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Galiano Gold reports Q3 2020 results - PR Newswire

VANCOUVER, BC, Nov. 6, 2020 /PRNewswire/ - Galiano Gold Inc. ("Galiano" or the "Company") (TSX: GAU) (NYSE American: GAU) (formerly Asanko Gold Inc.) reports third quarter ("Q3") 2020 operating and financial results for the Asanko Gold Mine ("AGM"), located in Ghana, West Africa. The AGM is a 50:50 joint venture ("JV") with Gold Fields Ltd (JSE,NYSE: GFI), which is managed and operated by Galiano. 

Q3 2020 Asanko Gold Mine Highlights (100% basis)

• There were no lost time injuries ("LTI") and two total recordable injuries ("TRI")
• Quarterly gold production of 48,974 ounces at an all-in sustaining cost1 ("AISC") of $1,488/oz
• Gold sales of 53,975 ounces at an average realized price of $1,861/oz, generating gold sales proceeds of $100.5 million
• Net income after tax of $12.4 million
• Generated operating cash flow of $18.5 million, and negative free cash flow1 of $4.2 million after incurring $14.2 million of non-sustaining capital and exploration expenditure
• As at September 30, 2020, the JV had cash of $43.3 million, $16.3 million in receivables from gold sales and $4.3 million in gold on hand, with the RMB revolving credit facility of $30.0 million fully drawn
• Completed a 33-hole drilling program at the Nkran pit to confirm and improve confidence in the Mineral Reserve estimate for the third phase of mining and tested the extent of mineralization below the proposed Cut 3 pit shell with positive results (refer to news release dated September 8, 2020)
• Completed the exploration drilling program at Abore with results indicating a strike extension of mineralization of the pit (refer to news release dated July 6, 2020)

Q3 2020 Quarterly Highlights for Galiano Gold Inc.

• Net income after tax of $3.2 million and Adjusted EBITDA1 of $6.5 million
• At September 30, 2020, Galiano held cash and receivables of $66.4 million
• Appointed Matt Badylak as Executive Vice President and Chief Operating Officer

"Coming into the second half of 2020 with very strong production and all-in sustaining cost performance, we expected production to decrease and unit costs to increase in the second half as the mine shifted to a lower grade production mix after the depletion of Nkran Cut 2 late in Q2," said Greg McCunn, Chief Executive Officer. "For the balance of 2020, ore will be sourced from the Esaase and Akwasiso pits, augmented with run of mine stockpiles. This quarter was an investment quarter where the Esaase and Akwasiso pits were developed and optimised for sustainable ore production in Q4 and beyond which put pressure on all-in sustaining costs. With the continued strong gold price environment, the mine generated cash from operations in excess of $18 million allowing it to fund pit development as well as its ongoing exploration programs.

"The focus on exploration in Q3 was delineating and expanding upon known mineralization at the highly prospective Miradani targets and to confirm and improve confidence in the Mineral Reserve Estimate for the third phase of mining at Nkran and to test the extent of mineralization below the proposed Cut 3 pit shell."

Asanko Gold Mine - Summary of Q3 2020 Operational and Financial Results (100%)

• During the quarter, there were no LTI's and two TRI's reported resulting in an LTI frequency rate of nil per million employee hours worked and a TRI frequency rate of 0.72 per million employee hours worked.
• Gold production of 48,974 ounces during the three months ended September 30, 2020, in line with plan. Lower relative production was impacted by lower head grade driven by the mine shifting to a production mix excluding the higher grade Nkran Cut 2 deposit which was depleted in Q2 as well as a reliance on lower grade stockpiles to augment primary feed as the Esaase and Akwasiso deposits were developed for sustainable ore production in Q4 and beyond.
• During Q3 2020, the AGM sold 53,975 ounces of gold at an average realized gold price of $1,861/oz. Revenues totaled $100.7 million (including $0.3 million of by-product revenue).
• The AGM incurred operating cash costs per ounce1 of $1,150, total cash costs per ounce1 of $1,244 and AISC1 of $1,488 per ounce in Q3 2020. The increase in total cash costs per ounce1 from Q2 2020 was primarily due to higher waste stripping at the Esaase and Akwasiso pits. AISC1 were also relatively higher than Q2 2020 due to higher royalty costs associated with an increase in the gold price, as well as higher general and administration ("G&A") costs associated with one-off COVID-19 related expenses and the completion of a lift on the tailings storage facility. All unit cost metrics were also impacted by relatively lower gold sales volumes in Q3 2020 which had the effect of increasing costs on a per ounce basis.
• Total cost of sales (including depreciation and depletion and royalties) amounted to $83.3 million in Q3 2020, an increase of $3.4 million from Q3 2019. The increase in cost of sales was primarily due to higher operating cash costs and royalty expense arising from improvement in the gold price during Q3 2020 compared to Q3 2019. These factors were partly offset by a decrease in gold ounces sold in Q3 2020 compared to Q3 2019 and a reduction in depreciation and depletion expense following the impairment recorded in Q4 2019.
• The AGM generated $18.5 million of cash flows from operating activities (after taking into account unfavorable working capital changes of $9.9 million) and negative free cash flow1 of $4.2 million during Q3 2020. This compares to $45.6 million of cash flows from operating activities and $13.9 million of free cash flow1 during Q3 2019. The reduction in free cash flow1 was the result of a $25.3 million unfavorable increase in cash invested in non-cash working capital when comparing Q3 2020 to Q3 2019 and a $3.7 million decrease in income from operations (excluding depreciation and depletion). These factors were partly offset by a $7.7 million decrease in cash flows associated with capital expenditure from Q3 2019 to Q3 2020 and a $1.3 million reduction in mining services and contractor lease payments.
• As at September 30, 2020, the JV had cash of $43.3 million, $16.3 million in receivables from gold sales and $4.3 million in gold on hand, with the RMB revolving credit facility of $30.0 million fully drawn.

Galiano Gold Inc. – Summary Q3 2020 Financial Results

• The Company reported net income after tax of $3.2 million in Q3 2020 compared to a net loss of $147.5 million in Q3 2019. The improvement in earnings during Q3 2020 was predominantly due to the fact that the Q3 2019 net loss included a $128.3 million impairment recognized on the Company's equity investment in the AGM JV, as well as a $20.0 million negative fair value adjustment on the Company's redeemable preference shares, both of which were associated with the update to the AGM Life of Mine plan. Additionally, the improvement in earnings in Q3 2020 was also partly due to an increase in the Company's 45% interest in the net earnings of the JV which totaled $5.6 million for the quarter. These factors were partly offset by restructuring costs recorded in Q3 2020 associated with the intended closure of the Company's Johannesburg office.
• As at September 30, 2020, the Company had cash on hand of $63.5 million and $2.9 million in receivables for a gross liquidity position of $66.4 million and no debt.
• Adjusted EBITDA1 for Q3 2020 amounted to $6.5 million, compared to $9.4 million in Q3 2019. The decrease in Adjusted EBITDA1 was primarily a result of an increase in the AGM's total cash costs1 and increase in corporate G&A expense associated with the intended closure of the Company's Johannesburg office (see "Management changes").
• Cash used in operating activities in Q3 2020 was $3.0 million, compared to $3.5 million in Q3 2019. The decrease in cash used in operations was due to a reduction in the amount of cash invested in working capital during Q3 2020, partly offset by higher corporate G&A expense.

2020 Outlook

In 2020, the AGM is on track to deliver on its guidance with gold production of approximately 245,000 ounces and AISC1 of approximately $1,150 per ounce which slightly exceeds the upper end of the AISC1 guidance of $1,000 to $1,100/oz as a result of increased cost pressures (as discussed below).

AISC1 includes budgeted sustaining capital expenditures of $11.0 million (spend to date: $11.5 million), primarily for a planned tailings storage facility lift of $7.0 million (spend to date $9.5 million). Year-to-date AISC1 performance remained in line with the Company's guidance range, however, certain cost factors continue to put pressure on the JV's cost performance. Current cost pressures include higher royalty expense associated with higher realized gold prices (approximately $30 incremental per ounce), higher sustaining capital expenditures associated with design changes to the raise of the tailings dam as well as additional costs associated with the JV's COVID-19 mitigation measures.

During Q4 2020 the mine expects to source ore primarily from the lower grade Esaase and Akwasiso pits as the AGM's primary fresh ore source. These ore sources will be augmented where necessary with run-of-mine stockpile material.

Development capital is forecast at $24.0 million (spend to date: $21.0 million), primarily for the Tetrem village relocation. In addition, $17.1 million was budgeted for exploration (spend to date: $14.6 million), mainly around the Miradani mineralized trend.