Investors

Brio Gold Reports Fourth Quarter and Year End 2016 Results


February 16, 2017

Q4 and FY 2016 Financial Statements (PDF)
Q4 and FY 2016 MD&A (PDF)

TORONTO, ON--(Marketwired - February 16, 2017) - BRIO GOLD INC. (TSX: BRIO) ("BRIO GOLD" or the "Company") is pleased to announce the Company's fourth quarter and year end 2016 financial results, three year operating outlook and year end mineral reserve and mineral resource estimates. All dollar figures are in U.S. dollars unless otherwise indicated.

2016 Financial and Operating Highlights

  • Record full year production of 189,662 ounces of gold, representing a 32% increase from 2015 and exceeding guidance range of 183,000 to 188,000 ounces of gold.
  • Total cost of sales, including depletion, depreciation and amortization (DDA) of $1,099 per gold ounce sold and cost of sales excluding DDA of $752 per ounce sold.
  • Cash costs(1) of $746 per ounce of gold produced and all-in sustaining costs (AISC) (1) of $985 per gold ounce produced.
  • Revenues of $232.4 million, a 44% increase from 2015, on the sale of 192,524 ounces of gold
  • Cash flow from operations before and after changes in working capital of $70.5 million and $70.1 million, respectively.
  • Net loss of $16.9 million, or $0.37 per share.
  • Adjusted EBITDA(1) of $67.4 million, or $1.47 per share.
  • Positive decision made to move forward with the recommissioning of Santa Luz.
  • Construction of water storage facility at the Riacho dos Machados (RDM) mine functionally completed allowing for consistent production.

2016 Mineral Reserves and Resources

  • Proven and probable mineral reserves of 60.6 million tonnes averaging 1.41 g/t gold for total contained gold of 2.75 million ounces, an increase of 275% from 2015.
  • Measured and indicated mineral resources of 30.0 million tonnes averaging 2.00 g/t gold for total contained gold of 1.93 million ounces.
  • Inferred mineral resources of 31.5 million tonnes averaging 2.56 g/t gold for total contained gold of 2.59 million ounces.
  • Further update to mineral reserves and mineral resources expected in the second quarter of 2017 with the completion of additional drilling and analysis at Santa Luz and RDM.
(1) A non-GAAP financial measure. For a reconciliation of non-GAAP financial measures, please see the end of this press release.
 

"2016 was a transformational year for Brio Gold as we became a standalone public company and operationally delivered against our objectives," commented Gil Clausen, President and CEO of Brio Gold. "We ended the year with record production, beating the top end of our guidance range and each of our operating mines demonstrated continued improvements. We have a solid production platform along with low risk near term growth, which is driven by our recently acquired RDM mine and our Santa Luz mine entering re-commissioning. Each of these mines are expected to add, when at full run rate, an average of over 100,000 ounces per year. 2017 will be a year for us to focus on maximizing cash flow to allow for us to execute on our growth plans that get us to 400,000 ounces and move up the mid-tier curve."

2016 Financial Results

     
    For the years ended December 31,
In thousands of U.S. Dollars (unaudited)   2016   2015
Revenues from operating mines   $232,356   $161,567
Gross margin before depletion, depreciation and amortization   $87,620   $55,150
Net loss   $(16,859)   $(69,418)
Adjusted earnings (loss)(1)   $(17,925)   $19,312
Adjusted EBITDA (1)   $67,379   $27,339
Cash flow from operating activities before changes in working capital   $70,470   $34,451
Cash flow from operating activities after changes in working capital   $70,086   $11,768
         
(1) A non-GAAP financial measure. For a reconciliation of non-GAAP measures, please see the end of this press release.
 

Revenues were $232.4 million on the sale of 192,524 ounces of gold compared to $161.6 million on the sale of 144,437 ounces of gold for the comparable period in 2015.

Gross margin before depletion, depreciation and amortization totalled $87.6 million for the year ended December 31, 2016 compared to $55.2 million for the year ended December 31, 2015. Overall, the increase is due to higher gold quantities sold combined with higher metal prices, all while maintaining costs to lower increases.

Net loss for the year ended December 31, 2016 was $16.9 million or $0.37 per share, compared to a net loss of $69.4 million or $4.40 per share for the year ended December 31, 2015. The net loss was due in large part to impairment charges, reorganizations costs, losses on indirect tax credits, and foreign exchange losses, all of which are excluded from the calculation of adjusted loss and are non-cash items with the exception of reorganization costs. The lower net loss when compared to the prior year was primarily from the higher gross margin before depletion, depreciation and amortization as discussed above in addition to the recording of a tax recovery in 2016 versus a tax expense in 2015. The reductions achieved in general and administrative expenses, other operating expenses, and mine related impairment charges, were offset by the impact of foreign exchange.

Adjusted loss was $17.9 million or $0.39 per share compared to an adjusted gain of $19.3 million or $1.22 per share for the same period in 2015. 2016 included a non-cash tax gain on unrealized foreign exchange losses of $31.3 million, compared to a loss of $81.2 million in 2015. Excluding this impact, adjusted earnings would have increased $75.3 million from 2015 to 2016. Adjusted EBITDA was $67.4 million or $1.47 per share compared to $27.3 million or $1.73 per share for the same period in 2015.

The Company recorded a pre-tax $14.7 million impairment charge, which is comprised of a $110.9 million impairment charge for the Pilar mine and a $96.2 million reversal for the Santa Luz mine. On an after-tax basis, the Company recorded a reversal of $1.7 million, which is comprised of a $94.5 million impairment charge for the Pilar mine and a $96.2 million reversal for the Santa Luz mine. The adjustments to these assets represent a better alignment between the book value and the realizable value of each mine, which results in the overall value of the Company's assets remaining relatively unchanged. The impairment for the Pilar mine is a result of a revised mine plan following a thorough Brio Gold management review and a change in the weighted average cost of capital assumptions used to calculate the discounted net present value of the asset. For the Santa Luz mine, reversal of the previous impairment is due to the decision to recommission the mine following a positive Technical Report, which included the reclassification of Mineral Resources into Mineral Reserves, as their ability to be mined profitably was demonstrated.

Cash flow from operating activities before and after changes in working capital were $70.5 million and $70.1 million, respectively, compared to $34.5 million and $11.8 million in 2015, respectively.

2016 Operational Results

         
    For the years ended December 31,    
    2016   2015   Change
Total gold production (oz) (1)   189,662   144,098   32%
Total cost of sales per gold ounce sold   $1,099   $1,085   1%
Cost of sales excluding depletion, depreciation and amortization per gold ounce sold   $752   $737   2%
Cash cost per gold ounce produced (2,3)   $746   $718   4%
AISC per gold ounce produced (2,3)   $985   $956   3%
             
Notes:    
(1)   Production in 2016 includes the attributable ounces from RDM subsequent to the date it was acquired on April 29, 2016.
(2)   The 2015 comparative cash costs per ounce produced and all-in sustaining costs per ounce produced relate only to the Fazenda Brasileiro Mine and Pilar Mine.
(3)   A non-GAAP financial measure. For a reconciliation of non-GAAP measures see the end of this press release.
     

All of the Brio Gold mines met or exceeded production guidance for 2016. Total gold production of 189,662 ounces exceeded guidance of 183,000 to 188,000 ounces of gold, highlighted by the Fazenda Brasileiro Mine which exceeded the upper end of guidance.

The Company produced 32% more than the 144,098 ounces produced in 2015, mainly due to higher throughput in all the mines, and specifically the contribution of 31,714 ounces of production from the RDM mine, from the date it was acquired on April 2016. Gold production at Pilar recorded successive yearly increases since it completed commissioning in 2014.

Total cost of sales per ounce of gold sold was $1,099 compared to $1,085 in 2015 and cost of sales excluding depletion, depreciation and amortization was $752 compared to $737 per gold ounce sold. Total cash cost was $746 per ounce produced in 2016 compared to $718 in 2015. All-in sustaining costs per ounce of gold produced increased by 3% from $956 in 2015 to $985 in 2016. Overall, the increase in per ounce costs was primarily due to higher sustaining capital expenditures in 2016 and the RDM mine operating at less than full capacity due to a water shortage. In early 2017, a water storage facility was built at the RDM mine, which allows for consistent production.

Breakdown by Mine

         
    For the years ended December 31,    
Gold production (oz)   2016   2015   Change
Fazenda Brasileiro   70,887   60,914   16%
Pilar   87,061   83,184   5%
RDM(1)   31,714   -   -
Total Production   189,662   144,098   32%
             
Notes:    
(1)   Only include ounces produced in 2016 since the Company acquired RDM on April 29, 2016.

In the year ended December 31, 2016, the Fazenda Brasileiro mine produced a total of 70,887 ounces of gold, compared to 60,914 ounces of gold in 2015. The increase in production was due to a combination of higher throughput, higher feed grade, and higher recovery. Total cost of sales per ounce of gold sold was $949, cost of sales excluding depletion, depreciation and amortization per ounce of gold sold was $694. Cash costs per ounce produced were $689 per ounce of gold in 2016, and all-in sustaining costs per ounce produced were $918 in 2016.

The Pilar mine produced 87,061 ounces of gold for the year ended December 31, 2016 compared to 83,184 ounces in 2015. The increase in gold production was due to higher recovery and throughput. Total cost of sales per ounce of gold sold was $1,195, cost of sales excluding depletion, depreciation and amortization per ounce of gold sold was $689. Cash costs averaged $742 per ounce of gold produced and all-in sustaining costs per ounce produced were $951 in 2016.

The RDM mine produced 31,714 ounces of gold for the year ended December 31, 2016, which includes only the ounces produced since its acquisition on April 29, 2016. Total cost of sales per ounce of gold sold was $1,183, cost of sales excluding depletion, depreciation and amortization per ounce of gold sold was $1,045. Cash costs averaged $881 per ounce of gold produced and all-in sustaining costs per ounce produced were $1,001.

Fourth Quarter Highlights

Revenues from mining operations increased 30% to $59.5 million in the fourth quarter of 2016 from $45.7 million in the fourth quarter of 2015, due to a combination of higher ounces sold from the RDM mine that was acquired in 2016, and a higher gold price. Mine Operating earnings was a loss of $122.4 million in the fourth quarter of 2016, compared to a loss of $12.8 million in the fourth quarter of 2015 primarily due to an impairment of mining properties for the Pilar Mine of $110.9 million which is included in Mine Operating earnings.

Cash flow from operating activities before changes in working capital in the fourth quarter of 2016 was $20.0 million, compared to $20.7 million in the same quarter of 2015. Cash flow from operating activities after changes in working capital in the fourth quarter of 2016 was $31.2 million, compared to $29.5 million in the same quarter of 2015.

Total production in the fourth quarter of 2016 was 50,477 ounces of gold, compared to 39,279 ounces in the same period of 2015, mainly because of higher throughput in all the mines, and specifically the contribution of production from the RDM mine, which was acquired in April 2016. Production of gold at Pilar recorded successive yearly increases since it has completed commissioning.

Total cost of sales was $1,421 per ounce of gold sold in the fourth quarter of 2016, compared to total cost of sales of $1,016 per ounce of gold sold in the fourth quarter of 2015. Cost of sales excluding depletion, depreciation and amortization was $896 per gold ounce sold in the fourth quarter of 2016, compared to $657 per gold ounce sold in the fourth quarter of 2015. Cash costs were $832 per ounce of gold produced in the fourth quarter of 2016, compared to $610 per ounce of gold produced in the same quarter of 2015. Overall, costs increased in the fourth quarter of 2016 compared to 2015, primarily due to the strengthening of the average Brazilian Real against the U.S. dollar by 14% and the inclusion of results from the relatively higher cost RDM Mine.

Fazenda Brasileiro Mine
Production in the fourth quarter of 2016 was 18,279 ounces of gold, compared to 17,953 ounces in the same period of 2015. Total cost of sales $1,074 per ounce of gold sold in the fourth quarter of 2016, compared to total cost of sales of $1,210 per ounce of gold sold in the fourth quarter of 2015. Cost of sales excluding depletion, depreciation and amortization in the fourth quarter of 2016 was $767 per gold ounce sold compared to $703 per gold ounce sold in the same period in 2015. Cash costs were $753 per ounce of gold produced in the fourth quarter of 2016, compared to $599 per ounce of gold produced in the same quarter of 2015.

Pilar Mine
Production at the Pilar mine in the fourth quarter of 2016 was 22,170 ounces of gold, compared to 21,326 ounces in the same period of 2015. Total cost of sales was $1,687 per ounce of gold sold in the fourth quarter of 2016, compared to total cost of sales of $851 per ounce of gold sold in the fourth quarter of 2015. Cost of sales excluding depletion, depreciation and amortization in the fourth quarter of 2016 was $867 per gold ounce sold compared to $599 per gold ounce sold in the same period in 2015. Cash costs were $872 per ounce of gold produced in the fourth quarter of 2016, compared to $618 per ounce of gold produced in the same quarter of 2015.

RDM Mine
In the fourth quarter of 2016, production at the RDM mine was 10,082 ounces of gold. Total cost of sales per ounce of gold was $1,494 and cost of sales excluding depletion, depreciation and amortization per ounce of gold sold was $1,223. Cash costs averaged $888 in the fourth quarter of 2016.

Development Update

The Company has made a positive decision to advance Santa Luz to the execution phase and move forward with the re-start of the operation. This decision was based on the positive results from the Technical Report for the recommissioning of Santa Luz. Brio Gold has since completed drilling to further delineate the ore body as well as additional metallurgical testwork for further optimization. The Company has commenced engineering and is currently in the process of ordering long lead items. Re-commissioning of the operation is expected in the first half of 2018.

The water storage facility at RDM is now functionally complete and is currently retaining water allowing for increased and consistent production. Production for 2017 is expected to be 75,000 to 85,000 ounces of gold. Brio Gold is also looking at further mine plan optimizations at RDM with the objective of reducing costs and maximizing cash flow. With the completion of further infill drilling, the Company expects to announce an updated mine plan along with an updated mineral reserves and mineral resources estimate in the second quarter of 2017.

2016 Mineral Reserves and Mineral Resources

Brio Gold ended 2016 with proven and probable reserves of 2.75 million ounces of gold, 275% higher than at the year end of 2015, measured and indicated resources of 1.93 million ounces of gold and inferred resources of 2.59 million ounces of gold. A summary table is provided below.

             
As at December 31, 2016 (Contained gold in koz)   Proven & Probable Mineral Reserves   Measured & Indicated Mineral Resources   Inferred Mineral Resources
    2016   2015   2016   2015   2016   2015
Fazenda Brasileiro   417   392   256   229   156   2,041
Pilar   450   342   704   360   1,626   91
RDM   663   -   190   -   416   -
Santa Luz   1,221   -   780   1,657   395   943
Total   2,751   734   1,930   2,246   2,593   3,075
                         
Mineral Resources are exclusive of Mineral Reserves. See complete Mineral Reserves and Resources Table along with Notes to the Mineral Reserves and Resources Estimate at the end of this press release.
 

Pilar's 2016 year end proven and probable mineral reserves and measured and indicated mineral resources in contained gold ounces increased by 32% and 51%, respectively, due to the significant drilling program completed in 2016, largely driven by the potential open-pit Tres Buracos deposit.

Fazenda Brasileiro benefited from a major drilling program during 2016 that resulted in increased resources, as well as reserves. Highlights include results obtained from the relatively unexplored Canto Sequence that is in the footwall zone parallel to the traditional mine sequences.

The December 31, 2016 mineral reserves and resources estimate for RDM currently only reflects the depletion of recent production from the prior mineral reserves and resources estimate. A new updated resources model is now in progress, which will reflect the benefit of the 2016 drilling programs, as well as other model improvements. As the Company completes additional drilling and analysis at both RDM and Santa Luz in the first quarter of 2017, Brio Gold intends to publish an update to its reserves and resources estimate in the second quarter of 2017.

Outlook

The Company three-year operating outlook is provided below. The Company's 2017 production and cost guidance remains unchanged from previously announced guidance.

             
Production (koz)   2017E   2018E   2019E
Fazenda Brasileiro   65-70   67-72   67-72
Pilar   83-88   88-93   100-105
RDM   75-85   100-105   115-120
Santa Luz   -   100-110   115-120
Consolidated Brio Gold   223-243   355-380   397-417
             
Total COS (1,2)per ounce   2017E   2018E   2019E
Fazenda Brasileiro   $980-$1,000   $1,010-$1,030   $1,045-$1,065
Pilar   $1,000-$1,020   $980-$1,000   $920-$940
RDM   $1,010-$1,030   $855-$875   $775-$795
Santa Luz   -   $835-$855   $1,070-$1090
Consolidated Brio Gold   $995-$1,015   $910-$930   $945-$965
             
Cash Costs (1,2)   2017E   2018E   2019E
Fazenda Brasileiro   $740-$760   $740-$760   $740-$760
Pilar   $740-$760   $665-$685   $625-$645
RDM   $910-$930   $710-$730   $610-$630
Santa Luz   -   $525-$545   $755-$775
Consolidated Brio Gold   $800-$820   $650-$670   $680-$700
             
AISC (1,2)   2017E   2018E   2019E
Fazenda Brasileiro   $910-$930   $910-$930   $910-$930
Pilar   $940-$960   $960-$980   $875-$895
RDM   $990-$1,010   $770-$790   $790-$810
Santa Luz   -   $530-$550   $760-$780
Consolidated Brio Gold   $1,080-$1,100   $805-$825   $855-$875