Mid-tier producers Teranga Gold, OceanaGold generate net profit

POSTED ON October 29, 2015 BY James Fraser
CATEGORY OceanaGold, Teranga Gold,

Sabodala Gold Mine (Image: Teranga)

A look at third-quarter financial results from Teranga Gold and OceanaGold.

Teranga Gold (TGZ:TSX) - Teranga is out with another profitable quarter from operations in Senegal, although the trend for profitability has been down. Net profit for the third quarter came in at US$1.56 million, down from $7.03 million in Q2 and $15.27 million in Q1.

It appears production was lower than expected due to the rainy season and a change in mine plan at the high-grade Gora project.

Management has now revised 2015 guidance to ~200,000 ounces from between 200,000 and 230,000.

For the three months ended September 30, 2015 compared to three months ended September 30, 2014

Net profit increased to $1.6 million from a loss of $1.5 million
Cash flow used in operations of $8.2 million (includes $7.8 million VAT paid and not yet recovered) compared to cash provided by operations of $13.8 million
Production declined to 32,956 ounces impacted by heavy rainfall, which caused significant material handling issues and lower than anticipated grade through the mill
Total cash costs decreased to $712 from $781 per ounce¹
All-in-sustaining costs of $1,191 per ounce¹ include $247 per ounce in new project capital
Ended the quarter with cash and cash equivalents of $29.9 million
Mining began on schedule at Gora; total development capital projected to be 15% below budget
Mill optimization project remains on budget and is ahead of schedule
Heap leach delivering positive test results; pre-feasibility study to be completed by year-end
Subsequent to quarter end, Teranga completed a strategic private placement for C$22.7 million.

"In terms of our 2015 guidance, we expect that our total cash costs will be better than forecast while production will likely come in at the low end of the guided range given the negative impact of heavy rainfall and the deferral of three high-grade benches into next year due to a change in mine plan at Gora to enlarge the phase one pit to optimize operating efficiencies," stated Richard Young, President and Chief Executive Officer. "The fourth quarter is anticipated to be our best one of the year with significant increases in production and free cash flow due to the addition of high-grade ore from our new Gora deposit and an increase in processing rates with the end of the rainy season. While we have been very conservative in our forecast, there is a risk to achieving our production guidance if we have underestimated the impact of the artisanal miners at Gora."

TGZ stock is still up significantly in 2015 as investors seek out gold companies that can turn a profit.

More recently the stock has been held in a tighter range with lower gold prices and lower production this quarter.

The cash balance at Sept. 30 was $29.9 million. Earlier this month TGZ completed a private placement for $22.7 million with David Mimran. The Mimran family is a successful business group in Senegal.

Read: Significant Cost Savings Underlie Teranga's Third Quarter Results

OceanaGold (OGC:TSX) - OceanaGold was also out with third-quarter results before the bell this morning, a net profit of $6.9 million. Management at Oceana has been aggressive this year, completing two takeovers: one of Romarco and buying the Waihi gold mine from Newmont. Management is laying the groundwork for a solid future here, especially with the acquisition of Romarco.

Key Highlights

• Produced 297,663 ounces of gold(1) and 17,518 tonnes of copper in the first nine months of 2015 including 120,664 ounces of gold(1) and 5,219 tonnes of copper in the third quarter.

• Recorded All-In Sustaining Costs(1) of $708 per ounce and cash costs(1) of $465 per ounce on sales of 276,104 ounces of gold(1) and 17,167 tonnes of copper in the first nine months of the year.

• Reported revenue of $364.4 million and net profit of $30.4 million for the first nine months of 2015 including revenue of $109.6 million and a net profit of $6.9 million in the third quarter.

• Completed the acquisition of Romarco Minerals Inc. on October 1, 2015 and welcomed Diane Garrett to the Board of Directors.

• Received regulatory approval from the New Zealand Overseas Investment Office to acquire the Waihi Gold Mine from Newmont Mining; legal close expected on October 30, 2015.

CEO Michael Wilkes said: "The past six months have been an exciting time for Oceanagold. With the addition of the Haile and Waihi assets, we have further strengthened and transformed the company into a leading mid-tier gold producer with low-cost production growth, significant cash flow generation and a solid pipeline of organic growth opportunities. Over the course of the next 12 months, we will advance comprehensive exploration programs across our portfolio to unlock value at each site while optimizing our existing operations. We will continue to deliver consistent, positive results while creating additional value for our shareholders and other stakeholders."

Big swings in the OceanaGold chart this year would make this one a great trader. The company has exposure to both gold and copper and is an interesting play for investors wanting both metals in one company.

Cash balance (as of Oct. 2) was $190 million, with total net debt of $109 million.

To get the latest on OGC view the conference call/webcast at 2 pm PST here.

Read: OCEANAGOLD REPORTS THIRD QUARTER 2015 OPERATIONAL AND FINANCIAL RESULTS

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James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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