IAMGOLD CORPORATION 220 Bay Street, 5thFloor, Toronto, ON, M5J 2W4 Canada Telephone: (416) 360-4710 Fax: (416) 360-4750, Toll free 1-888-IMG-9999 website:www.iamgold.com lE-mail: info@iamgold.com |
TSX Trading Symbol: | IMG IAG 145.5MM 151.5MM Cdn$5.75 - $10.99 |
FOR IMMEDIATE RELEASE: May 13, 2004 | No. 08/ 04 |
l | Net earnings for the first quarter of 2004 increased to a record $5.9 million, a 70% increase compared to the first quarter of 2003. |
l | Attributable production for the quarter amounted to 106,000 ounces at a cash cost, as defined by the Gold Institute, of US$239/oz. |
l | Operating cash flow for the quarter was US$5.8 million. |
l | Consolidated cash and gold bullion position at March 31, 2004 stood at US$113.2 million, including US$97.3 million in cash and gold bullion directly held by the Company and its subsidiaries. |
l | On March 30, 2004 IAMGOLD and Wheaton River Minerals Ltd. announced an agreement to enter into a business combination whereby each Wheaton share will be exchanged for 0.55 of a share of the Company. A shareholder meeting to vote on this proposed transaction is to be held on June 8, 2004. |
Three Months Ended | |||||||
Mar. 31, 2004 | Mar. 31, 2003 | ||||||
Net earnings | $ | 5,906 | $ | 3,472 | * | ||
Operating cash flow | $ | 5,773 | $ | 12,292 | |||
Net earnings per share - basic and diluted | $ | 0.04 | $ | 0.03 | * | ||
Operating cash flow per share - basic and diluted | $ | 0.04 | $ | 0.09 | |||
Gold produced(oz) IMG share | 105,657 | 101,102 | |||||
GI cash cost(US$/oz) | $ | 239 | $ | 217 | |||
Total production cost(US$/oz) | $ | 312 | $ | 282 | |||
Average gold revenue(US$/oz) | $ | 411 | $ | 359 | |||
* | Restated to reflect a change in accounting estimates relating to future income taxes and a change in accounting policy related to asset retirement obligations. |
2003 | 2004 | ||||||||||||||||||
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| 4th Qtr |
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| Total |
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| 1st Qtr |
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---------------------------------------------------(Restated)----------------------------------------------- | |||||||||||||||||||
Net earnings(US$)* | $ | 3,472 | $ | 2,045 | $ | 4,587 | $ | 5,376 | $ | 15,480 | $ | 5,906 | |||||||
Net earnings per share | |||||||||||||||||||
- basic & diluted(US$)* | 0.03 | 0.01 | 0.03 | 0.04 | 0.11 | 0.04 | |||||||||||||
Operating cash flow(US$) | 12,292 | 7,850 | 6,485 | 4,011 | 30,638 | 5,773 | |||||||||||||
Operating cash flow per share | |||||||||||||||||||
- basic and diluted(US$) | 0.09 | 0.05 | 0.04 | 0.03 | 0.21 | 0.04 | |||||||||||||
Cash and bullion balance(US$000) | 93,014 | 99,816 | 106,463 | 113,958 | 113,190 | ||||||||||||||
Gold produced(000 oz - IMG share) | 101 | 109 | 103 | 108 | 421 | 106 | |||||||||||||
Weighted average GI cash cost (US$/oz - IMG share)** | 217 | 215 | 221 | 246 | 225 | 239 | |||||||||||||
Gold spot price(US$/oz)*** | 352 | 347 | 363 | 391 | 363 | 408 | |||||||||||||
* | 2003 figures have been restated to reflect a change in accounting estimates relating to future income taxes and a change in accounting policy related to asset retirement obligations. |
** | Weighted average Gold Institute cash cost is a non-GAAP measure, calculated in accordance with the Gold Institute Standard wherein cash cost equals the sum of cash operating costs inclusive of production-based taxes and management fees and may include certain cash costs incurred in prior periods such as stockpiling and stripping costs and may exclude certain cash costs incurred in the current period that relate to future production. Refer to individual mining operating results sections for mine GI cash costs and reconciliations to GAAP. |
*** | Average gold price as per the London pm fix. |
2003 | 2004 | ||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | Total | 1st Qtr | ||||||||||||||
Production(000 oz) | |||||||||||||||||||
Sadiola - 38% | 40 | 40 | 42 | 50 | 172 | 45 | |||||||||||||
Yatela - 40% | 21 | 30 | 19 | 17 | 87 | 20 | |||||||||||||
Tarkwa - 18.9% | 26 | 25 | 28 | 27 | 105 | 26 | |||||||||||||
Damang - 18.9% | 15 | 14 | 14 | 14 | 57 | 15 | |||||||||||||
Total production | 101 | 109 | 103 | 108 | 421 | 106 | |||||||||||||
GI cash cost(US$/oz - IMG share) | 217 | 215 | 221 | 246 | 225 | 239 | |||||||||||||
2003 | 2004 | ||||||||||||||||||
1st Qtr | 2ndQtr | 3rd Qtr | 4th Qtr | Total | 1st Qtr | ||||||||||||||
Ore milled(000t) | 1,190 | 1,290 | 1,240 | 1,350 | 5,070 | 1,160 | |||||||||||||
Head grade(g/t) | 3.1 | 2.6 | 2.7 | 3.7 | 3.0 | 3.9 | |||||||||||||
Recovery(%) | 86 | 93 | 92 | 84 | 88 | 80 | |||||||||||||
Gold production - 100%(000 oz) | 104 | 105 | 111 | 132 | 452 | 117 | |||||||||||||
Gold sales - 100%(000 oz) | 113 | 101 | 105 | 134 | 453 | 118 | |||||||||||||
Gold revenue(US$/oz)* | 369 | 359 | 365 | 402 | 376 | 418 | |||||||||||||
Direct cash costs(US$/oz) | 216 | 208 | 187 | 227 | 210 | 210 | |||||||||||||
Production taxes(US$/oz) | 23 | 20 | 20 | 24 | 22 | 25 | |||||||||||||
Total cash costs(US$/oz) | 239 | 228 | 207 | 251 | 232 | 235 | |||||||||||||
Stockpile adjustments(US$/oz) | (28 | ) | (11 | ) | (9 | ) | (25 | ) | (19 | ) | (15 | ) | |||||||
GI cash cost(US$/oz) | 211 | 217 | 198 | 226 | 213 | 220 | |||||||||||||
GI cash cost(US$000) | 21,872 | 22,666 | 21,984 | 29,907 | 96,429 | 25,781 | |||||||||||||
IMG share - 38%(US$000) | 8,311 | 8,613 | 8,354 | 11,365 | 36,643 | 9,797 | |||||||||||||
GAAP reconciling items(US$000)**,# | 726 | (950 | ) | (624 | ) | (272 | ) | (1,120 | ) | 565 | |||||||||
Mining expense(US$000) | 9,037 | 7,663 | 7,730 | 11,093 | 35,523 | 10,362 | |||||||||||||
* | Gold revenue is calculated as gold sales, adjusted for hedge accounting, divided by ounces of gold sold. |
** | Canadian GAAP reconciling items are made up of stock movement, mine interest, exploration and consolidation adjustments. |
# | 2003 figures have been restated to reflect a change in accounting policy related to asset retirement obligations. |
2003 | 2004 | ||||||||||||||||||
1st Qtr | 2ndQtr | 3rd Qtr | 4th Qtr | Total | 1st Qtr | ||||||||||||||
Ore crushed(000t) | 740 | 700 | 470 | 680 | 2,590 | 640 | |||||||||||||
Head grade(g/t) | 2.8 | 3.8 | 2.3 | 2.2 | 2.8 | 3.6 | |||||||||||||
Gold stacked(oz) | 67 | 85 | 35 | 49 | 236 | 74 | |||||||||||||
Gold production - 100%(000 oz) | 53 | 75 | 48 | 42 | 218 | 51 | |||||||||||||
Gold sales - 100%(000 oz) | 54 | 70 | 53 | 45 | 222 | 46 | |||||||||||||
Gold revenue(US$/oz)* | 355 | 346 | 358 | 395 | 361 | 405 | |||||||||||||
Direct cash costs(US$/oz) | 210 | 172 | 247 | 444 | 249 | 335 | |||||||||||||
Production taxes(US$/oz) | 23 | 20 | 24 | 26 | 23 | 22 | |||||||||||||
Total cash costs(US$/oz) | 233 | 192 | 271 | 470 | 272 | 357 | |||||||||||||
Accounting adjustments(US$/oz)** | (20 | ) | 11 | (7 | ) | (134 | ) | (28 | ) | (72 | ) | ||||||||
GI cash cost(US$/oz) | 213 | 203 | 264 | 336 | 244 | 285 | |||||||||||||
GI cash cost(US$000) | 11,400 | 15,231 | 12,743 | 13,874 | 53,248 | 14,536 | |||||||||||||
IMG share - 40%(US$000) | 4,560 | 6,092 | 5,097 | 5,550 | 21,299 | 5,815 | |||||||||||||
GAAP reconciling items(US$000)***,# | 137 | (328 | ) | (272 | ) | 261 | (202 | ) | (619 | ) | |||||||||
Mining expense(US$000) | 4,697 | 5,764 | 4,825 | 5,811 | 21,097 | 5,196 | |||||||||||||
* | Gold revenue is calculated as gold sales divided by ounces of gold sold. |
** | Accounting adjustments are made up of stockpile, gold in process, and deferred stripping adjustments. |
*** | Canadian GAAP reconciling items are made up of stock movement, mine interest and consolidation adjustments. |
# | 2003 figures have been restated to reflect a change in accounting policy related to asset retirement obligations. |
2003 | 2004 | ||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | Total | 1st Qtr | ||||||||||||||
Ore crushed (000t) | 3,850 | 3,720 | 4,080 | 3,920 | 15,570 | 4,170 | |||||||||||||
Head grade (g/t) | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | |||||||||||||
Gold stacked (000 oz) | 172 | 162 | 185 | 191 | 710 | 226 | |||||||||||||
Expected yield (%) | 74 | 75 | 75 | 73 | 74 | 74 | |||||||||||||
Gold production & sales - 100% (000 oz) | 136 | 129 | 148 | 142 | 555 | 137 | |||||||||||||
Gold revenue (US$/oz)* | 342 | 336 | 361 | 391 | 358 | 407 | |||||||||||||
Direct cash costs (US$/oz) | 187 | 204 | 200 | 215 | 201 | 244 | |||||||||||||
Production taxes (US$/oz) | 11 | 10 | 11 | 12 | 11 | 12 | |||||||||||||
Total cash costs (US$/oz) | 198 | 214 | 211 | 226 | 212 | 256 | |||||||||||||
Gold-in-process adjustments (US$/oz) | 14 | 9 | 10 | 13 | 12 | (8 | ) | ||||||||||||
GI cash cost (US$/oz) | 212 | 223 | 221 | 240 | 224 | 248 | |||||||||||||
Gold revenue less GI cash cost (US$000) | 17,715 | 14,592 | 20,628 | 21,411 | 74,346 | 21,731 | |||||||||||||
IMG share - 18.9% (US$000) | 3,348 | 2,758 | 3,899 | 4,047 | 14,052 | 4,107 | |||||||||||||
GAAP reconciling items (US$000)** | (1,844 | ) | (1,684 | ) | (1,868 | ) | (1,917 | ) | (7,313 | ) | (1,920 | ) | |||||||
Earnings from working interest (US$000) | 1,504 | 1,074 | 2,031 | 2,130 | 6,739 | 2,187 | |||||||||||||
* | Gold revenue is calculated as gold sales, adjusted for hedge accounting, divided by ounces of gold sold. |
** | Canadian GAAP reconciling items are made up of stock movement, mine interest, mine depreciation, mine taxes and consolidation adjustments. |
First quarter gold production at Tarkwa was essentially equal to that of the first quarter of 2003. Stripping ratios have increased at Tarkwa and tonnes of waste mined were 31% higher than the fourth quarter of 2003. As a result, direct cash costs for the quarter were $33.6 million. The higher stripping ratio is required to increase the availability of ore for the start of the new mill in the third quarter 2004.
2003 | 2004 | ||||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | Total | 1st Qtr | ||||||||||||||
Ore milled (000t) | 1,230 | 1,310 | 1,180 | 1,360 | 5,080 | 1,300 | |||||||||||||
Head grade (g/t) | 2.2 | 2.1 | 2.0 | 2.0 | 2.1 | 2.0 | |||||||||||||
Recovery (%) | 91 | 92 | 92 | 90 | 91 | 90 | |||||||||||||
Gold production & sales - 100% (000 oz) | 77 | 78 | 70 | 78 | 303 | 78 | |||||||||||||
Gold revenue (US$/oz)* | 349 | 345 | 359 | 393 | 362 | 406 | |||||||||||||
Direct cash costs (US$/oz) | 215 | 226 | 218 | 202 | 215 | 210 | |||||||||||||
Production taxes (US$/oz) | 11 | 10 | 11 | 12 | 11 | 12 | |||||||||||||
Total cash costs (US$/oz) | 226 | 236 | 229 | 214 | 226 | 222 | |||||||||||||
Gold-in-process adjustments (US$/oz) | 21 | (18 | ) | (1 | ) | 15 | 4 | (5 | ) | ||||||||||
GI cash cost (US$/oz) | 247 | 218 | 228 | 229 | 230 | 217 | |||||||||||||
Gold revenue less GI cash cost (US$000) | 7,898 | 9,922 | 9,210 | 12,679 | 39,709 | 14,764 | |||||||||||||
IMG share - 18.9% (US$000) | 1,493 | 1,875 | 1,741 | 2,396 | 7,505 | 2,790 | |||||||||||||
GAAP reconciling items (US$000)** | (1,138 | ) | (1,257 | ) | (1,295 | ) | (904 | ) | (4,594 | ) | (861 | ) | |||||||
Earnings from working interest (US$000) | 355 | 618 | 446 | 1,492 | 2,911 | 1,929 | |||||||||||||
* | Gold revenue is calculated as gold sales divided by ounces of gold sold. |
** | Canadian GAAP reconciling items are made up of stock movement, mine interest, mine depreciation, mine taxes and consolidation adjustments. |
Three Months Ended | |||||||
(US$ 000’s) | Mar. 31, 2004 | Mar. 31, 2003 | |||||
(Restated) | |||||||
Gold sales | $ | 26,105 | $ | 23,529 | |||
Mining expense | 15,558 | 13,734 | |||||
Depreciation and depletion | 6,730 | 5,540 | |||||
Earnings from Mining Interests | $ | 3,817 | $ | 4,255 | |||
Three Months Ended | |||||||
(US$ 000’s) | Mar. 31, 2004 | Mar. 31, 2003 | |||||
Tarkwa | $ | 2,187 | $ | 1,504 | |||
Damang | 1,929 | 355 | |||||
Earnings from Working Interests | $ | 4,116 | $ | 1,859 | |||
Three Months Ended | |||||||
(US$ 000’s) | Mar. 31, 2004 | Mar. 31, 2003 | |||||
Gold Royalties | |||||||
Revenue | $ | 537 | $ | 313 | |||
Amortization | 331 | 224 | |||||
Diamond Royalties | |||||||
Revenue | 990 | - | |||||
Amortization | 521 | - | |||||
Earnings from Royalty Interests | $ | 675 | $ | 89 | |||
March 31, 2004 | December 31, 2003 | ||||||
Working Capital | $ | 124.3 | $ | 118.5 | |||
Current Ratio | 7.5 | 5.3 | |||||
March 31, | December 31, | ||||||
2004 | 2003 | ||||||
Joint venture cash | $ | 15.9 | $ | 13.5 | |||
Corporate cash | 49.8 | 53.2 | |||||
Total | $ | 65.7 | $ | 66.7 | |||
Three Months Ended | |||||||
March 31, | March 31, | ||||||
2004 | 2003 | ||||||
Inflows | |||||||
Sadiola cash receipts | $ | 2.7 | $ | 4.6 | |||
Proceeds from sale of marketable securities and loans receivable | 1.8 | - | |||||
Royalties received, net of withholding taxes and gold bullion receipts | 1.3 | 0.2 | |||||
Share issuances, net of share issue costs | 0.5 | 2.5 | |||||
Interest income | 0.2 | 0.2 | |||||
Net cash acquired from Repadre | - | 34.2 | |||||
Damang cash receipts | - | 2.0 | |||||
Foreign exchange gain on cash balances | - | 0.7 | |||||
Other | 0.2 | - | |||||
$ | 6.7 | $ | 44.4 | ||||
Outflows | |||||||
Dividends | $ | 6.7 | $ | 2.5 | |||
Corporate administration | 1.5 | 2.0 | |||||
Exploration and exploration administration | 1.1 | 0.9 | |||||
Investment and merger transaction costs | 0.5 | 0.1 | |||||
Foreign exchange loss on cash balances | 0.2 | - | |||||
Gold bullion purchases | - | 10.5 | |||||
Other | - | 0.6 | |||||
$ | 10.0 | $ | 16.6 | ||||
Net inflow (outflow) | $ | (3.3 | ) | $ | 27.8 | ||
Joseph F. Conway | Grant A. Edey | Thomas R. Atkins | ||
President & Chief Executive Officer | Chief Financial Officer | Vice-President, Investor Relations | ||
Tel: (416) 360-4710 | North America Toll-Free: 1 (888) IMG-9999 | Fax: (416) 360-4750 |
Three months ended | |||||||||||||
Mar. 31, 2004 | Mar. 31, 2003 | ||||||||||||
(Restated) | |||||||||||||
Revenue: | |||||||||||||
Gold sales | $ | 26,105 | $ | 23,529 | |||||||||
Royalties | 1,527 | 313 | |||||||||||
27,632 | 23,842 | ||||||||||||
Expenses: | |||||||||||||
Mining | 15,558 | 13,734 | |||||||||||
Depreciation and depletion | 6,730 | 5,540 | |||||||||||
Amortization of royalty interests | 852 | 224 | |||||||||||
23,140 | 19,498 | ||||||||||||
4,492 | 4,344 | ||||||||||||
Earnings from working interests | 4,116 | 1,859 | |||||||||||
8,608 | 6,203 | ||||||||||||
Other expenses (income): | |||||||||||||
Corporate administration | 2,328 | 1,313 | |||||||||||
Restructuring costs | - | 689 | |||||||||||
Exploration | 1,068 | 878 | |||||||||||
Foreign exchange | (43 | ) | (83 | ) | |||||||||
Investment income | (1,324 | ) | (233 | ) | |||||||||
2,029 | 2,564 | ||||||||||||
Earnings before income taxes | 6,579 | 3,639 | |||||||||||
Income taxes (recovery): | |||||||||||||
Current | 1,386 | 876 | |||||||||||
Future | (713 | ) | (709 | ) | |||||||||
673 | 167 | ||||||||||||
Net earnings | 5,906 | 3,472 | |||||||||||
Retained earnings, beginning of period, as previously reported | 42,023 | 33,709 | |||||||||||
Restatement of opening retained earnings(note 2a) | (2,602 | ) | - | ||||||||||
Prior period adjustment(note 2b) | 585 | 144 | |||||||||||
Retained earnings, beginning of period, restated | 40,006 | 33,853 | |||||||||||
Retained earnings, end of period | $ | 45,912 | $ | 37,325 | |||||||||
Number of common shares | |||||||||||||
Average outstanding during period | 145,480,791 | 138,868,000 | |||||||||||
Outstanding at end of period | 145,536,179 | 143,512,000 | |||||||||||
Net earnings per share - basic and diluted | $ | 0.04 | $ | 0.03 | |||||||||
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| As at |
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| As at |
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| Mar. 31, 2004 |
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| Dec. 31, 2003 |
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| (Restated) | |
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents(note 3) | $ | 65,745 | $ | 66,675 | |||
Gold bullion | |||||||
(market value $61,499; Dec. 31, 2003 - $60,394) (note 4) | 47,445 | 47,283 | |||||
Accounts receivable and other | 20,646 | 21,443 | |||||
Inventories | 9,601 | 10,397 | |||||
143,437 | 145,798 | ||||||
Marketable securities | 1,102 | 1,116 | |||||
Long-term inventory | 14,598 | 12,773 | |||||
Long-term receivables | 6,933 | 7,610 | |||||
Working interests | 63,922 | 59,806 | |||||
Royalty interests | 62,089 | 62,941 | |||||
Mining interests(note 2b) | 83,397 | 87,953 | |||||
Future tax asset | 43 | 47 | |||||
Other assets | 1,238 | 1,239 | |||||
Goodwill | 74,886 | 74,886 | |||||
$ | 451,645 | $ | 454,169 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable & accrued liabilities | $ | 19,186 | $ | 27,259 | |||
Long-term liabilities: | |||||||
Deferred revenue | 1,241 | 1,655 | |||||
Future tax liability | 20,336 | 21,264 | |||||
Asset retirement obligation(note 2b) | 6,034 | 5,961 | |||||
Non-recourse loans payable(note 5) | 11,399 | 11,342 | |||||
58,196 | 67,481 | ||||||
Shareholders' equity: | |||||||
Common shares (Issued: 143,536,179 shares)(note 6) | 343,243 | 342,208 | |||||
Stock-based compensation(notes 2(a) and 6(b)) | 4,560 | 2,138 | |||||
Share purchase loans | (266 | ) | (266 | ) | |||
Retained earnings | 45,912 | 42,608 | |||||
393,449 | 386,688 | ||||||
$ | 451,645 | $ | 454,169 | ||||
Three months ended | |||||||
Mar. 31, 2004 | Mar. 31, 2003 | ||||||
Operating activities: | |||||||
Net income | $ | 5,906 | $ | 3,472 | |||
Items not affecting cash: | |||||||
Earnings from working interests, net of dividends | (4,116 | ) | (1,859 | ) | |||
Depreciation and amortization | 7,598 | 5,767 | |||||
Deferred revenue | (414 | ) | (413 | ) | |||
Future income taxes | (713 | ) | (709 | ) | |||
Stock-based compensation | 320 | 41 | |||||
Loss (gain) on sale of marketable securitiesand long-term receivables | (1,121 | ) | 3 | ||||
Unrealized foreign exchange losses (gains) | (221 | ) | 779 | ||||
Change in non-cash current working capital | 225 | 6,058 | |||||
Change in non-cash long-term working capital | (1,691 | ) | (847 | ) | |||
5,773 | 12,292 | ||||||
Financing activities: | |||||||
Issue of common shares, net of issue costs | 537 | 2,467 | |||||
Dividends paid | (6,725 | ) | (2,519 | ) | |||
Repayments of non-recourse loans | (3 | ) | (1 | ) | |||
(6,191 | ) | (53 | ) | ||||
Investing activities: | |||||||
Net cash acquired from Repadre Capital Corporation | - | 33,402 | |||||
Mining interests | (2,120 | ) | (2,213 | ) | |||
Note receivable | (48 | ) | (57 | ) | |||
Distributions received (paid) from (to) working interests | - | 2,005 | |||||
Purchase of gold bullion | (162 | ) | (10,655 | ) | |||
Proceeds from disposition of marketable securities and long-term receivables | 1,833 | 24 | |||||
Other assets | (15 | ) | 674 | ||||
(512 | ) | 23,180 | |||||
Increase (decrease) in cash and cash equivalents | (930 | ) | 35,419 | ||||
Cash and cash equivalents, beginning of period | 66,675 | 15,835 | |||||
Cash and cash equivalents, end of period | $ | 65,745 | $ | 51,254 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 39 | $ | 315 | |||
Income taxes | 1,353 | 860 | |||||
1. | Business Combination: |
On March 31, 2004, the Company announced an agreement to enter into a business combination with Wheaton River Minerals Ltd. (“Wheaton”). The combination will be completed by way of a plan of arrangement whereby each Wheaton share will be exchanged for 0.55 of a share of the Company. If all Wheaton warrants and options were exercised on closing of the transaction, the combined company would be held 68% by existing Wheaton shareholders and 32% by the Company’s existing shareholders. As a result, the transaction will be accounted for as if Wheaton is the acquiring company. | |
The combination must be approved by at least two-thirds of the votes cast by the shareholders of Wheaton and by a majority of the votes cast by the Company’s shareholders. The shareholder meetings are expected to be held in June 2004, with the transaction expected to close shortly thereafter. | |
If the combination does not occur as a result of one of the parties accepting a superior proposal from a competing bidder then the party which accepted the superior proposal will be required to pay a fee equal to three percent of its market capitalization to the other party. | |
2. | Change in Accounting Policies: |
(a) | Stock-based compensation: | |
Effective January 1, 2004, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants in the Handbook Section 3870, “Stock-based compensation and other stock-based payments” (Section 3870) with respect to directors and employees, whereby all stock options granted are accounted for under the fair value based method. Section 3870 is applied retroactively to all stock-based compensation granted to directors and employees on or after January 1, 2002. Opening retained earnings as at January 1, 2004 have been adjusted downwards by $2.6 million and opening share capital has been adjusted upwards by $0.2 million to reflect the cumulative effect of the change in prior periods. Prior periods have not been restated. | ||
(b) | Provision for reclamation and closure: | |
On January 1, 2004 the Company adopted CICA Handbook Section 3110: “Asset Retirement Obligations”, which requires that the fair value of liabilities for asset retirement obligations be recognized in the period in which they are incurred. A corresponding increase to the carrying amount of the related assets is generally recorded and depreciated over the life of the asset. The amount of the liability is subject to re-measurement at each reporting period. The prior policy involved accruing for the estimated reclamation and closure liability through charges to earnings |
basis over the estimated life of the mine. This change has been applied retroactively with prior periods being restated. The effect of the changes to opening retained earnings is summarized as follows: |
Increase in mining assets, January 1, 2003 | $ | 3,671 | |||
Increase in asset retirement obligation, January 1, 2003 | 3,527 | ||||
Increase in opening retained earnings, January 1, 2003 | 144 |
Increase in net earnings for 2003 | - Q1 | 67 | |||
- Q2 | 25 | ||||
- Q3 | 186 | ||||
- Q4 | 163 | ||||
441 | |||||
Increase in opening retained earnings, January 1, 2004 | $ | 585 | ||
The adjustment to opening retained earnings at January 1, 2004 is further summarized as follows: |
Increase in mining assets, January 1, 2004 | $ | 3,028 | ||
Increase in asset retirement obligation, January 1, 2004 | 2,443 | |||
Increase in opening retained earnings, January 1, 2004 | $ | 585 | ||
3. | Cash and Cash Equivalents: |
Mar. 31, 2004 | Dec. 31, 2003 | ||||||
Corporate | $ | 49,826 | $ | 53,171 | |||
Joint ventures | 15,919 | 13,504 | |||||
$ | 65,745 | $ | 66,675 | ||||
4. | Gold Bullion: |
As at March 31, 2004, the Company held 145,148 ounces of gold bullion at an average cost of US$327 per ounce. The market value of this gold bullion, based on the market close price of $424 per ounce was $61,499,000. | |
5. | Non-Recourse Loans Payable: |
Mar. 31, 2004 | Dec. 31, 2003 | ||||||
Yatela loans | $ | 11,399 | $ | 11,342 | |||
Note receivable from the Government of Mali, included inlong-term receivables | 6,683 | 6,635 | |||||
Net Yatela obligation | $ | 4,716 | $ | 4,707 | |||
6. | Share Capital: |
Authorized: | |
Unlimited first preference of shares, issuable in series | |
Unlimited second preference shares, issuable in series | |
Unlimited common shares | |
Issued and outstanding common shares are as follows: |
Number of | |||||||
shares | Amount | ||||||
Issued and outstanding, December 31, 2003 | 145,333,845 | $ | 342,208 | ||||
Restatement of opening share capital(note 2(a)) | 172 | ||||||
Exercise of options | 202,334 | 863 | |||||
Issued and outstanding, March 31, 2004 | 145,536,179 | $ | 343,243 | ||||
(a) | Share Option Plan: | |
The Company has a comprehensive share option plan for its full-time employees, directors and officers and self-employed consultants. The options vest over three years and expire no longer than 10 years from the date of grant. | ||
A summary of the status of the Company’s share option plan as of March 31, 2004 and changes during the three months then ended is presented below. All exercise prices are denominated in Canadian dollars. |
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| 2003 | ||||
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| Weighted | ||||
|
|
| Average | ||||
|
|
| Exercise | ||||
|
| Options | Price | ||||
Outstanding, beginning of period | 5,414,535 | $ | 5.13 | ||||
Granted | 805,000 | 9.02 | |||||
Exercised | (202,334 | ) | 3.48 | ||||
Forfeited | (24,001 | ) | 5.33 | ||||
Outstanding, March 31, 2004 | 5,993,200 | $ | 5.71 | ||||
Options exercisable, March 31, 2004 | 4,064,868 | $ | 4.74 | ||||
(b) | Stock-based compensation: | |
The Company accounts for all stock-based compensation granted on or after January 1, 2002, using the fair value based method. | ||
The fair value of the options granted subsequent to January 1, 2002 has been estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 5%, dividend yield of 1%, volatility factor of the expected market price of the Company’s common stock of 37%; and a weighted average expected life of these options of 8 years. The estimated fair value of the options is expensed over the options’ vesting period of 3 years. | ||
For the three months ended March 31, 2004, $312,000 was recorded as compensation expense relating to the following options: |
Weighted | Total | ||||||||||||
Average | Weighted | March 31, | |||||||||||
Year of Grant/ | Exercise | Average | 2004 | ||||||||||
Modification | # of Options | (Cdn$) Price | Fair Value | Expense | |||||||||
2002 | 432,667 | $ | 7.27 | $ | 2.50 | $ | 130 | ||||||
2003 | 910,000 | 7.61 | 1.56 | 116 | |||||||||
2004 | 805,000 | 9.02 | 2.12 | 66 | |||||||||
2,147,667 | $ | 8.07 | $ | 1.96 | $ | 312 | |||||||
In 2004, the Company awarded 22,173 restricted common shares to certain executives of the Company under the Company’s share option plan. These restricted shares have a value of Cdn$200,000 and will be issued and expensed over their three-year vesting period. For the three months ended March 31, 2004, $8,000 was recorded as compensation expense relating to the restricted share awards. | ||
7. | Segmented Information: | |
(a) | The Company’s assets, liabilities, revenue and expenses, and cash flows allocated to the appropriate reporting segments identified by the Company are as follows: |
Joint Venture | |||||||||||||
and Working | |||||||||||||
March 31, 2004 | Interests | Royalties | Corporate | Total | |||||||||
Cash and gold bullion | $ | 15,919 | $ | - | $ | 97,271 | $ | 113,190 | |||||
Other current assets | 27,768 | - | 2,479 | 30,247 | |||||||||
Long-term assets | 104,720 | 77,221 | 2,590 | 184,531 | |||||||||
Long-term assets related to working interests | 123,677 | - | - | 123,677 | |||||||||
$ | 272,084 | $ | 77,221 | $ | 102,340 | $ | 451,645 | ||||||
Current liabilities | 13,273 | - | 5,913 | 19,186 | |||||||||
Long-term liabilities | 18,674 | - | 20,336 | 39,010 | |||||||||
$ | 31,947 | $ | - | $ | 26,249 | $ | 58,196 | ||||||
Revenues | $ | 26,105 | $ | 1,527 | $ | - | $ | 27,632 | |||||
Operating costs of mine | 14,735 | - | - | 14,735 | |||||||||
Earnings from working interests | 4,116 | - | - | 4,116 | |||||||||
Depreciation and amortization | 6,730 | 852 | 16 | 7,598 | |||||||||
Exploration expense | - | - | 1,068 | 1,068 | |||||||||
Other expense | - | - | 2,234 | 2,234 | |||||||||
Interest & investment expense (income), net | 823 | - | (1,289 | ) | (466 | ) | |||||||
Income taxes | 1,357 | 34 | (718 | ) | 673 | ||||||||
Net income (loss) | $ | 6,576 | $ | 641 | $ | (1,311 | ) | $ | 5,906 | ||||
(b) | The Company’s share of joint venture cash flows for the three months ended March 31, 2003 is as follows: |
Mar. 31, 2004 | ||||
Cash flows from (used in) operations | $ | 7,246 | ||
Cash flows from (used in) financing | (3 | ) | ||
Cash flows from (used in) investments | (2,168 | ) | ||
8. | Contingencies and Commitments: | |
(a) | The Company was a defendant in an action commenced in the Ontario Court of Justice (General Division) by Kinbauri Gold Corporation (“Kinbauri”). | |
On December 10, 2002, the trial judge released reasons for judgment awarding damages to the Plaintiff in the amount of Cdn $1.7 million. The trial judge awarded pre-judgment interest at the rate of 10% and costs to be determined by assessment. The Company recorded an expense of $2,900,000 in Q4, 2002 in relation to this judgment. | ||
The Plaintiff filed a Notice of Appeal, dated January 20, 2003, appealing the damage award. The Company filed a Notice of Cross-Appeal, dated January 31, 2003, also appealing the damage award and the pre-judgment interest rate. The appeals were argued before the Ontario Court of Appeal on April 15th, 2004. Judgment was reserved. A decision is expected during Q2, 2004. | ||
(b) | In December 2003, the Department of Taxation in Mali performed an audit of the mining operations at the Yatela and Sadiola mines in Mali for the years 2000, 2001 and 2002. The audit report claimed taxes and penalties payable of approximately $15.6 million of which the Company’s share is $5.9 million. Sadiola and Yatela management have reviewed the claims with legal and tax advisors and are of the opinion that all taxes were properly paid and that the audit report is without merit. | |
The Company continues to work with the other partners in the Yatela and Sadiola mines to negotiate a settlement of the audit claims. Discussions with the Ministry of Finance in Mali are continuing, failing which the mines may elect to commence arbitration to enforce their rights under their original Convention Agreements with the Government of Mali. |