News

Brio Gold Reports Third Quarter 2017 Financial Results


October 31, 2017

Q3 2017 Financial Statements (PDF)
Q3 2017 MD&A (PDF)

TORONTO, ON --(Marketwired - October 31, 2017) - BRIO GOLD INC. (TSX: BRIO) ("BRIO GOLD" or the "Company") announces its third quarter 2017 financial and operating results. All dollar figures are in U.S. dollars unless otherwise indicated. R$ = Brazilian Reais where noted.

Q3 2017 Financial and Operating Highlights

  • Production of 42,913 ounces of gold.
  • Total cost of sales of $1,160 per gold ounce sold.
  • Cash costs(1) of $876 per ounce of gold produced.
  • All-in sustaining costs (AISC)(1) of $1,228 per gold ounce produced.
  • Revenues of $54.1 million on the sale of 43,228 ounces of gold.
  • Mine operating earnings of $4.0 million.
  • Net loss of $10.0 million, or $0.09 per share.
  • Adjusted net loss(1) of $6.8 million, or $0.07 per share.
  • Adjusted EBITDA(1) of $9.7 million, or $0.08 per share
  • Cash flow from operating activities of $6.6 million, and $10.9 million before changes in working capital.
  • Secured $22 million in credit facilities with three major Brazilian banks
  • Implemented forward contract currency hedges for 2019 at an average fixed rate of R$3.40 to US$1.00 for R$120 million and at R$3.50 to US$1.00 for $120 million.
  • Hedged 30,000 ounces of gold over 15 months with zero cost collars with a put and call strike prices of $1,300 and $1,340 per ounce of gold, respectively.

(1) A non-GAAP financial measure. For a reconciliation of non-GAAP financial measures, please see the end of this press release.

 
Q3 2017 Summary Financial Results
    For the three months
ended September 30,
  For the nine months
ended September 30,
In thousands of U.S. Dollars   2017   2016   2017   2016
Revenues from mining operations   $54,126   $60,559   $166,478   $172,846
Mine operating earnings   $3,999   $7,550   $14,022   $32,304
Net (loss)/earnings   $(10,003)   $(15,534)   $(14,987)   $5,255
Adjusted (loss)/earnings(1)   $(6,752)   $(6,686)   $(7,819)   $(3,137)
Adjusted EBITDA(1)   $9,653   $13,032   $29,068   $45,301
Cash flow from operating activity   $6,570   $13,998   $326   $38,860
Cash flow from operating activities before changes in working capital   $10,902   $15,506   $30,616   $50,446
(1) A non-GAAP financial measure. For a reconciliation of non-GAAP measures, please see the end of this press release.
   

Revenues from mining operations were $54.1 million in the third quarter of 2017 compared to $60.6 million for the comparable period in 2016 due to lower ounces sold.

Net loss in the third quarter of 2017 was $10.0 million or $0.09 per share, compared to a net loss of $15.5 million or $0.63 per share for the third quarter of 2016. The Company sold VAT tax credits in the quarter that resulted in a gain of $4.4 million, which is excluded from the calculation of adjusted earnings.

The adjusted loss in the third quarter of 2017 was $6.8 million compared to $6.7 million in the same period of 2016 as lower revenue was partially offset by lower depreciation expense.

The adjusted EBITDA in the third quarter of 2017 was $9.7 million compared to $13.0 million in the same period of 2016 due to the lower ounces sold, and higher costs of sales per ounce.

Cash flow from operating activities after changes in working capital for the third quarter of 2017 was an inflow of $6.6 million, compared to an inflow of $14.0 million in the same period of 2016 due to lower ounces sold, and a decline in working capital due to timing of gold shipments that is expected to reverse in the fourth quarter of 2017.

The Company has secured $22 million in credit facilities with three major Brazilian banks at an average interest rate of 4%. The Company plans to utilize these credit facilities for working capital purposes at its operations and is currently assessing other debt funding alternatives including increasing its current $75 million corporate credit facility and direct project financing for the completion of the Santa Luz Mine recommissioning project.

During the third quarter, the Company entered into gold price hedging arrangements in order to manage cash flow during the development phase of the Santa Luz mine. On September 20, 2017, the Company entered into a zero-cost collar contract, where gold puts were purchased and gold calls were sold with put and call strike prices of $1,300 and $1,340 per ounce, respectively, for 2,000 ounces per month. These purchases and sales will be made from October 2017 to December 2018, inclusive, totaling 30,000 ounces of gold.

Subsequent to the quarter end, the Company entered into forward currency contracts of R$120 million for 2019, at a fixed exchange rate that averages R$3.40 to US$1.00 and R$120 million at a fixed exchange rate that average R$3.50 to US$1.00. The Company already has currency hedging arrangements in place for 2017 and 2018. In 2017 and 2018, Brio Gold has R$672 million of forward rate contracts at a rate of R$3.55 to US$1.00 and R$672 million of zero-cost collars with average call and put strike prices of R$3.30 and R$3.90, respectively.

 
Q3 2017 Summary Operational Results
    For the three months ended September 30,   For the nine months ended September 30,
    2017   2016   Change   2017   2016   Change
Gold production (oz) (1)   42,913   46,076   (7)%   137,676   139,185   (1)%
Gold sales (oz) (1)   43,228   46,808   (8)%   135,534   140,403   (3)%
Average realized gold price(2)   $1,267   $1,309   (3)%   $1,242   $1,243   -%
Total cost of sales per gold ounce sold(1)   $1,160   $1,132   2%   $1,124   $1,001   12%
Cash cost per gold ounce produced (1,2)   $876   $813   8%   $858   $714   20%
Consolidated AISC per gold ounce produced (1,2)   $1,228   $1,157   6%   $1,119   $965   16%
Notes:
 
(1) Operating statistics only include RDM from the date that it was acquired on April 29, 2016.
(2) A non-GAAP financial measure. For a reconciliation of non-GAAP measures see the end of this press release.
   

Production during the third quarter from the Company's three producing mines was 42,913 ounces of gold, 7% lower than the comparative quarter of 2016.

At the Pilar mine, third quarter production decreased 6% when compared to the same period in 2016. Gold feed grades were significantly lower as a result of a proportional increase in production from the lower grade Maria Lazara deposit and an increased percentage of ore development tonnage at the main Pilar Mine, which led to higher overall dilution. The Company ran the mill at its full design capacity in the quarter, which corresponds to an annual design rate of 1.4 million tonnes per year, or 26% greater throughput year over year. The Company is now confident that the plant can sustain this rate as Brio Gold, in the future, introduces low cost ore from the Tres Buracos open pit development project at Pilar. The Company now intends to return to a lower throughput rate by reducing development ore tonnage and Maria Lazara production, focusing on cost containment and grade. Although this is expected to impact production in the fourth quarter, ultimately cash flow should improve with reduced cost and improved margins. The Company now expects 2017 production for Pilar to be 78,000 to 83,000 ounces.

At Fazenda Brasileiro, third quarter production in 2017 was 8% lower than the same period last year primarily due to lower feed grades as a result of mine sequencing, partially offset by higher recoveries. Feed grade significantly improved month-over-month within the quarter. The Company expects grade to continue to show improvements in the fourth quarter with production forecasted to increase and provide the strongest quarter for Fazenda Brasileiro in 2017. To reflect actual production year to date, the Company expects production at Fazenda Brasileiro to be 60,000 to 65,000 ounces.

The RDM mine was put on care and maintenance for 51 days during the quarter due to a lack of water as a result of continued dry season conditions. At the end of October, the rainy season commenced and the Company is now in the process of re-starting the RDM mine. Consistent production is expected going forward at RDM with the water storage facility complete. The Company expects production for 2017 at RDM to be 45,000 to 50,000 ounces of gold. An ore stockpile was built up in the third quarter to provide process flexibility for when the mine resumes production

 
Breakdown by Mine
    For the three months
ended September 30,
  For the nine months
ended September 30,
Gold production (oz)   2017   2016   Change   2017   2016   Change
  Pilar   19,045   20,237   (6)%   59,816   64,891   (8)%
  Fazenda Brasileiro   15,915   17,211   (8)%   44,879   52,608   (15)%
  RDM(1)   7,953   8,628   (8)%   32,981   21,686   52%
Total Production   42,913   46,076   (7)%   137,676   139,185   (1)%
                         
Total Cost of Sales ($ per oz sold)                        
  Pilar   $1,212   $1,152   5%   $1,123   $1,023   10%
  Fazenda Brasileiro   $1,152   $998   15%   $1,161   $901   29%
  RDM(1)   $1,046   $1,342   (22)%   $1,078   $1,189   (9)%
Total Cost of Sales per gold oz sold   $1,160   $1,132   2%   $1,124   $1,001   12%
                         
Cash Costs ($ per oz produced)                        
  Pilar   $845   $791   7%   $820   $698   17%
  Fazenda Brasileiro   $943   $751   26%   $877   $667   31%
  RDM(1)   $815   $986   (17)%   $900   $878   3%
Total Cash Costs   $876   $813   8%   $858   $714   20%
                         
AISC ($ per oz produced)                        
  Pilar   1,085   1,067   2%   1,035   884   17%
  Fazenda Brasileiro   1,158   1,039   11%   1,055   883   19%
  RDM(1)   1,241   1,174   6%   1,022   999   2%
Total Mine AISC ($ per oz produced)   1,141   1,077   6%   1,038   897   16%
Total Consolidated AISC ($ per oz produced)   1,228   1,157   6%   1,119   965   16%
Notes:
 
(1) Operating statistics only include RDM from the date that it was acquired on April 29, 2016.
   

Third Quarter 2017 Financial Results Conference Call and Webcast

Brio Gold will hold a conference call and webcast on November 1, 2017 at 10:00 am ET.

Third Quarter 2017 Conference Call:
Toll Free (North America): 1-844-543-5236
International: 1-703-318-2218
Webcast: www.briogoldinc.com

Conference Call REPLAY:
Toll Free (North America): 1-855-859-2056
Toronto Local and International: 1-404-537-3406
Conference ID: 94463369

The conference call replay will be available from 1:00 p.m. ET on November 1, 2017 until 12:00 p.m. ET on November 8, 2017.

About Brio Gold

Brio Gold is a Canadian mining company with significant gold producing, development and exploration stage properties in Brazil. Brio Gold's portfolio includes three operating gold mines and a fully-permitted, fully-constructed mine that was on care and maintenance and currently is in development to be re-started at the end of 2018. Brio Gold produced approximately 190,000 ounces of gold in 2016 and at full run-rate expects annual production to be approximately 400,000 ounces of gold.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release contains or incorporates by reference "forward-looking statements" and "forward-looking information" under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to information with respect to the Company's strategy, plans or future financial or operating performance, the outcome of the legal matters involving the damages assessments and any related enforcement proceedings. Forward-looking statements are characterized by words such as "plan," "expect", "budget", "target", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company's expectations in connection with the production and exploration, development and expansion plans at the Company's projects discussed herein being met, the impact of proposed optimizations at the Company's projects, the impact of the proposed new mining law in Brazil, and the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating metal prices (such as gold and silver), currency exchange rates (such as the Brazilian real versus the United States dollar), the impact of inflation, possible variations in ore grade or recovery rates, changes in the Company's hedging program, changes in accounting policies, changes in mineral resources and mineral reserves, risks related to asset disposition, risks related to metal purchase agreements, risks related to acquisitions, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, unanticipated costs and expenses, higher prices for fuel, steel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, unanticipated results of future studies, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, permitting timelines, government regulation and the risk of government expropriation or nationalization of mining operations, risks related to relying on local advisors and consultants in foreign jurisdictions, environmental risks, unanticipated reclamation expenses, risks relating to joint venture operations, title disputes or claims, limitations on insurance coverage and timing and possible outcome of pending and outstanding litigation and labour disputes, risks related to enforcing legal rights in foreign jurisdictions, as well as those risk factors discussed or referred to herein. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates, assumptions or opinions should change, except as required by applicable law. The reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is presented for the purpose of assisting investors in understanding the Company's expected financial and operational performance and results as at and for the periods ended on the dates presented in the Company's plans and objectives and may not be appropriate for other purposes.

Non-GAAP Financial Measures

The Company has included certain non-GAAP financial measures including cash costs per ounce of gold produced, all-in sustaining costs per ounce of gold produced, adjusted earnings (loss), and adjusted EBITDA to supplement its consolidated financial statements, which are presented in accordance with IFRS.

The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP financial measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Cash Costs

The Company uses the non-GAAP financial measure "cash costs" on a per ounce of gold produced basis because it believes this measure provides investors and analysts with useful information about the Company's underlying cash costs of operations and is a relevant metric used to understand the Company's operating profitability, and ability to generate cash flow. Cash costs figures are calculated based on the standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard remains the generally accepted standard of reporting cash costs of production in North America. Adoption of the standard is voluntary and the cost measures presented herein may not be comparable to other similarly titled measures of other companies.

Cash costs include mine site operating costs such as mining, processing, administration, production taxes and royalties, which are not based on sales or taxable income calculations, but are exclusive of amortization, reclamation, capital, development, and exploration costs. Cash costs per ounce of gold produced are calculated on a weighted average basis.

The term "cash costs" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

All-in Sustaining Costs

The Company uses the non-GAAP financial measure "all-in sustaining costs", also referred to as "AISC", on a per ounce of gold produced basis because it believes this measure provides investors with useful information about the Company's underlying cash costs of operations, after deducting certain non-discretionary items such as sustaining capital expenditures, exploration expenses and certain general and administrative costs and is a relevant metric used to understand the Company's ability to generate cash flow. All-in sustaining costs are based on cash costs, including cost components of mine sustaining capital expenditures and exploration and evaluation expense. All-in sustaining costs for a mine do not include capital expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects, Brio Gold corporate general and administrative expenses, Yamana general and administrative expenses allocated to Brio Gold or stock-based compensation, income tax payments, financing costs and dividend payments. Consequently, this measure is not representative of all of the Company's cash expenditures. In addition, the calculation of all-in sustaining costs does not include depletion, depreciation and amortization expense as it does not reflect the impact of expenditures incurred in prior periods. The term "all-in sustaining costs" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

Reconciliation of cost of sales including depletion, depreciation and amortization to cash costs and all-in sustaining costs, consolidated and per mine

(Based on Condensed Consolidated Interim Financial Statements unless otherwise noted)

       
    For the three months ended September 30, 2017  
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated     Pilar Mine     Fazenda
Brasileiro
Mine
    RDM Mine  
Cost of sales including depletion, depreciation and amortization   50,127     22,348     19,196     8,497  
Depletion, depreciation and amortization   (10,442 )   (5,868 )   (3,356 )   (1,132 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,093 )   (387 )   (832 )   (883 )
Cash costs(2)   37,592     16,093     15,008     6,482  
General and administrative expenses attributable to all-in sustaining costs   5,470     99     86     103  
Stock based compensation   (1,888 )   -     -     -  
Sustaining capital expenditures   11,523     4,472     3,336     3,285  
All-in sustaining costs(2)   52,697     20,664     18,430     9,870  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,160     1,212     1,152     1,046  
Cash cost per gold ounce produced(2)   876     845     943     815  
All-in sustaining costs per ounce produced(2)   1,228     1,085     1,158     1,241  
                         
Gold ounces produced during the period (oz.)   42,913     19,045     15,915     7,953  
Gold ounces sold during the period (oz.)   43,228     18,444     16,658     8,126  
     
    For the three months ended September 30, 2016
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated   Pilar Mine   Fazenda
Brasileiro
Mine
  RDM Mine
Cost of sales including depletion, depreciation and amortization     53,009       23,787       17,072       12,150  
Depletion, depreciation and amortization     (13,936 )     (9,295 )     (3,792 )     (849 )
Adjustments:                                
Inventory movement and adjustments(1)     (1,613 )     1,515       (355 )     (2,794 )
Cash costs(2)     37,460       16,007       12,925       8,507  
General and administrative expenses attributable to all-in sustaining costs     5,509       26       44       30  
Stock based compensation     (1,742 )     -       -       -  
Sustaining capital expenditures     12,065       5,560       4,913       1,592  
All-in sustaining costs(2)     53,292       21,593       17,882       10,129  
                                 
Cost of sales including depletion, depreciation and amortization per gold ounce sold   $ 1,132     $ 1,152     $ 998     $ 1,342  
Cash cost per gold ounce produced(2)   $ 813     $ 791     $ 751     $ 986  
All-in sustaining costs per ounce produced(2)   $ 1,157     $ 1,067     $ 1,039     $ 1,174  
                                 
Gold ounces produced during the period (oz.)     46,076       20,237       17,211       8,628  
Gold ounces sold during the period (oz.)     46,808       20,656       17,100       9,052  
     
    For the nine months ended September 30, 2017
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated   Pilar Mine   Fazenda
Brasileiro
Mine
  RDM Mine
Cost of sales including depletion, depreciation and amortization   152,456     65,936     50,272     36,162  
Depletion, depreciation and amortization   (35,348 )   (17,150 )   (13,136 )   (4,976 )
Adjustments:                        
Inventory movement and adjustments(1)   1,018     263     2,223     (1,503 )
Cash costs(2)   118,126     49,049     39,359     29,683  
General and administrative expenses attributable to all-in sustaining costs   17,041     873     677     413  
Stock based compensation   (5,632 )   -     -     -  
Sustaining capital expenditures   24,524     11,988     7,311     3,611  
All-in sustaining costs(2)   152,820     61,910     47,347     33,707  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,124     1,123     1,161     1,078  
Cash cost per gold ounce produced(2)   858     820     877     900  
All-in sustaining costs per ounce produced(2)   1,119     1,035     1,055     1,022  
                         
Gold ounces produced during the period (oz.)   137,676     59,816     44,879     32,981  
Gold ounces sold during the period (oz.)   135,534     58,702     43,283     33,549  
     
    For the nine months ended September 30, 2016
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated   Pilar Mine   Fazenda
Brasileiro
Mine
  RDM Mine
Cost of sales including depletion, depreciation and amortization   140,542     65,737     48,998     25,807  
Depletion, depreciation and amortization   (40,494 )   (25,605 )   (12,822 )   (2,067 )
Adjustments:                        
Inventory movement and adjustments(1)   (670 )   5,162     (1,086 )   (4,700 )
Cash costs(2)   99,378     45,294     35,090     19,040  
General and administrative expenses attributable to all-in sustaining costs   16,426     560     214     34  
Stock based compensation   (5,226 )   -     -     -  
Sustaining capital expenditures   23,755     11,501     11,150     2,580  
All-in sustaining costs(2)   134,333     57,355     46,454     21,654  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,001     1,023     901     1,189  
Cash cost per gold ounce produced(2)   714     698     667     878  
All-in sustaining costs per ounce produced(2)   965     884     883     999  
                         
Gold ounces produced during the period (oz.)   139,185     64,891     52,608     21,686  
Gold ounces sold during the period (oz.)   140,403     64,289     54,408     21,706  
Notes:
 
(1) Inventory movement and adjustment represent the difference between the costs of production (which are based on ounces produced) and the cost of sales (which is based on ounces sold). The timing difference between the units sold and the costs of those units requires an adjustment to reflect the nature of the underlying metric.
(2) A non-GAAP financial measure.
   

Quarterly trailing cost of sales including depletion, depreciation and amortization to cash costs consolidated and per mine

(Based on Condensed Consolidated Interim Financial Statements unless otherwise noted)

                 
Brio Gold Consolidated                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-17   Q2-17   Q1-17   Q4-16
Cost of sales including depletion, depreciation and amortization   50,127     48,646     53,684     71,169  
Depletion, depreciation and amortization   (10,442 )   (11,541 )   (13,366 )   (26,275 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,093 )   877     2,254     (2,897 )
Cash costs(2)   37,592     37,982     42,572     41,997  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,160     1,139     1,082     1,421  
Cash cost per gold ounce produced(2)   876     859     842     832  
                         
Gold ounces produced during the period (oz.)   42,913     44,223     50,540     50,477  
Gold ounces sold during the period (oz.)   43,228     42,691     49,615     50,092  
                 
Brio Gold Consolidated                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-16   Q2-16   Q1-16   Q4-15
Cost of sales including depletion, depreciation and amortization   53,009     54,265     33,111     39,812  
Depletion, depreciation and amortization   (13,936 )   (15,752 )   (10,855 )   (14,076 )
Adjustments:                        
Inventory movement and adjustments(1)   (1,614 )   (226 )   1,382     (1,850 )
Cash costs(2)   37,459     38,287     23,638     23,886  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,132     1,037     803     1,016  
Cash cost per gold ounce produced(2)   813     726     590     610  
                         
Gold ounces produced during the period (oz.)   46,076     52,737     40,372     39,279  
Gold ounces sold during the period (oz.)   46,808     52,351     41,243     39,194  
                 
Pilar Mine                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-17   Q2-17   Q1-17   Q4-16
Cost of sales including depletion, depreciation and amortization   22,348     22,635     20,953     36,843  
Depletion, depreciation and amortization   (5,868 )   (6,213 )   (5,070 )   (17,919 )
Adjustments:                        
Inventory movement and adjustments(1)   (387 )   436     258     408  
Cash costs(2)   16,093     16,858     16,141     19,332  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,212     1,144     1,024     1,687  
Cash cost per gold ounce produced(2)   845     831     788     872  
                         
Gold ounces produced during the period (oz.)   19,045     20,287     20,484     22,170  
Gold ounces sold during the period (oz.)   18,444     19,793     20,465     21,837  
                 
Pilar Mine                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-16   Q2-16   Q1-16   Q4-15
Cost of sales including depletion, depreciation and amortization   23,787     22,554     19,726     19,237  
Depletion, depreciation and amortization   (9,295 )   (8,782 )   (7,577 )   (5,682 )
Adjustments:                        
Inventory movement and adjustments(1)   1,515     1,713     1,626     (374 )
Cash costs(2)   16,007     15,485     13,775     13,181  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,152     1,023     914     851  
Cash cost per gold ounce produced(2)   791     679     641     618  
                         
Gold ounces produced during the period (oz.)   20,237     22,806     21,848     21,326  
Gold ounces sold during the period (oz.)   20,656     22,047     21,586     22,617  
                 
Fazenda Brasileiro Mine                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-17   Q2-17   Q1-17   Q4-16
Cost of sales including depletion, depreciation and amortization   19,196     14,624     16,452     20,530  
Depletion, depreciation and amortization   (3,356 )   (3,189 )   (6,591 )   (5,870 )
Adjustments:                        
Inventory movement and adjustments(1)   (832 )   1,135     1,932     (896 )
Cash costs(2)   15,008     12,570     11,793     13,764  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,152     1,145     1,188     1,074  
Cash cost per gold ounce produced(2)   943     892     793     753  
                         
Gold ounces produced during the period (oz.)   15,915     14,092     14,872     18,279  
Gold ounces sold during the period (oz.)   16,658     12,776     13,849     19,110  
                 
Fazenda Brasileiro Mine                
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-16   Q2-16   Q1-16   Q4-15
Cost of sales including depletion, depreciation and amortization   17,072     17,784     14,368     20,054  
Depletion, depreciation and amortization   (3,792 )   (5,484 )   (3,556 )   (8,394 )
Adjustments:                        
Inventory movement and adjustments(1)   (355 )   (50 )   (910 )   (914 )
Cash costs(2)   12,925     12,250     9,902     10,746  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   998     1,008     731     1,210  
Cash cost per gold ounce produced(2)   751     726     536     599  
                         
Gold ounces produced during the period (oz.)   17,211     16,873     18,524     17,953  
Gold ounces sold during the period (oz.)   17,100     17,650     19,657     16,577  
                         
RDM, Brazil                        
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q3-17   Q2-17   Q1-17   Q4-16   Q3-16   Q2-16
Cost of sales including depletion, depreciation and amortization   8,497     11,387     16,278     13,660     12,150     13,080  
Depletion, depreciation and amortization   (1,132 )   (2,139 )   (1,705 )   (2,477 )   (849 )   (1,217 )
Adjustments:                                    
Inventory movement and adjustments(1)   (883 )   (694 )   64     (2,278 )   (2,794 )   (1,334 )
Cash costs(2)   6,482     8,554     14,637     8,905     8,507     10,529  
                                     
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,046     1,125     1,064     1,494     1,342     1,079  
Cash cost per gold ounce produced(2)   815     869     964     888     986     807  
                                     
Gold ounces produced during the period (oz.)   7,953     9,844     15,184     10,028     8,628     13,058  
Gold ounces sold during the period (oz.)   8,126     10,122     15,301     9,146     9,052     12,654  
Notes:
 
(1) Inventory movement and adjustment represent the difference between the costs of production (which are based on ounces produced) and the cost of sales (which is based on ounces sold). The timing difference between the units sold and the costs of those units requires an adjustment to reflect the nature of the underlying metric.
(2) A non-GAAP financial measure.
(3) RDM was acquired during Q2 2016, therefore Q4 2015 and Q1 2016 are not applicable
   

Adjusted EBITDA

The Company uses the non-GAAP financial measure "Adjusted EBITDA" because it believes it provides investors with useful information to evaluate its performance and understand its ability to service and/or incur indebtedness.

The Company defines Adjusted EBITDA as net loss, before income tax recovery (expense), depletion, depreciation and amortization, impairment and reversals of mining properties, interest expense, share-based compensation, and non-recurring provisions and other adjustments.

The term "Adjusted EBITDA" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

Reconciliation of Net Loss to Adjusted EBITDA

(Based on Condensed Consolidated Interim Financial Statements unless otherwise noted)

         
    For the three months ended September 30,   For the nine months ended September 30,
(In thousands of U.S. dollars)   2017   2016   2017   2016
Net (loss)/earnings     (10,003 )     (15,534 )     (14,987 )     5,255  
Adjustments:                                
Income tax expense/(recovery)     1,229       7,064       (5,458 )     (15,058 )
Depletion, depreciation and amortization     10,442       13,936       35,348       40,494  
Foreign exchange loss     2,563       4,171       2,558       7,188  
Bank, financing fees, interest expense and other     1,734       1,653       3,647       2,196  
Stock based compensation     1,888       1,742       5,632       5,226  
Unrealized loss on foreign exchange hedges     1,800       -       2,328       -  
Adjusted EBITDA   $ 9,653     $ 13,032     $ 29,068     $ 45,301  
                                 

Adjusted Earnings or Loss

The Company uses the non-GAAP financial measure "Adjusted earnings or loss" because it believes this measure provides useful information to investors to evaluate the Company's performance by excluding certain cash and non-cash charges. The presentation of Adjusted earnings or loss is not meant to be a substitute for net earnings or loss or net earnings or loss per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Adjusted earnings or loss is calculated as net earnings excluding (a) stock based compensation, (b) unrealized foreign exchange (gains) losses related to revaluation of deferred income tax asset and liability on non-monetary items, (c) unrealized foreign exchange (gains) losses related to other items, (d) impairment losses and reversals, (e) deferred income tax expense (recovery) on the translation of foreign currency inter corporate debt, (f) periodic tax adjustments to historical deferred income tax balances relating to changes in enacted tax rates and (g) non-cash provisions and any other non-recurring adjustments. Non-recurring adjustments from unusual events or circumstances are reviewed from time to time based on materiality and the nature of the event or circumstance. Earnings adjustments for the comparative period reflect continuing operations.

The terms "Adjusted earnings or loss" has no standardized meaning prescribed by IFRS and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies.

For more information, see the Condensed Consolidated Interim Financial Statements and the related notes.

Reconciliation of Net Loss to Adjusted Earnings or Loss

(Based on Condensed Consolidated Interim Financial Statements unless otherwise noted)

         
    For the three months ended
September 30,
  For the nine months ended
September 30,
(In thousands of U.S. dollars)   2017   2016   2017   2016
Net earnings   $ (10,003 )   $ (15,534 )   $ (14,987 )   $ 5,256  
Adjustments:                                
Foreign exchange loss     2,563       4,171       2,558       7,188  
Unrealized loss on foreign exchange hedges     1,800       -       2,328       -  
Provisions on indirect tax credits     1,672       1,117       555       5,452  
(Gain)/loss on sale of indirect tax credits     (4,365 )     890       (4,376 )     657  
Business transaction costs     -       618       848       4,481  
Stock based compensation     1,888       1,742       5,632       5,226  
Non-cash tax effect on unrealized foreign exchange losses/(gains)     (1,587 )     1,120       (4,849 )     (28,161 )
Tax impact of adjustments     37       (1,441 )     119       (4,931 )
Other     1,243       631       4,353       1,695  
Adjusted (loss)/earnings   $ (6,752 )   $ (6,686 )   $ (7,819 )   $ (3,137 )
                                 

Realized Price

The Company uses the non-GAAP financial measure "realized price" on a per ounce of gold sold basis because it believes this measure provides investors and analysts with a more accurate measure with which to compare to market gold prices and to assess the Company's gold sales performance. Management believes that this measure provides a more accurate reflection of past performance and is a better indicator of expected performance in future periods. Realized price excludes the impact of the mining royalty on revenue from mining operations. The term "realized price" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of revenue from mining operations, operating profit or cash flows presented under IFRS.

Reconciliation of Revenue from Mining Operations to Realized Price per Gold Ounce Sold

(Based on Condensed Consolidated Interim Financial Statements unless otherwise noted)

         

(In thousands of U.S. dollars, except price per ounce in dollars and ounces sold)
  For the three months ended
September 30,
  For the nine months ended
September 30,
  2017   2016   2017   2016
Revenue from mining operations   $ 54,126   $ 60,559   $ 166,478   $ 172,846
Brazilian mining royalty (CFEM)     535     604     1,652     1,730
Revenue from mining operations excluding CFEM     54,661     61,163     168,130     174,576
Gold ounces sold during the period (oz.)     43,228     46,808     135,534     140,403
                         
Realized price per gold ounce sold ($/oz.)   $ 1,264   $ 1,307   $ 1,241   $ 1,243
 
BRIO GOLD INC.
 
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
 
    For the three months ended
September 30,
  For the nine months ended
September 30,
(In thousands of United States Dollars, except share and per share amounts), (unaudited)   2017   2016   2017   2016
Revenue from mining operations   $ 54,126     $ 60,559     $ 166,478     $ 172,846  
Cost of sales excluding depletion, depreciation and amortization     (39,685 )     (39,073 )     (117,108 )     (100,048 )
Gross margin excluding depletion, depreciation and amortization     14,441       21,486       49,370       72,798  
Depletion, depreciation and amortization     (10,442 )     (13,936 )     (35,348 )     (40,494 )
Mine operating earnings     3,999       7,550       14,022       32,304  
                                 
Expenses                                
General and administrative     (5,470 )     (5,509 )     (17,041 )     (16,426 )
Other operating expense     (53 )     (3,859 )     (4,651 )     (14,123 )
Operating (loss)/earnings     (1,524 )     (1,818 )     (7,670 )     1,755  
Foreign exchange loss     (2,563 )     (4,171 )     (2,558 )     (7,188 )
Unrealized foreign exchange hedges loss     (1,800 )     -       (2,328 )     -  
Finance expense     (2,887 )     (2,481 )     (7,889 )     (4,370 )
Loss before income taxes     (8,774 )     (8,470 )     (20,445 )     (9,803 )
Income tax (expense)/recovery     (1,229 )     (7,064 )     5,458       15,058  
Net (loss)/earnings     (10,003 )     (15,534 )     (14,987 )     5,255  
                                 
Other comprehensive (loss)/income                                
Items that may be reclassified subsequently to profit or loss:                                
                                 
  Change in fair value of hedging instruments, net of tax     9,894       -       12,753       -  
Total comprehensive (loss)/income   $ (109 )   $ (15,534 )   $ (2,234 )   $ 5,255  
                                 
Net (loss)/earnings per share                                
  Net (loss)/earnings per share (basic)   $ (0.09 )   $ (0.63 )   $ (0.13 )   $ 0.22  
  Net (loss)/earnings per share (diluted)   $ (0.09 )   $ (0.63 )   $ (0.13 )   $ 0.21  
Weighted average number of shares outstanding                                
  Basic     112,527,429       24,467,689       112,527,429       23,824,918  
  Diluted     112,527,429       24,467,689       112,527,429       25,341,058  
 
BRIO GOLD INC.
 
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
 
(In thousands of United States Dollars)   As at
September 30, 2017
(unaudited)
  As at
December 31, 2016
Assets        
Current assets:        
Cash   $ 9,698     $ 7,014  
Trade and other receivables     8,587       154  
Inventories     39,675       29,620  
Derivative related assets     14,926       1,328  
Other current assets     17,027       12,777  
      89,913       50,893  
Non-current assets:                
Property, plant and equipment     495,566       481,746  
Non-current derivative related assets     1,540       -  
Deferred tax assets     10,125       6,167  
Other non-current assets     9,695       2,893  
Total assets   $ 606,839     $ 541,699  
                 
Liabilities                
Current liabilities:                
Trade and other payables   $ 45,945     $ 56,066  
Income taxes payable     6,165       2,998  
Short-term debt     1,503       -  
Other financial liabilities     1,892       1,414  
Other provisions and liabilities     3,964       5,243  
      59,469       65,721  
Non-current liabilities:                
Long-term debt     60,166       -  
Decommissioning, restoration and similar liabilities     41,315       36,871  
Deferred income tax liabilities     10,816       11,413  
Other non-current provisions and liabilities     8,882       4,902  
Total liabilities     180,648       118,907  
                 
Equity                
Share capital     427,858       427,858  
Reserves     89,062       70,675  
Deficit     (90,729 )     (75,741 )
Total equity     426,191       422,792  
Total equity and liabilities   $ 606,839     $ 541,699  
 
BRIO GOLD INC.
 
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
 
    For the three months ended
September 30,
  For the nine months ended
September 30,
(In thousands of United States Dollars), (unaudited)   2017   2016   2017   2016
Operating activities                
Loss before income tax expense   $ (8,774 )   $ (8,470 )   $ (20,445 )   $ (9,803 )
Adjustments to reconcile loss before income taxes to operating cash flows:                                
  Depletion, depreciation and amortization     10,442       13,936       35,348       40,494  
  Foreign exchange loss     2,563       4,171       2,558       7,188  
  Unrealized foreign exchange hedges loss     1,800       -       2,328       -  
  Finance expense     2,887       2,481       7,889       4,370  
  Other non-cash operating expenses (Note 17b)     2,242       4,380       4,225       12,256  
  Decommissioning, restoration and similar liabilities paid     (258 )     (790 )     (1,199 )     (1,441 )
  Income taxes paid     -       (202 )     (88 )     (2,618 )
Cash flows from operating activities before net change in working capital   $ 10,902     $ 15,506     $ 30,616     $ 50,446  
Net change in working capital     (4,332 )     (1,508 )     (30,290 )     (11,586 )
Cash flows from operating activities   $ 6,570     $ 13,998     $ 326     $ 38,860  
Investing activities                                
Property, plant and equipment expenditures     (21,370 )     (16,224 )     (55,915 )     (40,350 )
Acquisition of Mineração Riacho dos Machados Ltda     -       -       -       (50,225 )
Cash flows used in investing activities   $ (21,370 )   $ (16,224 )   $ (55,915 )   $ (90,575 )
Financing activities                                
Proceeds from debt   $ 14,003     $ -     $ 64,003     $ -  
Related party financing     -       -       -       51,361  
Cost of debt     (293 )     -       (3,442 )     -  
Interest and other finance expenses paid     (836 )     -       (1,643 )     -  
Cash flows from financing activities   $ 12,874     $ -     $ 58,918     $ 51,361  
Effect of foreign exchange on cash     112       162       (645 )     919  
(Decrease)/increase in cash   $ (1,814 )   $ (2,064 )   $ 2,684     $ 565  
Cash, beginning of period   $ 11,512     $ 6,595     $ 7,014     $ 3,966  
Cash, end of period   $ 9,698     $ 4,531     $ 9,698     $ 4,531