Allied Reports Phased Approach to Hycroft Mill Expansion

 

RENO, NV - Allied Nevada Gold Corp. reported the company's plans to complete and operate a 130,000 ton per day ("tpd") mill by early 2015 are under review. Allied President and CEO, Bob Buchan said, Currently we believe there is value in phasing construction of the mill starting with a 75,000 tpd plant in 2015 and increasing to 130,000 tpd once the initial phase is operating according to plan. We expect that, once engineering is optimized, we will be able to show lower initial capital costs, initially processing only higher grade oxide and transition ore through the mill, leaching that ore on site and only producing sulfide concentrate as per demand. We are currently evaluating a number of options for onsite beneficiation of that concentrate. We expect the reserves will be unaffected and remain as stated in the Company's most recently filed Form 10-K.

As of March 31, 2013, we had spent or committed $723.5 million, which represents approximately 58% of the previously stated capital cost of $1.24 billion. Included in the $723.5 million spent or committed at March 31, 2013, were purchase obligations totaling $315.7 million, a portion of which are expected to be financed through capital leases. We estimate that 2013 capital expenditures at the Hycroft Mine for the expansion projects will total approximately $394.9 million; however, such amount may change if we determine our expansion project will include a stage with a smaller than originally planned mill, as discussed above.

The heap leach expansion is well underway and is expect to complete the crushing facility, North Leach Pad and new Merrill-Crowe plant this year. Recent major developments include: Construction of the lower cells of the North Leach Pad has been completed and we expect to begin loading ore during the first week of May. Upon completion, the North Leach Pad will increase our total leach pad space from 12.0 million square feet to 20.0 million square feet. The first wire rope shovel is expected to begin commissioning during the second week of May 2013, ahead of schedule.

During the first quarter of 2013, construction continued on the primary, secondary, and tertiary crushers and Allied expects to commission the gyratory crusher in the middle of the third quarter of 2013. The new 21,500 gpm Merrill-Crowe processing facility remains on track to be commissioned in the third quarter of 2013 which will bring our total solution processing capacity to 33,000 gpm.

Revenue increased 25% in the first quarter of 2013 to $49.2 million compared with $39.2 million in the first quarter of 2012 as a result of the increased ounces sold, partially offset by lower average realized selling prices for gold and silver. Net income decreased 27% to $8.8 million or $0.10 per share in the first quarter of 2013. Net income in 2013 was primarily impacted by increased net interest expense of $5.5 million, compared with $0.6 million in the first quarter of 2012. The increased interest expense arose from the May 2012 issuance of the senior unsecured notes and capital lease obligations. Cash provided by operating activities totaled $5.8 million, cash used in investing activities was $103.5 million and cash used in financing activities was $6.3 million, resulting in a cash balance of $243.1 million at March 31, 2013.

Hycroft had no lost time accidents or significant environmental incidents in the first quarter of 2013. As of April 25, 2013, Hycroft had achieved 236 days without a lost time accident. Ore tons mined more than doubled in the first quarter of 2013 to 9.6 million tons, compared with the same period in 2012 (4.0 million tons), and were consistent with expectation. The excavation tons mined during the 2013 quarter related entirely to the mill site excavation. Mined ore grades in the first quarter were also as per expectation and contained ounces placed on the leach pads were approximately 106,500 ounces of gold, 64% higher than in the first quarter of 2012, and approximately 1.4 million ounces of silver. The ratio of silver ounces sold to gold ounces sold was in-line with expectations and comparable in both periods (6.4:1 in the 2013 quarter and 6.3:1 in the 2012 quarter).

Production from Hycroft in the first quarter of 2013 was an increase of 17% for gold and 13% for silver as compared to the first quarter of 2012. Sales in the first quarter of 2013 surpassed that of the same period in 2012 by 34% for gold and 36% for silver. When compared to the first quarter of 2012, our 2013 adjusted cash costs were negatively impacted by increased mining and processing costs and lower realized silver prices. Due to uncommonly inclement weather experienced in January and increased mining costs due to Hitachi shovel maintenance, the ounces were placed on the leach pads at higher than expected costs and negatively impacted our production costs and adjusted cash costs per ounce1. Buchan said, We also consumed higher than expected lime and cyanide as we worked to improve leach pad solution properties, which also increased our production costs and adjusted cash costs.

The first 73 cubic-yard electric wire rope shovel is expected to be operational ahead of schedule in May of 2013 which we anticipate will benefit our future mining costs. During the first quarter of 2013, we successfully commissioned the first new set of 2,500 gallons per minute (gpm) carbon columns, and with the second set having been commissioned early in the second quarter of 2013, we have significantly increased our solution processing capacity. We also commissioned a second retort which we expect will allow us to process all precipitate generated from the Merrill-Crowe plant. Prior to this retort's commissioning we experienced processing limitations which prevented us from selling approximately 7,200 ounces of gold and 43,000 ounces of silver that remained in in-process inventories at quarter end. In addition to our planned second quarter 2013 sales, we expect to process and sell the metal that remained in precipitate at the end of the first quarter during the second quarter.

Allied Nevada intends to focus its resources towards the Hycroft operations and expansion. Any drilling in 2013 will be limited to data collection in support of engineering at Hycroft and ongoing permitting at Hycroft and the Hasbrouck project. At this time, no further exploration drilling is planned for 2013.

Buchan said that,  In 2013, we expect to sell approximately 225,000 to 250,000 ounces of gold and 1.5 million to 1.8 million ounces of silver. Sales in the first half of the year are expected to be approximately 90,000 to 100,000 ounces of gold, increasing in the second half of the year. We expect to move 94.1 million tons of material, including 46.5 million tons of ore at average grades of 0.012 oz/ton gold and 0.25 oz/ton silver. With the operation of the two wire rope shovels, one of which is expected to be commissioned during the second quarter and the other in the latter half of the year, the mining rate for the first half is expected to average 200,000 tons per day and is expected to increase to average 290,000 tons per day in the second half. The overall strip ratio for 2013 is expected to be 0.6:1.

A number of critical projects must be completed to achieve the higher end of the stated guidance range of metal sales. The stated guidance assumes that there will be no material delays in the start-up of the North leach pad, new Merrill-Crowe facility or operation of additional mobile equipment. Adjusted cash costs1 for 2013 are expected to be in the range of $665 to $685 per ounce (with silver as a byproduct credit), which is an increase from our previously expected range.