Jaguar Mining Inc. ("Jaguar") (JAG-TSX) reports its financial and operational results for Q1 ended March 31, 2006. All figures are in U.S. dollars unless otherwise indicated.
Q1 2006 Highlights
- Net loss of $6.2 million (approximately $1.2 million loss from operations) or $0.18 per share;
- Cash balance of $51.5 million, working capital of $49.9 million;
- Raised Cdn.$60.0 million, prior to expenses, by issuing 11.4 million common shares at Cdn.$5.25;
- Sold 3,910 oz of gold at $543/oz, produced 6,415 oz at a cash cost of $352/oz;
- Invested $8.4 million in project development, feasibility studies and exploration;
- Drew down $7.6 million of its $14 million Turmalina debt facility;
- Completed the Sabará feasibility study and successfully commissioned the new gold oxide plant.
- Processing capacity is now 3,400 tonnes per day;
- Construction started on the new 60,000 oz/year Turmalina mine, scheduled for Q4 2006 start-up;
- Issued positive Turmalina Phase II drill results confirming continuity at depth and adding resources;
- Increased proven and probable reserves at Turmalina and Sabará to 4.0 million tonnes at 4.37 g/t containing 554,000 oz of gold;
- Increased total measured and indicated resources to 16.2 million tonnes at 5.00 g/t containing 2.6 million oz of gold, including proven and probable reserves;
- Total inferred resources fell to 4.6 million tonnes at 4.82 g/t containing 712,000 oz of gold;
- Iron Quadrangle feasibility program progressing towards 2006 targets;
- Acquired options on a further 11,807 acres of prime exploration land on key trends in the Iron Quadrangle;
- Optioned additional gold resources from CVRD;
2006 First Quarter Results
The net loss for Q1 ended March 31, 2006 was $6,163,570, or $0.18 per basic and fully-diluted share, versus a net loss of $1,967,337, or $0.06 per share, in Q1 2005. $5,020,588 of the net loss was due to unrealized loss on forward sales contracts to manage the commodity price exposure on gold sales related to and required by the Turmalina loan facility. Q1 2006 sales revenue was $2,125,000 from the sale of 3,910 oz of gold at an average price of $543/oz versus $2,067,000 from the sale of 4,785 oz of gold at an average price of $432/oz in Q1 2005. Q1 2006 production was 6,415 oz of gold at a cash cost of $352/oz. Jaguar cannot calculate production or cash costs for individual quarters in 2005 because of the impact of inventory write-downs during 2005.
The Company recognized an unrealized gain of $485,752 and a realized gain of $35,631 on forward exchange contracts used to manage currency exposure on the Brazilian real.
The average rates of exchange for the Cdn.$ per US$1.00 were 1.15 for Q1 2006, 1.17 for Q4 2005, and 1.21 annually for 2005. The average rates of exchange for the Brazilian real (R$) per US$1.00 were 2.19 for Q1 2006, 2.25 for Q4 2005, and 2.43 annually for 2005.
Jaguar had 45,348,446 common shares outstanding at March 31, 2006 versus 31,058,389 a year ago. Per-share calculations for Q1 2006 and 2005 are based on weighted average shares outstanding of 33,781,140 and 30,498,389 respectively.
Development Outlook & Feasibility Studies
Jaguar continues to make significant progress in its overall program of converting resources to reserves. Jaguar's objective is to be able to sustain gold production of more than 200,000 oz/year by 2008, to achieve a minimum 10-year reserve life and to double its initial resources. Cash flow from gold production in the Sabará Region subsidizes the development costs of the longer-term mines in the Turmalina, Santa Bárbara and Paciência Regions.
Jaguar began construction of the 60,000 oz/year Turmalina plant in Q1 2006, which is expected to begin operation in Q4 2006.
Jaguar expects to complete feasibility studies at Santa Bárbara -- Pilar and Paciência -- Santa Isabel in 2006, which are expected to be positive and add significant gold reserves. The Santa Bárbara -- Pilar feasibility study is expected in Q2 2006 and the Paciência -- Santa Isabel feasibility study, which had been scheduled for Q3 2006, is now expected in Q4 2006.
Due to a combination of factors, including exchange rate movements, Jaguar has revised its production forecast for 2006 to 55,000 oz at a cash cost of approximately $300/oz from 65,000 oz at a cash cost of $265/oz.
The Sabará Region provides most of Jaguar's current gold production, supplemented by some ore from the Santa Bárbara Region. In Q1, Jaguar fed ore to three gold processing plants with a combined total capacity of 3,400 tpd.
The 1,500 tpd Sabará plant began production in Q1 2006 and exceeded expectations. It processed 63,308 tonnes of ore from adjacent orebodies at a feed grade of 2.41 g/t and a recovered grade of 1.72 g/t, producing 2,749 oz of gold at a cash cost of $304/oz or $17.56/t. Jaguar has increased its 2006 forecast production for the Sabará plant to 411,500 tonnes at 3.15 g/t from 338,000 tonnes at 2.98 g/t. The plant is expected to partially compensate for delays in bringing the Catita underground sulphide mine into production and for production shortfalls at Caeté.
The 1,500 tpd Caeté plant is in the Sabará Region. In Q1, it processed 36,367 tonnes of ore from the Sabará and Santa Bárbara Regions at a feed grade of 2.31 g/t and a recovered grade of 1.60 g/t. Production was 1,042 oz of gold at a cash cost of $510/oz or $30.82/t. After careful analysis of the Catita oxide mine, which feeds the Caeté plant, management has determined that 2006 oxide operations should be characterized as prestripping aimed at proper identification of the Catita sulphide orebody. As a result, the 2006 production forecast at Caeté has been reduced to 244,500 tonnes at 3.00 g/t from 305,500 tonnes at 3.13 g/t.
The 400 tpd Queiroz plant of AngloGold Ashanti processes Sabará Region sulphide ore for Jaguar under a tolling contract. It processed 27,251 tonnes of ore in Q1 at a feed grade of 4.00 g/t and a recovered grade of 3.64 g/t. Production was 2,624 oz of gold at a cash cost of $291/oz or $36.07/t. Slow underground development at Catita, which is the primary source of feed for Queiroz, means that 2006 production at Queiroz has been reduced to 81,400 tonnes at 4.65 g/t from 133,000 tonnes at 5.38 g/t. The Sabará plant increased production forecast is expected to compensate for delays in bringing the Catita underground sulphide mine into production and for some of the reduced production at Caeté.
Liquidity and Capital Spending
Jaguar raised Cdn.$60.0 million, prior to expenses, in Q1 2006 by issuing 11.4 million common shares at Cdn.$5.25 per share. At the end of Q1, it had $51.5 million in cash and $49.9 million in working capital. At a projected exchange rate of R$2.2/$1.0, Jaguar will spend a total of $103 million on project development (excluding exploration) of which $29.6 million has been spent, including $7.5 million in Q1 2006. Jaguar expects to spend an additional $45.5 million on project development in 2006 and believes that the funds needed to complete its development program will be available from existing cash balances, operating cash flow and some new debt or equity probably related to the Pilar and Paciência projects after completion of the respective feasibility studies.
Jaguar increased its reserves and resources in Q1, which is part of its stated strategy of resource conversion. Proven and probable reserves increased to 4.0 million tonnes at 4.37 g/t, containing 554,000 oz of gold, and the measured and indicated resources increased to 16.2 million tonnes at 5.00 g/t, containing 2.6 million oz of gold. Inferred resources fell to 4.6 million tonnes at 4.82 g/t, containing 712,000 oz of gold, because of the upgrading of inferred resources to the measured and indicated category.
The Qualified Person, as defined in National Instrument ("NI") 43-101, who reviewed the resources for the Paciência Region, Santa Bárbara Region and some of the Sabará Region targets (Catita, Camará, Juca Vieira, Morro do Adão and Zone 10) was Ivan C. Machado, M.Sc., P.E., P.Eng., principal of Salt Lake City based TechnoMine Services LLC. Mr. Machado is independent for the purposes of NI 43-101. The Qualified Persons who reviewed the reserves and resources for the Turmalina Region and some of the Sabará Region targets (Sabará Zones A, B, C and Queimada) were Graham G. Clow, P.Eng. and Wayne W. Valliant, P.Geo of Roscoe Postle Associates Inc. ("RPA"). Mr. Clow is a principal of RPA, and Mr. Clow and Mr. Valliant are independent for the purposes of NI 43-101.
Jaguar has had good exploration success at Turmalina where it has confirmed that the geology is consistent with major gold mines elsewhere in the Iron Quadrangle and that the current orebodies are open at depth.
Q1 drilling results at Turmalina included 13.2 g/t over 5.1 meters, 7.3 g/t over 7.0 meters, 11.3 g/t over 3.8 meters, 5.8 g/t over 6.8 meters, and 5.4 g/t over 4.5 meters. Only two holes contained no significant mineralization and 30 holes contained economic grades and widths, demonstrating good consistency and continuity across a large area of the orebody. Some of the best values occurred in the deepest part of the program on the Main Zone, confirming the potential for future exploration success and additional resources.
A Phase III drilling program is underway at Turmalina to explore both the shallower part of the Satinoco target, which is very close to the existing Main and Northeast Zones and the down dip extensions of the Main and Northeast Zones. The Phase III program will be completed in Q2 2006 and consists of 15,000 meters of drilling on a 25 x 50 meter grid on the sections with significant mineralization, with the goal of adding resources that can be processed at the new Turmalina Plant. Recent Phase III results included five separate holes containing 6.9 g/t over 9.0 meters, 13.8 g/t over 3.0 meters, 7.7 g/t over 5.0 meters, 16.2 g/t over 2.2 meters and 10.9 g/t over 3.0 meters. More results are pending.
Jaguar plans substantial further exploration at Turmalina. It expects the strong economics of the existing reserves and resources will reduce the required economic cut-off grade of newly discovered mineralization and significantly increase the potential for producing more ounces.
Exploration Properties Optioned
Jaguar optioned seven strategically valuable properties from Companhia Vale do Rio Doce ("CVRD") on a key geological trend in the Sabará Region of the Iron Quadrangle gold belt. The properties host a significant gold resource close to Jaguar's Caeté plant and represent 9,500 acres of high potential gold exploration terrain over 25 km. CVRD information indicates:
- A sulphide resource of 2.29 million tonnes at a grade of 7.48 g/t, containing 550,000 ounces of gold;
- An oxide resource of 626,000 tonnes at a grade of 2.23 g/t, containing 44,300 ounces of gold; and
- 92% recovery in the sulfides and 85% recovery in the oxides, based upon preliminary metallurgical work.
The new resources pre-date the introduction of NI 43-101 standards but were discovered and calculated by CVRD, which is one of the world's largest mining companies. Based upon independent technical advice, Jaguar intends to complete a feasibility study on the new resources and file an NI 43-101 technical report.
Jaguar also optioned 2,307 acres of gold exploration properties from IAMGold located near the Paciência Region.
Human Resources in Brazil
The majority of Jaguar's staff is in Brazil, where it employed 443 people at the end of Q1 2006, with only five staff in North America. Rising commodity prices have greatly increased the demand for experienced mining industry personnel but the Company has been able to compete well for and attract needed personnel. The well-established nature of the Company's team in Brazil and the close proximity of all the Company's operations to Belo Horizonte is a significant advantage. Belo Horizonte is a major urban center and the mining capital of Brazil, providing a substantial pool of skilled and experienced labor for Jaguar.
For further information, please contact Daniel Titcomb, President and Chief Executive Officer or James Roller, Chief Financial Officer on (603) 224-4800 or Robert Jackson, EVP, Corporate Development on (416) 725-4343.
This press release contains forward-looking statements concerning Jaguar's 2006 objectives, the measured and indicated resources, their average grade, the commencement period of production, cash operating costs and completion dates of feasibility studies, gold production and sales targets, capital expenditure costs, future profitability and growth in reserves. Forward-looking statements can be identified by the use of words, such as "are expected", "is forecast", approximately 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 involve known and unknown risks, uncertainties and other factors, which may cause the actual results, or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements.
These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other ecological data, fluctuating gold prices and monetary exchange rates, the possibility of project cost delays and overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, uncertainties related to production rates, timing of production and the cash and total costs of production, changes in applicable laws including laws related to mining development, environmental protection, and the protection of the health and safety of mine workers, the availability of labour and equipment, the possibility of labour strikes and work stoppages and changes in general economic conditions. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.
These forward-looking statements represent our views as of the date of discussion. The Company anticipates that subsequent events and developments may cause the Company's views to change. The Company does not undertake to update any forward-looking statements, either written or oral, that may be made from time to time by or on behalf of the Company subsequent to the date of this discussion. For a discussion of important factors affecting the Company, including fluctuations in the price of gold and exchange rates, uncertainty in the calculation of mineral resources, competition, uncertainty concerning geological conditions and governmental regulations and assumptions underlying the Company's forward-looking statements, see the "CAUTIONARY NOTE" regarding forward-looking statements and "RISK FACTORS" in the Company's Annual Information Form for the year ended December 31, 2005 filed on System for Electronic Document Analysis and Retrieval ("SEDAR") and available at http://www.sedar.com.