August 14, 2007
Glencairn Gold reports Second Quarter Results
TORONTO, ONTARIO--(Marketwire - Aug. 14, 2007) - Glencairn Gold Corporation (TSX:GGG)(TSX:GGG.WT)(AMEX:GLE) reports its financial and operating results for the three months and six month periods ended June 30, 2007 (currency figures in U.S. dollars). The consolidated financial statements along with management's discussion and analysis will be available for viewing on the Glencairn website at www.glencairngold.com. The documents are being filed with SEDAR (www.sedar.com) and should be available on SEDAR no later than 24 hours from the dissemination of this release.
Highlights for the second quarter of 2007:
- Gold sales increased to 21,490 ounces compared to 20,137 ounces in the corresponding period of 2006
- Net income totalled $3.3 million, or $0.01 per share in the latest period, compared to $2.1 million or $0.01 per share in the corresponding period of 2006
- Income from mining operations decreased to $1.5 million from $3.8 million in the corresponding period of 2006
- Sale of nickel royalties was completed for a gain of $6.5 million
- Company made final repayment on long term debt
"The second quarter results built on the forward momentum that we had from our first quarter and showed good progress that exceeds our budgeted projections. Unfortunately the steady progress and good results from the Company have been overshadowed by the ground movement situation at our Bellavista Mine in Costa Rica subsequent to our second quarter," commented President and CEO Peter Tagliamonte. "We have suspended mining operations and application of cyanide at Bellavista and are expending every effort to find a permanent solution and get the Company back on track. While this solution is sought, Bellavista will have a significant negative impact on the Company," said Company President and Chief Executive Officer, Peter Tagliamonte.
Glencairn produced 20,340 ounces during the second quarter, compared with 21,127 ounces during the second quarter of 2006, and 31,801 ounces during the first quarter of 2007. The lower production in the second quarter compared to the first quarter of 2007 reflects the suspension of mining operations at Libertad. Sales were $14,313,000, as a result of the sale of 21,490 ounces at an average realized price of $666 per ounce. This along with the $6.5 million gain from the sale of the nickel royalties resulted in net income of $3,260,000 or $0.01 per share during the quarter. This compares with income of $2,051,000 during the corresponding quarter of 2006, and a loss of $1,173,000 during the first quarter of 2007. Income from mining operations was $1,491,000 during the second quarter of 2007 compared with $3,843,000 during the corresponding quarter of 2006 and $756,000 during the first quarter of 2007. Cash operating cost per ounce sold was $451 during the quarter, up from $320 during the same quarter of 2006 but lower than the $470 during the first quarter of 2007.
For the first half of 2007, net income totalled $2,087,000, or $0.01 per share, compared to income of $3,821,000, or $0.02 per share, in the first half of 2006. Income from mining operations decreased in 2007 to $2,247,000 from $5,836,000 in the corresponding period of 2006. Revenue from gold sales increased in 2007 to $34,610,000 compared to $23,952,000 in the corresponding period of 2006.
Gold sales were 52,624 ounces sold in the current first half compared to 40,883 ounces in the corresponding half of the previous year.
In June 2007, the Company completed the sale to Independent Nickel Corp. of its sliding scale 1-3% net smelter royalty on Victory Nickel Inc.'s Minago nickel deposit, as well as the 2% net smelter royalty on the Lynn Lake property. Under the terms of the purchase and sale agreement, Glencairn recognized a gain of $6,548,000 from the receipt of $4,694,000 (Cdn$5,000,000) in cash and 2,500,000 Independent Nickel Corp. shares valued at $1,854,000 or Cdn$0.79 per share. The shares received are subject to a contractual escrow agreement with the release of blocks of shares in intervals up to June 2009.
Sales in the latest quarter increased by $1,432,000 or 24% to $7,286,000 in 2007 compared to $5,854,000 in 2006. The actual quantity of gold sold increased 1,521 ounces to 10,958, or 16% from the same period in the prior year. Production from the Limon Mine during the quarter was 9,913 ounces. The increase in sales revenue was attributable to the increase in gold ounces sold of 16%, partially from inventory, and an increase in realized gold prices of 7% over the same period in the previous year.
Cost of sales increased by $1,334,000 or 36% and cash operating costs per ounce increased by $67 to $463 in the second quarter of 2007 compared to 2006. Higher production costs were encountered with respect to haulage, fuel and especially electricity. As well, there were costs incurred with respect to ongoing improvements.
On July 25, 2007, mining operations at the Bellavista Mine were suspended due to concerns over recent ground movements. After initial review by consultants, the Company believes that this movement is in part caused by water saturation due to abnormally high rainfall during the past several years. In some areas of the leach pad and waste pile, local ground movements have been identified in the range of one centimeter per day. Extensive ground monitoring has been undertaken and a number of remedial measures are underway to reduce ground movement including de-watering wells, surface water control and redistribution of the weight load. Based on earth movement patterns in Costa Rica, the geological structure at the site and the opinions of its experts, the Company does not believe that there is a risk of sudden earth movement at this time. However, continued small movements could compromise the sub-liner, liner and drain system under the leach pad. As a precautionary measure, all cyanide application was suspended and rinsing of the leach pads started on July 25. Once a remedial plan is finalized and associated costs are known, the Company will decide on a course of action. It is possible that the Bellavista Mine may remain closed indefinitely if a cost-efficient solution is not found to the ground movement problem or required permitting for remediation is not obtained.
Sales in the latest quarter were $5,581,000 compared to $6,587,000 in the second quarter of 2006. Quantity of gold sold was 8,385 ounces compared to 10,700 ounces in 2006 and the average realized gold price was $666 in the latest quarter compared to $616 in the comparable period in 2006. Cash operating cost per ounce sold in the quarter was $371 compared to $252 per ounce sold in 2006. Cost of sales in the latest period was $3,114,000 compared to $2,698,000 in 2006.
The mine produced 8,374 ounces of gold in the quarter compared to 11,178 ounces of gold produced in the second quarter of 2006. During the most recent quarter, the mine experienced production disruptions as a result of an obstructed collection tube system under the heap leach pad and heavier than normal rainfalls. This obstruction was unrelated to the ground movement. As a result, lower tonnage of ore was crushed and stacked during the quarter. These events reduced gold production and increased costs.
Libertad Mine and Mill Project
Glencairn acquired the Libertad Mine in July 2006. Since that time Glencairn has managed to decrease the cost of gold production significantly, but not by an amount to make the operation profitable. On March 31, 2007, mining operations at the Libertad Mine were suspended while a feasibility study is being completed to convert the heap-leach refining process to a conventional milling operation. The completion of the mill project is dependent on this feasibility study, expected in early 2008, being positive, financing for the project being available and permitting being obtained on a timely basis.
The Company purchased a used mill facility for reassembly at the Libertad Mine for $7,595,000 which includes dismantling and crating for transport. Future payments of $4,345,000 are committed to complete the acquisition. Of this amount $1,649,000 was paid in July.
All mining operations were suspended on March 31, 2007; however, the mine continued to produce residual amounts of gold from the heap leach pad. In the second quarter of 2007, Libertad sold 2,147 ounces of gold at an average realized price of $673 per ounce, resulting in revenues of $1,446,000. The mine had a loss from operations of $490,000 for the second quarter of 2007. The 2,053 ounces of gold produced in the second quarter was far below normal rates and this figure will continue to decline until residual leaching ceases near the end of the third quarter. Since the Libertad Mine was placed on care and maintenance at the beginning of the second quarter of 2007, charges of $765,000 were incurred to June 30 2007. The mine will continue to incur care and maintenance costs until such time as the mine resumes mining activities or ceases operations permanently.
The suspension of mining operations at the Bellavista Mine has created an immediate and serious negative effect on the cash flow of the Company and, accordingly, it has initiated an aggressive program to conserve cash. This program includes the immediate cessation of all discretionary spending, including the Company's exploration program, employee reductions and deferring or eliminating, where possible, capital expenditures.
The Company had cash of $10,035,000 and working capital of $19,151,000 at June 30, 2007. It is expected that cash on hand at June 30, 2007 will not be sufficient to fund the Company's needs for the next twelve months and, accordingly, management is reviewing its options with respect to funding which includes equity and or debt financing and the sale of assets. Cash on hand at the end of July was approximately $5,000,000. While the Company has been successful in the past in raising funds, there can be no assurance it will be able to raise sufficient funds in the near future.
Glencairn Gold Corp.
Selected Quarterly Financial Information
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
-------- ------ ------ ------
Gold sales (ounces) 21,490 20,137 52,624 40,883
Average spot gold price ($/ounce) $667 $628 $659 $591
Average realized gold price ($/ounce) $666 $618 $658 $586
Cash operating costs ($/ounce) $451 $320 $463 $336
Total cash costs ($/ounce) $481 $344 $491 $358
Gold produced (ounces) 20,340 21,127 52,141 39,509
(in thousands, except per share amounts)
Sales $14,313 $12,441 $34,610 $23,952
Cost of sales $9,700 $6,436 $24,339 $13,731
Net income $3,260 $2,051 $2,087 $3,821
Income per share - basic and diluted $0.01 $0.01 $0.01 $0.02Conference Call
A conference call and webcast will be held Wednesday, August 15 at 10:00 a.m. To participate in the conference call, dial 416-340-8010 or, toll free in North America, 1-866-540-8136. You may also listen to the webcast at www.glencairngold.com. An archive of the conference call and webcast will be available on the Company's website.
Cautionary Note Regarding Forward-Looking Statements: This press release contains "forward-looking statements", within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the future financial or operating performance of the Company, its subsidiaries and its projects, the future price of gold, expectation that a solution to the ground movement at Bellavista will be found, estimated recoveries under the milling plan, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital for the mill project, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of gold; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, insurrection or war; delays in obtaining governmental approvals or required financing or in the completion of development or construction activities, as well as those factors discussed in the section entitled "General Development of the Business - Risks of the Business" in the Company's annual information form for the year ended December 31, 2006 on file with the securities regulatory authorities in Canada and the Company's Form 40-F on file with the Securities and Exchange Commission in Washington, D.C. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities.