineralization and the lithology of the previous drilling.
  • Received C$3.5 million in warrant exercise proceeds and exercised a buy-back right from Goldcorp of a 1% net smelter royalty ("NSR") on Ana Paula for US$2.9 million.

"We continue to focus on our key priorities which include executing on our revitalization plan at the San Francisco Mine and advancing our high-grade, high-margin Ana Paula project," said Greg McCunn, Chief Executive Officer. "As previously reported, the San Francisco mine had a challenging Q3 as we were not able to ramp up our pre-stripping rates inline with our revitalization plans primarily due to a slow build up of equipment by the mining contractor. In October, a second contractor was mobilized to site and mining rates have now increased with Phase 5 of the San Francisco pit now opened up. As a result, we only recently gained access in early November to the main ore body and started delivering ore to the crusher at the planned rates and grade. With 67,488 ounces produced in the first three quarters this delay in access to the main ore body has impacted our expected Q4 production and we have reduced our full year guidance to between 82,000 and 86,000 ounces. While the last four months have been difficult, we have positioned ourselves well for 2018 as Phase 5 is expected to supply the bulk of the ore for the next 8 months of operation. In addition, we have commenced pre-stripping both Phase 6 of San Francisco and Phase 2 of the La Chicharra pit.

At our high grade, high margin Ana Paula project we commenced the definitive feasibility study which is on track to be completed in Q2 2018. Significant progress was made on the permitting with the receipt of the change of land permit and the underground decline permit. The underground decline will provide access to initiate an underground drill program in mid-2018 which has the potential to significantly increase the economics of the project. We awarded the contracts for the underground decline and the team will begin mobilizing to site shortly. Our balance sheet remains strong with $68.5 million in cash and short term investments following our bought deal financing in early July."

Summarized Financial and Operating Results

($ thousands, except where indicated)Three months ended Sept 30Nine months ended Sept 30
Gold sold (ounces)19,60123,32767,14474,468
Silver sold (ounces)8,80813,86831,03843,423
Metal revenues$25,194$31,212$84,569$92,896
Production costs, excl. depreciation and depletion$17,523$18,588$52,956$55,877
Net earnings from operations$5,082$29,923$22,613$30,429
Net earnings$5,197$29,719$14,751$25,781
Net earnings per share, basic$0.12$0.93$0.39$0.81
Cash flows from operating activities*$2,738$9,844$15,253$24,089
By-product cash costs2 (per ounce)$886$785$781$740
AISC1 (per ounce)$1,104$846$957$812
Average realized gold price per gold ounce$1,278$1,338$1,251$1,240

*after changes in non-cash working capital

Financial performance

Metal revenues decreased to $25.2 million compared to $31.2 million during Q3 2016, as a result of fewer ounces sold, and a decline in the average realized gold price.

Production costs, which comprise the full cost of operations excluding depreciation and depletion, form a component of cost of sales and decreased to $17.5 million compared to $18.6 million during Q3 2016. The decrease was a result of the increased deferred stripping.

Depletion and depreciation costs decreased to $1.0 million compared to $4.2 million during Q3 2016. This decrease was due to an improved mine plan, resulting in lower unit-of-production depreciation rates.

Earnings from operations decreased to $5.1 million compared to $29.9 million during Q3 2016. This decrease was primarily due an impairment reversal of mineral properties and other assets of $23.7 million during Q3 2016. Additionally, there were lower earnings from mine operations of $6.7 million compared to $8.5 million during Q3 2016 primarily a result of fewer ounces sold and a lower realized average price.

Corporate and administrative expenses increased to $1.6 million compared to $1.4 million during Q3 2016 as a result of increased labour costs related to increased staff and appreciation of the Mexican peso.

Cash provided by operating activities was $2.7 million compared to $9.8 million during Q3 2016. The decrease was due to:

  • A decrease in metal revenues due to fewer ounces sold and a lower realized average price;
  • Tax instalments being applied against VAT receivable;
  • Slower VAT receivable collection;
  • Building of inventory supplies

Cash and cash equivalents, and short term investments at September 30, 2017, were $68.5 million. During the quarter, the Company generated $2.7 million from operations at the San Francisco Mine ("Mine"), and at the Mine invested $3.9 million on expansionary capital expenditures, $2.6 million on sustaining capital expenditures, $0.3 million on exploration and evaluation projects. At the Ana Paula Project the Company invested $3.2 million. Also, the Company received $37.9 million net proceeds from the bought deal financing, $2.5 million related to the completion of the sale of the Caballo Blanco Property ("Caballo Blanco") on July 20, 2016, and $2.4 million of its VAT receivable.

Working capital3 at September 30, 2017, was $73.0 million.