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Superior Gold Inc. Announces Second Quarter 2020 Financial and Operating Results

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Superior Gold Inc. Announces Second Quarter 2020 Financial and Operating Results

 

 

 

 

 

Superior Gold Inc. (TSX-V: SGI) announced today its financial and operating results for the second quarter 2020. This release should be read in conjunction with the Company’s Management Discussion and Analysis and consolidated financial statements for the quarter ended June 30, 2020. These documents will be posted on the Company’s website at www.superior-gold.com and SEDAR at www.sedar.com.

 

Second Quarter Highlights:

 

  • Successfully maintained operations safely through COVID-19 pandemic
  • Produced 15,177 ounces of gold, down 7% from the first quarter of 2020 and down 36% from the comparable period in 2019
  • Sold 15,536 ounces of gold at total cash costs1 of $1,426 per ounce sold and all-in sustaining costs1 of $1,547 per ounce sold which were below the record realized gold price1 of $1,608 per ounce sold
  • Operating cash flow before working capital changes of $0.6 million and after the repayment of $1.9 million under the gold loan
  • Net loss for the period of $0.00 per share and adjusted net loss1 of $0.01 per share
  • Ended the second quarter with $15.6 million in cash
  • Advanced underground optimization plan:
    • Achieved record underground tonnes mined, an increase of 51% over the prior quarter
    • Improved development rates, averaging 789 metres per month
    • Enhanced mine plan accuracy by incorporating constrained wire-frame block models
  • High-grade exploration drill results reported included (refer to Exploration Activities section):
    • 56.3 g Au/t over 15.10 metres
    • 40.4 g Au/t over 6.50 metres
    • 10.2 g Au/t over 7.10 metres

 

Highlights Subsequent to Quarter End:

  • Announced a 29% increase in Measured and Indicated Resources and a 55% increase in Inferred Resources
  • Announced a leadership change and the initiation of a Strategic Review Process

 

Tamara Brown, Interim CEO of Superior Gold stated: “The highlight of our second quarter results was the stope tonnage mined which increased by 51% over the first quarter of this year and was the highest quarterly mining rate since we acquired the Plutonic underground mine in 2016. We continue to be encouraged by the underground physicals of the operations and believe, with the execution of our five-year underground plan, the stope grade will progressively improve over time.

 

We are encouraged that despite continuing to invest in exploration and development and repaying our gold loan, our cash position remained largely unchanged from the first quarter, as we continue to benefit from the strong Australian dollar gold price, which is currently at all time highs. Over the next twelve months, we are focused on executing on a cost reduction program that targets higher grade stopes while improving productivity, which we expect will allow us to generate meaningful free cash flow for our shareholders as our operations continue to improve. 

 

We are very excited by our recent exploration results. During the quarter, we announced intersections of up to 56.3 g Au/t over 15.10 metres in the area between the Indian and Baltic Zones, which represents our best drill results since acquiring the asset (refer to the Press Release on June 17, 2020). Subsequent to quarter end, we announced our updated reserve and resource estimate in which we achieved a 29% increase in Measured and Indicated Resources to 1.59 million ounces and a 55% increase in Inferred Resources to 2.82 million ounces across our projects (refer to the Press Release on July 21, 2020).  These results confirm that Plutonic is a large mineralized system with significant upside and long term potential.”

 

Subsequent to the quarter, the Company announced a leadership change and a strategic review process that will explore all alternatives to maximize value for our shareholders (refer to the Press Release on July 30, 2020).  The Company does not intend to comment further unless the Board of Directors of the Company has approved a specific course of action or the Company has determined further disclosure is appropriate.

 

Summary of Financial and Operational Results:

 

  Three months

ended

June 30, 2020

Six months

ended

June 30, 2020

All amounts in $ millions except where noted    
Financial    
Revenue 25.0 51.5
Cost of sales 24.2 47.9
General and administrative 0.7 1.7
Operating income (loss) (0.4) 0.7
Income (loss) before taxes (0.3) (4.1)
Net income (loss)  (0.4) (4.2)
Earnings (loss) per share – basic and diluted (0.00) (0.04)
Adjusted net income (loss)1 (0.6) (0.7)
Adjusted net income (loss) per share – basic1 (0.01) (0.01)
Cash flow from operations before working capital changes 0.6 1.7
Cash and cash equivalents 15.6 15.6
Weighted average number of common shares outstanding (basic) 97,134,473 97,100,231
     
Operational    
Gold produced (ounces) 15,177 31,528
Gold sold (ounces) 15,536 32,386
Total cash costs ($/ounce)1 1,426 1,356
All-in sustaining costs ($/ounce)1 1,547 1,479
Average realized price1 ($/ounce) 1,608 1,588
Total underground material mined (Kt) 183 304
Total material milled (Kt) 394 760
Grade milled (g/t gold) 1.4 1.6
Recovery (%) 84 83

 

Plutonic Gold Operations

 

The Plutonic Gold Operations produced and sold 15,177 and 15,536 ounces of gold, respectively, for the second quarter of 2020. Total cash costs1 of $1,426/ounce sold and all-in sustaining costs1 of $1,547/ounce were below the realized gold price1 of $1,608/ounce for the second quarter of 2020. In comparison, 23,849 and 23,937 ounces of gold were produced and sold, respectively for the second quarter of 2019. Total cash costs1 of $1,222/ounce sold and all-in sustaining costs1 of $1,293/ounce were below the realized gold price1 of $1,320/ounce for the three-month period ending June 30, 2019.

 

Total cash costs and all-in sustaining cash costs increased over the prior period primarily as a result of no contribution of tonnages milled from Hermes for the period (the Company ceased mining operations at Hermes in May 2019), a decrease in underground grade and the processing of other low grade stockpiles, partially offset by higher underground tonnes milled. The variance from the prior period for underground grade was the result of mining lower grade out of reserve and inferred material in some stopes.

 

The Company generated net cash from operations after working capital changes of $0.6 million for the second quarter of 2020, after the repayment of $1.9 million under the gold loan.

 

Exploration Activities

 

On June 17, 2020, the Company announced results from the ongoing underground diamond drill program focused on reserve and resource expansion at its 100%-owned Plutonic Gold mine. The drilling was targeting potential extensions to the gold mineralization within the Indian Zone.

 

The drilling was focused on the area to the northwest of the Indian Zone within an area that extends approximately 500 metres between the Indian and Baltic Zones which has yet to be fully drill tested.

 

The following key findings were noted:

  • Demonstrates the potential to extend and connect the Indian and Baltic Zones
  • Drill hole UDD22011 intersected 56.3 g Au/t over 15.10 metres representing the best drill intersection ever achieved since the Company acquired the Plutonic underground mine
  • The drilling was completed over a strike length of approximately 200 metres and a vertical extent of more than 100 metres.
  • Mineralization remains open both up and down dip and along strike, resides close to existing infrastructure, and is only approximately 600 metres from surface

 

On June 24, 2020, the Company announced results from drilling that targeted potential extensions to the gold mineralization in the area between the Baltic and Baltic Deeps Zones. The drilling was focused on the area vertically between the Baltic and Baltic Deeps mineralized zones which has not previously been tested.

 

The following key findings were noted:

  • Continues to demonstrate potential continuity of mineralization between Baltic and Baltic Deeps Zones
  • Drill hole UDD22310 intersected 40.4 g Au/t over 6.50 metres including 232.0 g Au/t over 0.90 metres
  • Drill hole UDD22309 intersected 12.4 g Au/t over 4.10 metres
  • Mineralization remains open both up and down dip and along strike

 

The Indian and Baltic Zones are key targets for future exploration activities.

 

Outlook

 

The Company intends to focus on establishing the Plutonic Gold Operations as a gold producer capable of producing at least 100,000 ounces of gold annually. To achieve this goal, the Company intends to:

  • Continue to improve the reconciliation between the underground grade mined and reserve grade
  • Improve mining practices to lower costs and increase production
  • Increase operational efficiencies
  • Continue optimization of the global resource model
  • Advance open pit opportunities close to the mill

 

On July 30, 2020, the Company announced revised 2020 production guidance as follows:

 

2020 Guidance Original Revised
Production (oz of Gold) 80,000 – 90,000 60,000 – 70,000
Cash Costs ($/oz)1 $975 – $1,075 $1,250 – $1,350
All In Sustaining Costs ($/oz)1 $1,075 – $1,175 $1,350 – $1,450

 

Filing of Technical Report

 

The Company is announcing the filing of a technical report to support its previously released Mineral Reserve and Resource update on its Plutonic Gold operations (the “Report”) entitled, “2020 Mineral Resource and Reserve Estimate for the Plutonic Gold Operations”. The Plutonic Gold operations are located in Western Australia and are comprised of the 100%-owned Plutonic underground gold mine, the 100%-owned Hermes open pit gold project, along with the Company’s interest in the Bryah Basin joint venture.

 

The Report, which is dated August 7, 2020 and is effective December 31, 2019, was prepared in compliance with National Instrument 43-101 – Standards for Disclosure for Mineral Projects) and is available under Superior Gold Inc.’s profile on SEDAR at www.sedar.com and on the Company’s website at www.superior-gold.com.

 

The Report was prepared by Stephen Hyland, FAusIMM, BSc (Geology); Matthew Keenan, MAusIMM (CP), BEng; and Ashutosh Srivastava, FAusIMM, B. Tech. (Mining Engineering); all of whom are “qualified persons” within the meaning of NI 43-101. With the exception of the open pit Mineral Reserve estimates, the Qualified Persons who have approved the disclosure of the sections of the Technical Report referred to above are independent of the Company within the meaning of NI 43-101.

The Report supports the scientific and technical disclosure in the updated Mineral Resource and Mineral Reserve estimates contained in the Company’s press release dated July 21, 2020.

 

Qualified Person

 

Scientific and technical information in this news release has been reviewed and approved by Keith Boyle, P.Eng., Chief Operating Officer of the Company, who is a “qualified person” as defined by National Instrument 43-101 (NI 43-101). Mr. Boyle is not independent of the Company within the meaning of NI 43-101.

 

About Superior Gold

 

Superior Gold is a Canadian based gold producer that owns 100% of the Plutonic Gold operations located in Western Australia. The Plutonic Gold operations include the Plutonic underground gold mine and central mill, the Hermes open pit projects and an interest in the Bryah Basin joint venture. Superior Gold is focused on expanding production at the Plutonic Gold operations and building an intermediate gold producer with superior returns for shareholders.

 

Posted August 11, 2020

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