St Andrew Goldfields Swings to a Loss on Lower Gold Prices

St Andrew Goldfields Swings to a Loss on Lower Gold Prices

By: Tomas Ronolski - AllPennyStocks.com News

Thursday, November 7, 2013

Declining gold prices have been an anchor on profits for many miners in 2013, swinging some companies to quarterly losses as the yellow metal hovers around $1,300 per troy ounce. During the third quarter, gold was essentially flat overall, but that took a steady recovery after diving from around $1,400 per ounce to lows of $1,179 per ounce in June. Although gold is trying to uptrend from that bottom, it was still a drag on miners during the quarter. The earnings release after the markets closed on Wednesday by St Andrew Goldfields Ltd. (TSX:SAS) (OTCQX:STADF) clearly demonstrated the impact. Headquartered in Toronto, St Andrew controls a large land package in the Timmins mining district in northeastern Ontario, which lies in the prolific Abitibi greenstone belt. The company currently operates the Hold, Holloway and Hislop mines. Gold production for 2013 is expected in the range of 95,000 to 105,000 ounces.


During the third quarter, St Andrew produced 25,434 ounces of gold at the mines, keeping production on track to meet full-year guidance. Revenue of $36.4 million was generated by selling 26,600 ounces of gold at an average realized price of $1,329 per ounce. Compared to the same quarter in 2012, gold sales were down by $4.3 million because average realized prices were lower by $311 per ounce.

On that point, the company swung to a net loss for the quarter of $600,000, or nil per share, versus net income of $6.3 million, or 2 cents per share, in the year prior quarter. On an adjusted basis, which excludes the impact of one-time items, the company reported a net loss of $900,000, compared to a net profit of $5.0 million in last year’s quarter. What a difference that realized average price drop of 19 percent per ounce can make.

The company did make adjustments to try and shave costs. Mine cash costs of $720 per ounce were below guidance and improved by $63 per ounce from last year’s quarter. St Andrew had previously guided mine cash costs in the range of $800 to $850 per ounce. All-in sustaining cost per ounce of gold sold decreased by $181 per ounce year-over-year.

Operating cash flow for the quarter was $8.9 million, or 2 cents per share, and net cash flow was $3.0 million. In the third quarter last year, operating cash flow was $15.2 million, or 4 cents per share, and net cash flow was $6.8 million.

"We had another strong quarter with year-to-date production of 75,248 ounces of gold, and a significant improvement in mine cash costs," said Duncan Middlemiss, president and chief executive at St Andrew, in a statement Wednesday. "We are pleased to see that we were able to reduce cash costs and return to a positive net cash flow state despite the current gold price. We have a relatively strong balance sheet, we will continue to operate well in the current gold price environment, and thrive in better ones," he added.

The company ended the quarter with cash and cash equivalents of $31.6 million and working capital of $19.6 million, both improvements over the company’s financial position at the end of 2012.

Fundamentals aside, the chart of SAS has formed a “double bottom” pattern with a support level at 26 cents. The last time the price per share touched this level in June, a rise to highs of 42 cents in August followed. Since those highs, shares have sunk back to down 26 cents this week, but moved ahead on Wednesday to close the day at 27.5 cents. The earnings report was delivered after the market closed on Wednesday, but so far Thursday’s trading has been quite quiet with shares down 1.8% but still holding above the important support level. Proper due diligence is, as always, encouraged.

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