h Costs DENVER, Oct. 22 /PRNewswire/ -- Amax Gold Inc. (NYSE: AU; Toronto: AXG) today announced a third quarter 1997 net loss of $9.3 million, or $.10 per share, on revenue of $79.6 million compared with a third quarter 1996 net loss of $2.5 million, or $.04 per share, on revenue of $23.4 million. The Company's operating income was $2.5 million for the third quarter of 1997 compared with an operating loss of $1.2 million in the 1996 third quarter. The improved operating income was due to lower cash costs of $190 per ounce coupled with higher production and sales during the third quarter of 1997. For the first nine months of 1997, the Company had a net loss of $20.1 million, or $.24 per share, on revenue of $191.3 million compared with a net loss of $13.8 million, or $.19 per share, on revenue of $74.6 million, for the 1996 period. Excluding the $4.5 million cumulative effect of a first quarter accounting change to include depreciation and depletion in inventory, the Company's net loss for the first nine months of 1997 was $24.6 million, or $.28 per share. Cash flow from operations for the nine months ended September 30, 1997 more than tripled to $41.2 million compared to the 1996 period, also due to increased production and lower cash costs. Significant improvements in costs were offset by lower realized gold prices and higher interest expense, which resulted in the increased net loss. Interest expense increased during 1997 due to the reduction of capitalized interest resulting from the completion of the Company's new mines. The third quarter and first nine months of 1996 have been restated to reflect the effect of a LIFO to average cost inventory accounting change, which increased the previously reported net loss by $0.8 million, or $.01 per share, and $6.1 million, or $.06 per share, respectively. Milton H. Ward, Amax Gold's Chairman and Chief Executive Officer, said, "With our first full quarter of commercial production at Kubaka behind us, we are extremely gratified that both Fort Knox and Kubaka now have sustainable production that is significantly better than anticipated in the original feasibility studies. Fort Knox produced more than 100,000 ounces at a cash cost of $162 per ounce in the third quarter of 1997, while Kubaka, whose commercial production commenced three months after Fort Knox's, produced more than 50,000 ounces at a cash cost of $182 per ounce for Amax Gold's account." Ward continued, "Amax Gold has now successfully completed the transition from a company with mines nearing the end of their lives to a company with three flagship operations spanning the globe. We are well positioned to take advantage of the inevitable increase in gold prices with this new increased production profile and low cash costs. Although Refugio has continued to be hampered by the severe record setting winter weather in the second and third quarter of this year and other operational inefficiencies, we expect to achieve full production levels in the first quarter of 1998." Ward concluded, "We have completed the first phase of our multi-phased drilling program at Fort Knox and expect to add proved and probable reserves. Additionally, we are evaluating drilling results at our Kubaka project in Russia and expect to recommence the reserve expansion drilling program at Refugio, which has been delayed due to the weather conditions." Amax Gold's average realized price for the third quarter and the first nine months of 1997 was $355 per ounce and $368 per ounce, respectively, compared with $412 per ounce in both of the comparable 1996 periods. This compares with an average spot gold price of $324 per ounce and $340 per ounce for the third quarter and first nine months of 1997. Revenue increased significantly during the third quarter of 1997 due to higher gold sales attributed to commercial production at Fort Knox, Kubaka and Refugio, partially offset by lower gold realizations caused by lower spot prices. Gold production was a record 217,781 ounces for the third quarter of 1997, nearly four times the 59,250 ounces produced in the 1996 third quarter. Production at Fort Knox, Kubaka and Refugio totaled 164,155 ounces. Mill throughput and grade at both Fort Knox and Kubaka continue to exceed expectations, which has resulted in higher than anticipated production. Crushing operations were suspended at Refugio for nearly three months due to record heavy snow and high winds at the mine. As a result, the Company's 50 percent share of quarterly production decreased to 9,788 ounces. Fourth quarter production at Refugio is expected to improve, and full production rates are expected to be achieved in the first quarter of 1998. Mining was completed at Guanaco during July 1997, which resulted in the slight decrease in production to 21,803 ounces in the third quarter of 1997 compared with 22,456 ounces in the third quarter of 1996. Production at Guanaco will decline as residual leaching begins at the mine. Hayden Hill produced a record 31,823 ounces in the third quarter of 1997, a 6 percent increase over the 1996 third quarter, primarily due to record crusher throughput and higher grade. Hayden Hill is expected to complete mining during the fourth quarter of 1997. Residual leaching at both Hayden Hill and Guanaco is expected to continue into 1998. The Company's third quarter 1997 cost of sales as a percentage of revenue decreased to 59 percent compared with 67 percent for the prior year's third quarter, reflecting significantly lower average total cash costs. Consolidated total cash costs fell by nearly 23 percent to $190 per ounce for the third quarter of 1997 from $246 per ounce in the third quarter of 1996. Fort Knox's cash costs of $162 per ounce for the 1997 third quarter continue to be lower than expected as crusher and mill throughput and grade have been higher than anticipated. Kubaka's cash costs of $182 per ounce for the first full quarter of commercial operations are also lower than anticipated as a result of higher mill throughput. Refugio's cash costs for the quarter were $558 per ounce, primarily due to the adverse impact of the abnormal winter weather and certain operating inefficiencies. Cash costs at Refugio are expected to improve significantly over the next two quarters. Guanaco's cash costs of $206 per ounce improved by $110 per ounce compared with the 1996 third quarter. Cash costs at Hayden Hill improved slightly to $165 per ounce as a result of the slightly higher production. During the third quarter of 1997, the Company borrowed $0.8 million under the Cyprus Amax demand loan facility, increasing the total amount borrowed as of September 30, 1997, to $73.5 million. No additional funds have been borrowed under the demand loan facility during October 1997. Scheduled Fort Knox debt repayments of approximately $14.7 million during the third quarter of 1997 were made with cash flow from operations. The Company is currently considering various options to restructure its debt and capital, which could include accessing public debt and equity markets. The Company is also actively reviewing merger opportunities. Amax Gold Inc. produces gold in the United States, Russia and Chile and explores for gold in the Americas, Russia, Australia and Africa. Amax Gold is 58.8 percent owned by Cyprus Amax Minerals Company. Amax Gold's common stock is listed on the New York Stock Exchange (AU) and the Toronto Stock Exchange (AXG). The $3.75 Series B Convertible Preferred Stock is listed on the New York Stock Exchange under the symbol AUPrB. Actual results may vary materially from any forward-looking statements the Company makes. Refer to the Cautionary Statement in the Company's latest Form 10-Q. AMAX GOLD INC. CONSOLIDATED STATEMENT OF OPERATIONS (in millions except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues $79.6 $23.4 $ 191.3 $74.6 Costs and expenses: Cost of sales 46.6 15.7 115.0 56.2 Depreciation and depletion 27.9 6.6 64.4 19.4 General and administrative 1.8 1.4 5.7 6.4 Exploration 0.8 0.9 3.1 2.3 Total costs and expenses 77.1 24.6 188.2 84.3 Income (loss) from operations 2.5 (1.2) 3.1 (9.7) Interest expense (11.4) (7.5) (31.1) (20.0) Capitalized interest -- 6.5 4.2 16.7 Interest income 0.5 0.4 1.4 1.3 Other (0.8) (0.7) (2.0) (2.1) Loss before income tax expense and cumulative effect of accounting change (9.2) (2.5) (24.4) (13.8) Income tax expense (0.1) -- (0.2) -- Loss before cumulative effect of accounting change (9.3) (2.5) (24.6) (13.8) Cumulative effect of accounting change -- -- 4.5 -- Net loss (9.3) (2.5) (20.1) (13.8) Preferred stock dividends (1.7) (1.7) (5.1) (5.1) Loss attributable to common shares $ (11.0) $(4.2) $ (25.2) $ (18.9) Per common share: Loss before cumulative effect of accounting change $(.10) $(.04) $(.28) $(.19) Cumulative effect of accounting change -- -- .04 -- Loss per common share $(.10) $(0.4) $(.24) $(.19) Weighted average common shares outstanding 114.8 96.5 106.0 96.5 AMAX GOLD INC. CONSOLIDATED BALANCE SHEET (Dollars in millions except share amounts) September 30, December 31, 1997 1996 (Unaudited) ASSETS Cash and equivalents, including restricted cash of $3.5 million at September 30, 1997 $17.0 $11.1 Inventories 55.3 28.5 Receivables 31.1 3.2 Other 16.6 17.9 Current assets 120.0 60.7 Property, plant and equipment, net 739.4 667.1 Other 28.5 34.4 Total assets $887.9 $762.2 LIABILITIES AND SHAREHOLDERS' EQUITY Cyprus Amax demand loan $73.5 $130.0 Current maturities of long-term debt 73.2 39.3 Accounts payable, trade 26.9 14.7 Accrued and other current liabilities 32.9 23.8 Reclamation reserve, current portion 6.5 4.5 Current liabilities 213.0 212.3 Long-term debt 368.8 272.6 Reclamation reserve, noncurrent portion 10.2 11.2 Other 7.5 6.7 Total liabilities 599.5 502.8 Commitments and contingencies -- -- Shareholders' equity: Preferred stock, par value $1.00 per share, authorized 10,000,000 shares, of which 2,000,000 shares have been designated as $2.25 Series A Convertible Preferred Stock, no shares issued and outstanding; and 1,840,000 shares have been designated as $3.75 Series B Convertible Preferred Stock, issued and outstanding 1,840,000 shares 1.8 1.8 Common stock, par value $.01 per share, authorized 200,000,000 shares, issued and outstanding 114,798,851 shares in 1997 and 99,308,979 shares in 1996 1.1 1.0 Paid-in capital 408.5 355.7 Accumulated deficit (115.7) (90.5) Unearned equity-financing costs (7.3) (8.6) Total shareholders' equity 288.4 259.4 Total liabilities and shareholders' equity $887.9 $762.2 AMAX GOLD INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in millions) (Unaudited) Nine Months Ended September 30, 1997 1996 Cash Flows from Operating Activities: Net loss $ (20.1) $ (13.8) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and depletion 64.4 19.4 Cumulative effect of accounting change (4.5) -- Increase in reclamation reserves 1.0 0.2 (Increase) decrease in working capital items (1.3) 5.8 Other 1.7 0.6 Net cash provided by operating activities 41.2 12.2 Investing Activities: Capital expenditures (24.7) (150.3) Capitalized interest (4.2) (16.7) Loan to joint venture partner -- (2.0) Net cash used by investing activities (28.9) (169.0) Financing Activities: Proceeds from financings 102.8 149.3 Repayments of financings (108.7) (8.1) Deferred financing costs (2.4) (0.9) Cash acquired in connection with purchase of Kubaka investment 7.0 -- Cash dividends paid (5.1) (5.1) Net cash provided by financing activities (6.4) 135.2 Net increase (decrease) in cash and equivalents 5.9 (21.6) Cash and equivalents at January 1 11.1 25.6 Cash and equivalents at September 30 $17.0 $4.0 Non-cash Transaction: Issuance of common stock for purchase of Kubaka investment, net of cash acquired: Working capital, other than cash $ (10.3) $-- Property, plant and equipment (114.2) -- Debt 79.5 -- $ (45.0) $-- Results of Operations The following table sets forth the Company's gold production, production costs, ounces of gold sold and average realized prices for the periods indicated. Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Gold production (ounces)(a) Fort Knox 101,630 -- 225,685 -- Kubaka 52,737 -- 70,168 -- Refugio 9,788 -- 54,093 -- Guanaco 21,803 22,456 79,690 64,695 Hayden Hill 31,823 30,116 83,870 77,547 Sleeper -- 6,678 -- 38,199 Total gold production 217,781 59,250 513,506 180,441 Cash operating costs ($ per ounce of gold produced)(b) Fort Knox $162 $-- $168 $-- Kubaka 160 -- 154 -- Refugio 543 -- 321 -- Guanaco 191 302 214 316 Hayden Hill 157 164 188 225 Sleeper -- 319 -- 241 Average cash operating costs $181 $234 $192 $261 Total cash costs ($ per ounce of gold produced)(b) Fort Knox $162 $-- $168 $-- Kubaka 182 -- 177 -- Refugio 558 -- 338 -- Guanaco 206 316 227 329 Hayden Hill 165 175 196 234 Sleeper -- 333 -- 247 Average total cash costs $190 $246 $201 $271 Total production costs ($ per ounce of gold produced)(b) Fort Knox $334 $-- $340 $-- Kubaka 282 -- 277 -- Refugio 658 -- 434 -- Guanaco 320 475 358 488 Hayden Hill 242 291 289 349 Sleeper -- 399 -- 333 Average total production costs $321 $373 $336 $395 Ounces of gold sold 224,314 56,790 519,363 181,133 Average price per ounce sold $355 $412 $368 $412 (a) Commercial production commenced at Kubaka on June 1, 1997, at Fort Knox on March 1, 1997 and at Refugio on October 1, 1996. Consolidated total cash costs exclude the impact of the write-down of heap leach inventories at Guanaco in 1996. Mining at Guanaco is expected to be completed during the third quarter of 1997 and mining at Hayden Hill is expected to be completed during the fourth quarter of 1997, with residual leaching at both mines continuing through mid-year 1998. Mining at Sleeper was completed in September 1996. (b) Cash operating costs at the mine sites including overhead, net of credits for silver by-products. Total cash costs include cash operating costs plus royalties and applicable production taxes. Total production costs include total cash costs plus reclamation and depreciation and depletion. SOURCE Amax Gold Inc. -0- 10/22/97 /CONTACT: Marj Charlier, Director, Investor Relations, 303-643-5625; D. Michael Rounds, Director of Public Relations, 303-643-5186, both of Amax Gold Inc./ (AU AXG) /Web site: cyprusamax.com/ CO: Amax Gold Inc. ST: Colorado IN: MNG SU: ERN -0- (PRN) Oct/22/97 07:01 EOS (PRN) Oct/22/97 07:01 85 â -0- (
AMAX GOLD ANNOUNCES RECORD THIRD QUARTER PRODUCTION AND LOWER CA
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