Guyana Goldfields Inc. Announces First Quarter 2019 Financial Results and Reports Mine Plan Optimization; Retires Debt

Summary

• Gold production of 36,600 ounces, on track to achieve the previously stated 2019 guidance range of 145,000 to 160,000 ounces
  
  
• On April 30, 2019, the Company elected to retire the principal balance outstanding of its $35 million loan facility ("the Facility")
  
  
• Issued updated Mineral Resource and Mineral Reserve estimates, and life of mine plan for the Aurora Gold Mine authored by Roscoe Postle Associates Inc. Management has identified additional opportunities that fell outside the scope of the study that are expected to improve operating and financial flexibility which are presented below
  
  
• Gold sales of 38,200 ounces at a total cash cost (before royalty)¹ of $839 per ounce of gold sold. Cost of sales (including royalty and depreciation) was $1,302 per ounce while all-in sustaining costs¹ ("AISC") were $1,378 per ounce
  
  
• Mining rate averaged 61,542 tonnes per day. The decrease in the mining rate compared to the fourth quarter of 2018 can be attributed to the efforts to complete the deeper Phase 3 pit at Rory's Knoll
  
  
• Record quarterly mill performance of 7,213 tonnes per day
  
  
• Continued its corporate restructuring in Guyana and at Head Office and significantly strengthened its Senior Management
  
  
• Settlement agreement reached on April 28, 2019 with a group of shareholders who had requisitioned a special meeting of the Company's shareholders, resulting in the appointment of two new independent Board members and implementing a succession plan for the role of Chief Executive Officer
  
  
• Received environmental authorization from the Guyanese Environmental Protection Agency to resume construction and development work on an underground exploration decline

TORONTO, April 30, 2019 /CNW/ - Guyana Goldfields Inc. (TSX:GUY) (the "Company") announces its financial and operating results for the first quarter ended March 31, 2019, as well as results from its optimized life of mine plan "Optimized LOM Plan". A conference call is scheduled for tomorrow, Wednesday, May 1, 2019 at 10:00 am ET to discuss all the results. The Company previously released first quarter 2019 operational results on April 16, 2019. All amounts are expressed in U.S. dollars unless otherwise stated.

Scott A. Caldwell, President & CEO stated, "First quarter gold production was in-line with our annual guidance for the year. Since the release of the updated Mineral Resource and Mineral Reserve estimates, and life of mine plan in March, management now has an improved forecasting tool for production and cost forecasting. In addition to this, the Company has identified and is beginning to execute on various cost reduction initiatives which are expected to further improve upon these advancements. Further details of these developments are provided within the Management Optimization Plan. Furthermore, the Company is now debt free and positioned for growth allowing for greater flexibility in exploring new financing alternatives and controlling its capital program."

First Quarter 2019 Operational Results Summary

• In the first quarter of 2019, the Company significantly improved mining and milling volumes compared with the prior year. This improvement allowed the Company to partially offset the negative impact of a higher strip ratio and a lower head grade compared to the first quarter of 2018.
  
  
• Gold recovery averaged 90.5% for the quarter, compared with 91.7% a year earlier. The Company completed the mill expansion which is anticipated to enhance capacity and redundancy of the primary crushing circuit and expected to further lower per unit costs.

First Quarter 2019 Selected Financial Statistics

• A total of 38,200 ounces of gold were sold with an average realized gold price of $1,301 per ounce, resulting in revenues of $49.7 million.
  
  
• The increase in costs on a per ounce basis from the comparable and prior quarter were largely attributable to lower grades, higher strip ratio and higher production costs.
  
  
• Finished the first quarter with a cash balance of approximately $73 million and total debt balance of $35 million.
  
  
• On April 30, 2019, the Company elected to retire the $35 million principal balance of its long-term debt. Under the original terms of the Facility, $5 million quarterly principal repayments were required until extinguishment of the Facility on December 31, 2020. No prepayment penalty applies to early retirement of the loan. Interest accrued to the date of prepayment will be paid. The early retirement election was taken to provide immediate reduction in interest and administration costs, forecasted to be approximately $3 million over the remaining term of the loan, as well as, release of $3 million of restricted cash and allow greater flexibility in exploring new financing alternatives. Following the payment, the Company's unaudited cash balance is expected to be $36 million.

Management Optimization Plan

Roscoe Postle Associates Inc. ("RPA"), the author of the updated 43-101 life of mine plan which was completed in March (see press release dated March 26, 2019 and referred to as the "RPA LOM Plan"), recognized and pointed out that there were opportunities for further optimization of the mining schedule. Management has identified a number of additional opportunities that fell outside the scope of the RPA LOM Plan that are expected to improve operating and financial flexibility. A full presentation on this optimized plan, referred to as the ("Optimized LOM Plan") can be found on the Company website and a summary of the annual production profile and cash flow statement can be found at the end of this press release. The Optimized LOM Plan improves upon the RPA LOM Plan in two main areas:  

1.      Smoother production profile to reduce sizeable stockpile build up

• Open pit: redesign of pushbacks at Rory's Knoll and the last phase of mining split into two resulting in an extra year of mine life and the deferral of approximately 5 million tonnes ("Mt") of planned waste mining into 2021 and 2022
• Underground: sub level cave schedule at Rory's Knoll deferred nine months resulting in a slower underground development schedule in 2019, 2020 and 2021
• Stockpile: maximum stockpile balance reduced to 0.4 Mt in comparison to 2.4Mt in the RPA LOM plan

2.      Reduction & deferral of capital expenditures on the underground operation

• Slower underground development schedule resulted in the deferral of $28 million of lateral development capex in 2020 and 2021
• Assumed utilization of 40 tonne fixed frame trucks rather than 45 tonne articulated underground trucks resulting in capex saving of $8 million in 2020
• Deferral of $13 million of capital expenditures on the proposed cooling system from 2021/2022 to 2024/2025
• Reduction of $8 million in assumed capital expenditures for the electrical system given power generation on site is currently sufficient to accommodate the future underground operation

The impact of incorporating these changes in the Optimized LOM Plan in comparison to the RPA LOM Plan are summarized as follows:

• Gold production profile: no material impact on the medium-term production profile (average of ~215 koz gold production per annum over the next five years under both plans)
• Cost profile: average mine site AISC¹ over the life of mine of $953 per ounce compared to $930 per ounce in the RPA LOM plan
• Capital expenditure schedule: total deferral and reduction of $58 million of capex in 2019, 2020 and 2021
• Net Present Value (NPV): post-tax NPV(5%) based on a $1,300/oz gold price of $462 million, compared to $454 million in the RPA LOM plan

In addition to these optimization opportunities, Management has also identified a number of supplementary cost efficiency opportunities that it plans on pursuing. It is important to note that these cost efficiencies, as outlined below, have not been incorporated in the Optimized LOM Plan and hence have not been included in the cost, capital expenditures and Net Present Value estimates listed above.

• Tangible opportunities identified to further reduce operating costs by approximately 10% through renegotiation of existing supplier and procurement contracts
• Fuel contract reduced by $3.6 million per year
• Aviation contract reduced by approximately $550,000 per year
• Establish a strategic mining alliance into a single operating unit, improving operating efficiency, management focus and reducing overhead costs
• Incorporate results of restructuring site employees and Guyana office replacing 14 expatriate positions (30% of total expatriate staff) with locally skilled workforce
• Potential to supplement the production profile by development and test mining at Mad Kiss and East Walcott during the exploration phase of the underground
• Identify, upgrade and incorporate satellite open pit resources into the mine plan from Aleck Hill, Aleck Hill North, West Mad Kiss and Walcott Hill
• Reduce working capital requirements for the operations
• Reduced operating expenditures by approximately $2 million per year in the early years of the mine life due to the deferral of the underground refrigeration plant

Workshop Presentation

The Company will host a technical workshop tomorrow, Wednesday, May 1, 2019 at 1:00 pm ET at the Ivey Donald K. Johnson Centre to discuss the results of the Optimized LOM Plan. The accompanying presentation will be made available on the Company's website under the Investors tab and within the Events & Presentation section at www.guygold.com.

To RSVP for this event, please contact Jacqueline Wagenaar, VP Investor Relations, at 416-933-5485.

Exploration

The Company allocated $6.8 million in 2019 for additional surface brownfield drilling, initial underground exploration drilling and the resumption of greenfield exploration for a combined total of approximately 30,000 metres. Two diamond drills were in operation in the first quarter and 34 holes totaling 7,942 metres were completed. Drilling was conducted at Mad Kiss, North Aleck Hill and the Swamp Vein targets.  A complete list of the results received during the first quarter of 2019 are shown within the Management's Discussion and Analysis dated March 31, 2019.

Qualified Persons

All scientific and technical data contained in this press release has been reviewed, approved and verified by Mr. Ron Stewart (P.Geo) who is a "Qualified Person" within NI 43-101 and is a member of the Association of Geoscientists of Ontario ("APGO").  Mr. Stewart serves as Senior Vice President of Technical Services and Corporate Development for the Company.

Conference Call

A conference call will be held tomorrow Wednesday, May 1, 2019 at 10:00 am ET to discuss first quarter 2019 operational and financial results.

A webcast will be available on the Company's website for 90 days following the call or through the following link: https://event.on24.com/wcc/r/1974063/3DCA8782FBCF7CC956CED8B857FBFF53

Conference Call Details:
Date: Wednesday, May 1, 2019
Time: 10:00 am ET
Conference ID: 41739789
Dial-In Numbers:
North America Toll-Free: 888-390-0605
International: 416-764-8609

A recorded playback of the call will be available until Wednesday, May 8, 2019 by dialing: 1-888-390-0541 or 416-764-8677 and entering the call back passcode 739789.

About Guyana Goldfields Inc.:

Guyana Goldfields Inc. is a Canadian based mid-tier gold producer primarily focused on the exploration, development and operation of gold deposits in Guyana, South America.

Forwarding-Looking Information

This news release contains "forward-looking information" which may include, but is not limited to, statements with respect to underground exploration decline timeline and budget, further improvements in recovery and primary crusher redundancy from the Phase two mill expansion,  the Company's ability to meet significant near-term liquidity and operation requirements; development of follow-up exploration campaigns, definition of high grade lodes and further understanding of structural controls and mineralization through drilling, award of the underground development contract, delineation of exploration targets, addition of mineral resources and potential conversion of mineral resources to mineral reserves through underground exploration and drilling, underground test mining, 2019 guidance on production, costs, mining rates, stripping ratio, mill rates and recoveries and AISC, cost savings opportunities,  achieving Optimized LOM Plan production and cost estimates, management's outlook regarding future trends, outlook and activities, including the ability of Guyana Goldfields to generate sufficient cash flow to cover operating requirements for the next 12 months, exploration budget, meeting market expectations and the creation of long-term shareholder value.  Often, but not always, forward-looking statements can be identified by the use of words and phrases such as "plans," "expects," "is expected," "budget," "scheduled," "forecasts," "intends," or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may," "could," or "will" be taken, occur or be achieved. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and are based on various assumptions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, the receipt of applicable regulatory approvals, general business, economic, competitive, political and social uncertainties; the actual results of exploration activities; changes in project parameters as plans continue to be refined; accidents, labour disputes and other risks of the mining industry; political instability; as well as those factors discussed in the section entitled "Risk Factors" in the Company's annual information form. 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 statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this news release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, except as may be required by applicable securities laws. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.

SOURCE Guyana Goldfields Inc.