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Galiano Gold earns US$5m after tax in Q2 2021 - Stockwatch

Thursday, 12 August 2021


Galiano Gold Inc. has released second quarter operating and financial results, including results from the Asanko gold mine (AGM), located in Ghana, West Africa. The AGM is a 50/50 joint venture with Gold Fields Ltd. that is managed and operated by Galiano. All financial information contained in this release is unaudited and reported in U.S. dollars.

Q2 2021 Asanko Gold Mine Key Metrics (100% basis):

Production performance: Gold production of 50,421 ounces during the quarter. Year-to-date production of 110,420 ounces.

Strong financial results: Reported gold revenue of $95.1 million generated from 53,348 gold ounces sold at an average realized price of $1,782/oz, net income after tax of $12.7 million and Adjusted EBITDA1 of $19.3 million during the quarter.

Cost performance: Total cash costs per ounce1 of $1,236 and all-in sustaining costs1 ("AISC") of $1,497/oz during the quarter, in line with expectations.

Revised cost guidance: Full year production is expected at the lower end of guidance of 225,000-245,000 ounces, while cost guidance has been revised from AISC1 of $1,100-$1,300/oz to $1,350-$1,450/oz.

Consistent milling performance: The processing plant continued to operate above design delivering a quarterly milling performance of 1.5 million tonnes ("Mt") at an average plant feed grade of 1.1g/t with metallurgical recovery also well above design achieving 94% recovery.

Mine development: Advanced development of Akwasiso Cut 3 with stripping activities on schedule for ore delivery in Q3 2021.

Focus on exploration: Infill drilling program at Miradani North completed and on track to deliver maiden resource estimate in the latter part of 2021. Step-out drilling on the Greater Miradani trend is ongoing.

Excellence in safety: There were no lost-time injuries ("LTI") nor total recordable injuries ("TRI") reported during the quarter, resulting in 12-month rolling LTI and TRI frequency rates of 0.10 and 0.49 per million employee hours worked, respectively.

Stable liquidity: $41.3 million in cash, $13.4 million in gold sales receivables and $3.1 million in gold on hand as of June 30, 2021. Repaid remaining $15.0 million outstanding on the revolving credit facility ("RCF") during the quarter, JV is now debt-free.

Environmental responsibility: The AGM received its full Cyanide Code Certification after completion of an independent third-party cyanide management audit.

Q2 2021 Galiano Gold Highlights:

Stable balance sheet: Cash on hand of $58.5 million and $4.9 million in receivables as at June 30, 2021, while remaining debt-free.

Investing in exploration: Initiated a soil sampling and detailed mapping program on exploration properties in Mali and Ghana to identify targets for trenching and follow-on drilling programs.

Strong earnings: Generated net income after tax of $5.0 million or $0.02 per share during the quarter and Adjusted EBITDA1 of $6.1 million.

Changes to senior leadership: Appointed Matt Badylak, the Company's former Chief Operating Officer, to the position of President and Chief Executive Officer. Mr. Badylak also joined the Company's Board of Directors.

"It was a challenging quarter for the Asanko Gold Mine, although production was on plan, all-in sustaining costs were higher than budget due to lower plant feed grades. Looking towards the second half of the year, we are revising the AGM's annual AISC1 guidance upwards to reflect production at the lower end of guidance, an increase in Esaase ore transportation costs and higher fiscal levies," said Matt Badylak, President and Chief Executive Officer. "Cash flow from operations remain positive at current gold prices, and Galiano's balance sheet remains strong. Long term we remain focused on exploration and further development at the AGM and expect to publish our updated Reserves and Resources in late 2021."

Asanko Gold Mine - Summary of Q2 2021 Operational and Financial Results (100% basis)

Asanko Gold Mine (100% basis) Q2 2021  Q1 2021  Q4 2020  Q3 2020  Q2 2020 
Ore mined ('000t) 1,333   1,841   1,964   958   1,361 
Waste mined ('000t) 9,073   9,552  11,773  11,321  8,128 
Total mined ('000t) 10,406  11,393  13,737  12,279   9,489 
Strip ratio (W:O) 6.8   5.2   6.0   11.8   6.0 
Average gold grade mined (g/t) 1.2   1.3   1.4   1.4   1.4 
Mining cost ($/t mined) 3.03  3.31   3.20   3.13   3.59 
Ore transportation from Esaase ('000 t) 1,261   870   622   581   482 
Ore transportation cost ($/t trucked) 6.20   6.48   7.15   7.59   7.82 
Ore milled ('000t) 1,475   1,444   1,438   1,467   1,638 
Average mill head grade (g/t) 1.1   1.4   1.5   1.1   1.4 
Average recovery rate (%) 94   95   95   93   94 
Processing cost ($/t treated) 9.87   10.31   10.46   10.80   9.77 
Gold production (oz) 50,421  59,999  65,571  48,974  69,026 
Gold sales (oz) 53,348  62,925  60,655  53,975  61,357 
Average realized gold price ($/oz) 1,782   1,757   1,828   1,861   1,651 
Operating cash costs1 ($/oz) 1,147   901   801   1,150   725 
Total cash costs1 ($/oz) 1,236   989   892   1,244  807 
Asanko Gold Mine (100% basis) Q2 2021  Q1 2021  Q4 2020  Q3 2020  Q2 2020 
All-in sustaining costs1 ($/oz) 1,497   1,158  1,179   1,488   1,067 
All-in sustaining margin1 ($/oz) 285   599   649   373   584 
All-in sustaining margin1 () 15.2   37.7   39.4   20.1   35.8 
Revenue () 95.2   110.8   111.1   100.7   101.5 
Income from mine operations () 18.1  35.9   46.3   17.4   35.9 
Cash provided by operating activities () 10.8   35.4   48.0   18.5  48.8 
Free cash flow1 () (2.9) 20.5  21.5  (4.2) 22.6 

There were no LTIs nor TRIs reported during the quarter and the AGM has now achieved 7.0 million employee hours worked without a reported lost-time injury.

The AGM produced 50,421 ounces of gold during the quarter, as the processing plant achieved milling throughput of 1.5Mt of ore processed at a grade of 1.1g/t and metallurgical recovery averaging 94% (above design).

Sold 53,348 ounces of gold in Q2 2021 at an average realized gold price of $1,782/oz for total revenue of $95.2 million (including $0.2 million of by-product silver revenue), a decrease of $6.3 million from Q2 2020. The decrease in revenue quarter-on-quarter was a function of a 13% reduction in sales volumes, partly offset by an 8% increase in realized gold prices in Q2 2021.

Total cost of sales (including depreciation and depletion and royalties) amounted to $77.2 million in Q2 2021, an increase of $11.5 million from Q2 2020. The increase in cost of sales was primarily due to higher cash costs per ounce1 as described below.

The AGM incurred operating cash costs per ounce1 of $1,147, total cash costs per ounce1 of $1,236 and AISC1 of $1,497 per ounce in Q2 2021. Total cash costs were higher in Q2 2021 relative to Q2 2020 primarily due to lower gold sales volumes in Q2 2021 which had the effect of increasing fixed production costs on a per unit basis ($161/oz increase) and higher ore transportation costs associated with trucking ore from Esaase to the process plant as Esaase was the sole source of mined ore during the quarter ($76/oz increase). Additionally, total cash costs in Q2 2020 benefitted from the recording of a gain on termination of a mining contractor services lease agreement which was recorded as a credit to production costs ($60/oz increase).

Income from mine operations for Q2 2021 totaled $18.1 million compared to $35.9 million in Q2 2020. The decrease in income from mine operations was due to an $11.5 million increase in cost of sales and a $6.3 million decrease in revenues (as described above).

The AGM generated $10.8 million of cash flows from operating activities (after considering unfavorable working capital changes of $12.7 million) and free cash flow1 of negative $2.9 million during Q2 2021. This compares to $48.8 million of cash flows from operating activities (after considering favorable working capital changes of $4.6 million) and $22.6 million of free cash flow1 during Q2 2020. The reduction in free cash flow1 was primarily due to a $23.4 million decrease in mine operating income (excluding depreciation).

Reported Adjusted EBITDA1 of $19.3 million in Q2 2021 compared to $44.5 million in Q2 2020. The decrease in Adjusted EBITDA1 was due to lower mine operating income in Q2 2021.

As at June 30, 2021, the JV held cash and cash equivalents of $41.3 million, $13.4 million in receivables from gold sales and $3.1 million in gold on hand. During Q2 2021, the JV repaid the remaining $15.0 million outstanding on the RCF and is now debt-free.

Revised 2021 Outlook

For 2021, the AGM's expected gold production is forecast at the lower end of guidance of 225,000 to 245,000 ounces, while AISC1 guidance has been revised to $1,350 to $1,450/oz (previously $1,100 to $1,300/oz).

AISC1 guidance has been revised upwards due to higher anticipated ore transportation costs as more material will be mined from Esaase and inflationary cost impacts. As disclosed in the Company's Q1 2021 MD&A, AISC1 was also affected by the Government of Ghana introducing a number of new levies and taxes impacting the mining industry in the areas of COVID-19 relief, sanitation, pollution and energy.

Galiano Gold Inc. – Summary Q2 2021 Financial Results

Galiano Gold Inc. (consolidated) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020
Net income after tax () 5.0 13.0 17.7 3.2 14.7
Net income after tax per share 0.02 0.06 0.08 0.01 0.07
Adjusted EBITDA1 () 6.1 15.8 20.4 6.5 18.5

The Company reported net income after tax of $5.0 million in Q2 2021 compared to net income after tax of $14.7 million in Q2 2020. The decrease in earnings during Q2 2021 was predominantly due to a reduction in the Company's 45% interest in the net earnings of the JV which totaled $5.7 million for the quarter, compared to $14.3 million in Q2 2020.

Adjusted EBITDA1 for Q2 2021 amounted to $6.1 million, compared to $18.5 million in Q2 2020. The decrease in Adjusted EBITDA1 was primarily a result of an increase in the AGM's total cash costs1.

Cash used in operating activities in Q2 2021 was $3.1 million, compared to $1.0 million in Q2 2020. The increase in cash used in operations was primarily due to severance paid to a former executive of the Company and an increase in receivables related to the Company's JV service fee.

As at June 30, 2021, the Company had cash on hand of $58.5 million and $4.9 million in receivables for a gross liquidity position of $63.4 million and no debt.

This news release should be read in conjunction with Galiano's Management's Discussion and Analysis and the Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2021 and 2020, which are available at and filed on SEDAR.

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