TORONTO,
March 28, 2013 /CNW/ - U.S. Silver
& Gold Inc. (TSX: USA) (OTCQX:
USGIF) ("U.S. Silver & Gold" or the "Company") today reported
year-end financial and operational results for 2012.
This earnings release should be read in
conjunction with the Company's MD&A, Financial Statements and
Notes to Financial Statements for the corresponding period, which
have been posted on SEDAR at www.sedar.com and are also
available on the Company's website at
www.us-silver.com.
All figures are in U.S. dollars unless
otherwise noted.
Financial Highlights
For the fourth quarter of 2012, the Company
reported the following results from continuing operations:
- Revenues of $25.5 million
- Adjusted net income of $0.3
million or $0.01 per share
prior to a $14.4 million non-cash
impairment charge related to the Drumlummon Mine and one-time,
merger-related expenses
- Net loss of $16.6 million or
$0.27 per share
- Strong production of 661,000 silver ounces at cash costs of
$17.65 per silver ounce
- Cash balance of $18.9 million at
December 31, 2012
For the full year 2012, the Company reported the
following results from continuing operations:
- Revenues of $94.9 million
- Adjusted net income of $4.7
million or $0.08 per share
prior to a $14.4 million non-cash
impairment charge related to the Drumlummon Mine and one-time,
merger-related expenses
- Net loss of $17.8 million, or
$0.29 per share
- Production of 2.57 million silver ounces at cash costs of
$18.33 per ounce with the Drumlummon
Mine consolidated for the full fiscal year 2012
Earnings for the quarter and full year were impacted by non-cash
impairment charges related to the Drumlummon mine. These non-cash
charges were identified as part of the Company's normal course
value impairment testing and were due to a number of factors,
including a capital allocation decision to focus exploration
spending in 2013 on the Caladay Zone at the Galena Complex, a
year-over-year reduction in measured, indicated and inferred
resources, an industry-wide reduction in precious metal valuations
and increases in operating costs.
"The Caladay Zone has the potential to double the Company's
silver production and significantly reduce operating costs without
the need to issue equity to fund its development at current silver
prices," commented Darren Blasutti,
President and CEO of U.S. Silver and Gold. "The close proximity of
the Caladay Zone to our existing infrastructure, coupled with spare
hoisting and milling capacity should position us for strong
production growth and operating cost leverage, thereby enhancing
future profitability."
Corporate Highlights
- In 2012, the Company replaced proven and probable reserves of
23.2 million ounces and reported measured and indicated resources
of 13.0 million ounces (an increase of 8 percent) and inferred
resources of 14.4 million ounces as at December 31, 2012 and an additional 4.0 million
ounces of inferred resources as at March 19,
2013 (versus 13.1 million ounces as at December 31, 2011). Please see SEDAR or
www.us-silver.com for the Company's independent NI 43-101 compliant
technical report in respect of the Galena Complex dated
March 22, 2013 (the "Galena Technical
Report") prepared by Chlumsky, Armbrust & Meyer, LLC
("CAM").
- Drilling continues to identify significant mineralization in
the Caladay Zone since the January 30,
2013 press release including 20 feet of 15.9 ounce per ton
(544 grams per tonne) silver equivalent, 23.9 feet of 12.3 ounces
per ton (422 grams per tonne) silver equivalent and 1.9 feet of
100.4 ounces per ton (3,443 grams per tonne) silver
equivalent. For additional results, see Tables 1 and 2
below.
- Silver production in 2013 is forecast to grow approximately 10
- 15 percent to 2.7 - 3.0 million ounces with projected silver cash
costs of $17.00 to $19.00 per
ounce.
Consolidated Mine Production and Operating Costs
As previously announced in the press release of January 30, 2013, the Company had strong fourth
quarter consolidated silver production totalling 661,337 ounces
along with gold production of 3,832 ounces. Consolidated silver
cash costs decreased from $18.72 in
the third quarter of 2012 to $17.65
per ounce in the fourth quarter.
In 2012, the Company produced 2.31 million ounces of silver and
5,691 ounces of gold at a by-product cash cost of $18.33 per ounce silver, compared to 2.32 million
ounces of silver and cash costs of $15.82 per ounce in 2011. Had RX Gold been
consolidated with U.S. Silver & Gold for the entire fiscal
year, annual silver production would have been 2.57 million ounces,
representing an increase of 11 percent over 2011. Consolidated
annual gold production would have been 20,432 ounces.
The Company recorded a net loss of $17.8
million for the year ended December
31, 2012 compared to net income of $12.4 million for the year ended 2011. The
decrease in earnings was primarily attributable to impairment
charges at the Drumlummon Mine, higher depreciation, depletion and
amortization, lower realized silver prices as well as higher cost
of sales, higher general and administration expenses, higher
exploration costs, higher stock-based compensation expense and
lower income tax expense for 2012 compared to 2011.
Galena Complex
During 2012, 231,496 tons of ore were mined at the Galena
Complex at an average grade of 10.1 ounces per ton silver, which
produced 2.25 million ounces of silver at a cash cost of
$19.02 per ounce. This compares
to 236,903 tons of ore mined in 2011 at an average grade of 10.2
ounces per ton silver, which produced 2.32 million ounces of silver
at a cash cost of $15.82. Combined
silver recoveries from the Galena and Coeur mills were 96.3 percent
for 2012 compared with recoveries of 96.4 percent in 2011.
Tonnage was negatively impacted by the
termination of high cost contract mining crews and re-habilitation
work on the #3 Shaft in early 2012. In August 2012, this situation improved with the
addition of 60 full-time employees enabling the Galena Complex to
move from the current five-day-a-week schedule to a 24/7 schedule
on January 27, 2013. The new
management team is committed to increasing profitable production
and ensuring a cash flow positive operation in fiscal 2013 and
beyond. Fourth quarter labour costs were affected by increased
hiring and new-employee training expenditures as the operation
adjusted its staffing levels in preparation for a seven-day-a-week
schedule. The increase in productivity noted in the fourth
quarter is expected to continue to positively impact ounce
production and cash costs over 2013 and the longer term.
Drumlummon Mine
From August 13, 2012 to
December 31, 2012, Drumlummon milled
25,741 tons of ore at a grade of 0.23 ounces per ton gold and 2.70
ounces per ton silver to produce 5,691 ounces of gold and 59,184
ounces of silver at a by-product cash cost of $1,426.53 per ounce gold during this period.
Operations at the Drumlummon Mine were lower than expected
during the fourth quarter of 2012 in both tons and grade as
decisions were made to reassign mining personnel to enable
development of diamond drilling stations for exploration on the
Northstar and Frankie veins. This resulted in operations accessing
smaller high-grade veins areas thereby decreasing production
tonnage during the quarter. Ongoing ventilation challenges and
weather-related air reversal inside the mine prevented miners from
reaching active headings. A fan and air-door installation was
excavated and installed in the Gunsinger Decline which along with
other ventilation re-routing in the mine has alleviated the
issues.
At the end of 2012, given the state of the capital markets in
the precious metals industry, the Company decided to focus its
capital resources on the drilling and development in the Caladay
Zone at the Galena Complex. The Caladay Zone requires confirmation
drilling, is close to existing infrastructure with both spare
hoisting and spare milling capacity, requires no ore transportation
for milling and no additional permitting. The exploration budget
for the Drumlummon mine was reduced to $1
million for 2013 compared with $5.9
million in 2012 for the full calendar year. As a
result, an impairment charge of $14.4
million to the carrying value of the Drumlummon Mine and
related goodwill has been taken. The Drumlummon Mine will continue
operating for as long as it can generate positive cash flow.
Exploration Update
As previously announced in the Company's January 30, 2013 press release, recent drilling
in the Caladay Zone of the Galena Mine Complex along with modelling
of past results led to the expansion of existing silver-lead areas
and the discovery of a large, high-grade silver-copper target
located close to the existing mine infrastructure. Work in this
area is progressing well. Selected results since the
January 30, 2013 press release for
silver lead and silver copper mineralization are found below in
Tables 1 and 2, respectively.
Table 1
Recent Silver-Lead Drilling Results - Caladay Zone |
Hole # |
From (ft) |
To (ft) |
Width (ft) |
Ag (oz/ton) |
Pb (%) |
AgEq (oz/t) |
AgEq (g/t) |
40-320 |
282.4 |
306.7 |
24.3 |
4.71 |
5.22 |
5.22 |
179 |
40-326 |
175.0 |
225.0 |
50.0 |
7.17 |
AP1 |
7.17 |
246 |
49-219 |
146.5 |
170.4 |
23.9 |
7.53 |
9.49 |
12.27 |
421 |
49-220 |
148.9 |
245.0 |
96.1 |
3.41 |
4.84 |
5.83 |
200 |
49-221 |
129.5 |
173.4 |
43.9 |
4.48 |
5.75 |
7.35 |
252 |
49-222 |
141.0 |
174.5 |
33.5 |
6.19 |
6.28 |
9.33 |
320 |
49-227 |
145.0 |
260.0 |
115.0 |
5.36 |
7.17 |
8.95 |
307 |
49-232 |
193.0 |
239.0 |
46.0 |
5.44 |
AP1 |
5.44 |
187 |
49-236 |
222.0 |
373.0 |
151.0 |
2.50 |
3.76 |
4.38 |
150 |
49-238 |
175.0 |
195.0 |
20.0 |
11.03 |
9.67 |
15.86 |
544 |
49-238 |
226.8 |
330.0 |
103.2 |
3.49 |
3.73 |
5.35 |
183 |
1 Assay Pending.
Table 2
Recent Silver-Copper Drilling Results - Caladay Zone |
Hole # |
From (ft) |
To (ft) |
Width (ft) |
Ag (oz/ton) |
Ag (g/t) |
Cu (%) |
49-220 |
74.8 |
99.0 |
24.2 |
11.21 |
384 |
0.15 |
49-222 |
71.0 |
78.3 |
7.3 |
8.33 |
286 |
0.11 |
49-259T |
25.6 |
30.0 |
4.4 |
14.71 |
504 |
0.25 |
49-260T |
25.6 |
30.0 |
4.4 |
11.39 |
391 |
0.19 |
49-260T |
148.1 |
150.0 |
1.9 |
99.06 |
3394 |
1.00 |
Note: Since these drill holes were completed from different
drill stations and intersect the veins at various angles the
recovered intersections may not reflect true widths. Please refer
to www.us-silver.com for all drilling results.
Based on the existing block model and analysis done in
connection with the current Galena Technical Report, the additional
exploration potential for the Caladay Zone can be expressed as 10
to 30 million tons, grading 5 to 6 ounces per ton silver, for a
potential of 50 to 180 million ounces of silver. No economic or
recovery considerations were included in this estimate. CAM agrees
that the exploration potential estimate by U.S. Silver & Gold
is a reasonable assessment of the ultimate exploration potential of
that area. However, the potential quantity and grade is conceptual
in nature. There has been insufficient exploration to define
a mineral resource on the Caladay Zone and it is uncertain if
further exploration will result in this target being delineated as
a mineral resource.
Consultants have been engaged to advise on geotechnical aspects
of the Caladay Zone and develop a mine plan which integrates the
significant resource into the existing Galena Complex mine
plan. Test mining advanced on a block of silver-lead ore at
the 4000 level which has allowed a relatively large (25'x80') area
to be opened up thereby adding to the growing understanding of the
Caladay Zone's geological and geotechnical characteristics.
Test mining continues in support of the evaluation of possible
extraction methods. Development is underway on the 4900 level
to gain access to a prospective block of high grade silver-copper
mineralization. The intent is to refine the geological
interpretation and provide a platform for possible production
mining later in the year. Both of these areas are outside of
the mine's 2013 production schedule and would represent new mining
fronts incremental to the current plan.
Management believes the Caladay Zone will not only provide high
grade feed to fill the existing infrastructure but will also prove
to be amendable to bulk mining methods enabling significant per ton
cost reductions in an expansion scenario. A new team focused on the
Caladay Zone, separate from operations, has been created. The
Company will provide a Preliminary Economic Assessment for the
Caladay Zone in the first half of 2013.
"Because over 1100 of the holes in the Caladay Zone are historic
holes, we plan to spend several months drilling holes to validate
these old results," stated Jim
Atkinson, Vice President Exploration, U.S. Silver and
Gold. "In early March alone, we drilled three confirmatory
holes and have already confirmed over 4 million inferred silver
ounces."
Reserves and Resources
The Company replaced reserves of 23.1 million ounces in
2012. In addition, measured and indicated resources were
increased by 8 percent to 13.0 million ounces silver. Inferred
resources of 14.4 million ounces were reported as of December 31, 2012 followed by an additional 4.0
million added as of March 19,
2013.
Table 3
NI-43-1012012 Reserve & Resource Summary |
|
Tons |
Ag
(oz) |
Ag
(oz/t) |
Cu (t) |
Cu % |
Pb (t) |
Pb (%) |
Reserves (Proven &
Probable)
December 31, 2012 |
2,091,279 |
23,176,206 |
11.08 |
5,450 |
0.41 |
50,368 |
6.60 |
Resources (Measured and
Indicated)
December 31, 2012 |
1,318,874 |
13,043,743 |
9.89 |
3,919 |
0.67 |
38,532 |
5.23 |
Resources (Inferred)
1
December 31, 2012 |
1,338,052 |
14,392,293 |
10.76 |
3,147 |
0.69 |
71,148 |
8.09 |
Resources
(Inferred)1
March 19, 2013 |
822,711 |
4,050,540 |
4.92 |
0 |
0.00 |
27.711 |
3.37 |
1The table shows inferred resources with effective
dates of December 31, 2012 and
March 19, 2013. These figures
represent distinct resource blocks. It was necessary to
separate the two resources because data from three holes drilled in
March 2013 was incorporated in the
latter estimate. In this instance, regulations prohibit
resources with different effective dates from being combined.
The Company is committed to following best
practices for ore reconciliation and reserve estimation. For
this reason, an ore reconciliation was completed for 2012
production for the first time in more than five years. As a
result, a reduction in the December 31,
2012 reserve grades for silver, copper and lead was deemed
appropriate after consideration of actual mine performance against
the reserve model. Previously, parameters used in the reserve
estimation process were drawn from historic practices preceding the
Company's involvement at the Galena Complex. Findings
indicated that, while the amount of contained metal was matching
well, the grade of ore mined was below expectations. This
discrepancy between reserve grade and mined grade has existed for
several years (see Chart 1). Reasons for this difference
include; average vein width, ability to mine to design stope width
and changes in vein continuity (i.e. pinch/swell, faulted
offsets). It was decided that the best way to incorporate
this updated view was to increase the amount of waste
dilution. The changes made to the reserve estimate do not
alter the near-to-medium term plans for the operation in terms of
production or operating costs and have already been incorporated in
the 2013 outlook and beyond.
Quality Assurance / Quality Control ("QA/QC")
U.S. Silver & Gold maintains a QA/QC Program
for all assays, whether completed at the Drumlummon laboratory or
at a contract laboratory including the use of standards, blanks,
duplicates. All QA/QC results are evaluated using a program of
QA/QC monitoring. Both the contract laboratory and the
Drumlummon laboratory maintain programs of QA/QC as well.
Assays for the Caladay Zone were prepared by a commercial
laboratory.
Calculation of Silver and Gold Cash
Cost
The Company has changed its presentation of
revenues and cash costs to report under a payable ounces basis to
conform to the presentation used by other comparable entities
within the silver mining industry. Previous disclosures have been
restated to conform to the amended presentation. The Company
reports the cash cost per ounce of silver produced, a non-GAAP
measure, in accordance with measures widely reported in the silver
mining industry as a benchmark for performance measurement.
These measures do not have any standardized meaning and may differ
from methods used by other companies with similar descriptions. The
method does not include depletion, depreciation, exploration or
corporate administrative costs and is therefore not directly
reconcilable to costs as reported under International Financial
Reporting Standards.
About U.S. Silver & Gold Inc.
U.S. Silver & Gold Inc. is a newly formed
silver and gold mining company focused on growth from its existing
asset base and the execution of targeted accretive acquisitions.
U.S. Silver & Gold owns and operates the Galena Mine Complex in
the heart of the Silver
Valley/Coeur d'Alene Mining District, Shoshone County, Idaho and the Drumlummon Mine
Complex in Lewis and Clark County,
Montana. Within the Galena Mine Complex, the Galena Mine
produces high-grade silver and is the second most prolific silver
mine in U.S. history, delivering over 200 million ounces to date,
the Coeur Mine is under re-development with first production having
been achieved in late 2012 and the Caladay Zone is being evaluated
for bulk mining development. The Drumlummon Mine currently produces
high-grade gold and silver with historical production of 1 million
ounces of gold and 12 million ounces of silver and has never been
fully exploited or explored. Visit www.us-silver.com.
Mr. Jim Atkinson,
Vice President, Exploration and a Qualified Person under Canadian
Securities Administrators guidelines, has approved the contents of
this news release.
For further information please see SEDAR or
www.us-silver.com for the NI 43-101 compliant Technical Report on
the Galena Project dated March 22,
2013.
Cautionary Statement Regarding Forward Looking
Information:
This news release contains "forward‐looking
information" within the meaning of applicable securities laws.
Forward‐looking information includes, but is not limited to, the
Company's expectations intentions, plans, and beliefs with respect
to, among other things, the Galena Complex and the Drumlummon Mine.
Often, but not always, forward‐looking information can be
identified by forward‐looking words such as "anticipate",
"believe", "expect", "goal", "plan", "intend", "estimate", "may",
and "will" or similar words suggesting future outcomes, or other
expectations, beliefs, plans, objectives, assumptions, intentions,
or statements about future events or performance. Forward‐looking
information is based on the opinions and estimates of the Company
as of the date such information is provided and is subject to known
and unknown risks, uncertainties, and other factors that may cause
the actual results, level of activity, performance, or achievements
of the Company to be materially different from those expressed or
implied by such forward looking information. This includes the
ability to develop and operate the Galena and Drumlummon
properties, risks associated with the mining industry such as
economic factors (including future commodity prices, currency
fluctuations and energy prices), failure of plant, equipment,
processes and transportation services to operate as anticipated,
environmental risks, government regulation, actual results of
current exploration activities, possible variations in ore grade or
recovery rates, permitting timelines, capital expenditures,
reclamation activities, social and political developments and other
risks of the mining industry. Although U.S. Silver and Gold has
attempted to identify important factors that could cause actual
results to differ materially from those contained in
forward‐looking information, there may be other factors that cause
results not to be as anticipated, estimated, or intended. Readers
are cautioned not to place undue reliance on such information. By
its nature, forward‐looking information involves numerous
assumptions, inherent risks and uncertainties, both general and
specific those contribute to the possibility that the predictions,
forecasts, and projections of various future events will not occur.
The Company undertakes no obligation to update publicly or
otherwise revise any forward‐looking information whether as a
result of new information, future events or other such factors
which affect this information, except as required by law.
SOURCE U.S. Silver & Gold Inc.
Image with caption: "Chart 1 - Actual Grade Mined vs. NI 43-101
Reserve Grade (CNW Group/U.S. Silver & Gold Inc.)". Image
available at:
http://photos.newswire.ca/images/download/20130328_C9307_PHOTO_EN_24922.jpg