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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2017.
Commission File Number 001-14598
RICHMONT MINES INC.
(Translation of registrant’s name into English)
161, avenue Principale, Rouyn-Noranda (Quebec) J9X 4P6
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [ X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Exhibit | |
99.1 | Third Quarter Report for the Period Ended September 30, 2017 |
99.2 | Form 52-109F2 Certification of Interim Filings - CEO |
99.3 | Form 52-109F2 Certification of Interim Filings - CFO |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Richmont Mines Inc. | ||||||
(Registrant) | ||||||
Date | November 8, 2017 | By | Nicole Veilleux (signed) | |||
(Signature)* | ||||||
Nicole Veilleux | ||||||
* Print the name and title under the signature of the signing officer. | Vice-President, Finance |
SEC 1815 (04-09) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
Exhibit 99.1
November 7, 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
(All dollar figures are in thousands of Canadian dollars, unless otherwise stated)
CONTENTS | |||
GENERAL | 4 | ||
OVERVIEW | 4 | ||
KEY FINANCIAL DATA | 6 | ||
KEY OPERATING AND FINANCIAL STATISTICS | 8 | ||
OUTLOOK | 10 | ||
PRODUCTION OUTLOOK AND COST GUIDANCE FOR 2017 | 10 | ||
REVIEW OF FINANCIAL RESULTS | 10 | ||
A) | FOR THE QUARTER ENDED SEPTEMBER 30, 2017 | 10 | |
B) | FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017 | 12 | |
REVIEW OF OPERATING MINES | 14 | ||
Island Gold Mine | 14 | ||
Beaufor Mine (Discontinued Operations) | 16 | ||
EXPLORATION EXPENSE1 | 17 | ||
ISLAND GOLD MINE | 17 | ||
QUARTERLY RESULTS – PREVIOUS EIGHT QUARTERS | 19 | ||
FINANCIAL CONDITION1 | 20 | ||
LIQUIDITY AND CAPITAL RESOURCES | 20 | ||
OUTSTANDING SHARE CAPITAL | 21 | ||
COMMITMENTS AND CONTINGENCIES | 21 | ||
OFF-BALANCE-SHEET TRANSACTIONS | 21 | ||
TRANSACTIONS WITH RELATED PARTIES | 21 | ||
CRITICAL ACCOUNTING ESTIMATES | 22 | ||
FINANCIAL INSTRUMENTS | 22 | ||
ACCOUNTING POLICIES | 22 | ||
NON-IFRS PERFORMANCE MEASURES | 22 | ||
RISKS AND UNCERTAINTIES | 25 | ||
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING | 25 | ||
NATIONAL INSTRUMENT 43-101 | 26 | ||
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 26 | ||
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING RESOURCE ESTIMATES AND CIVIL LIABILITIES AND JUDGMENTS | 27 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 3 |
MANAGEMENT’S DISCUSSION AND ANALYSIS
(All dollar figures are in thousands of Canadian dollars, unless otherwise stated)
GENERAL
The following Management’s Discussion and Analysis (“MD&A”) dated November 7, 2017 relates to the financial condition and results of the operations of Richmont Mines Inc. (“Richmont Mines”, “Richmont”, or “the Corporation”), and should be read in conjunction with the Richmont Mines unaudited consolidated interim financial statements for the quarter and nine-month period ended September 30, 2017, consolidated audited financial statements for the year ended December 31, 2016, and notes thereto. All amounts are expressed in Canadian dollars, unless otherwise noted, and are in accordance with International Financial Reporting Standards (“IFRS”), except for certain performance indicators that are not defined under IFRS. For further information, please refer to section “Non-IFRS Performance Measures” on page 22 of this MD&A. With the exception of troy ounces, production data is presented in metric units. Further information on Richmont Mines can be obtained in the form of news releases, quarterly and annual financial statements and Annual Information Form (“AIF”) on the SEDAR website (www.sedar.com), and the Corporation’s website (www.richmont-mines.com).
In addition to historical information, this MD&A contains forward-looking information. Please refer to section “Cautionary Statement Regarding Forward-Looking Statements” on page 26.
OVERVIEW
As at September 30, 2017, the Corporation was producing gold from the Island Gold Mine in Ontario and the Beaufor Mine in Quebec. On September 11, 2017, the Corporation announced a definitive agreement with Monarques Gold Corporation to sell all of the Corporation’s Quebec based assets, which includes the Beaufor Mine, the Camflo Mill and the Wasamac development project as well as all other mineral claims, mining leases and mining concessions located in the province of Quebec. This transaction was subsequently closed on October 2, 2017.
Throughout this document, reference is made to results from both continuing operations and discontinued operations. Current and prior period results for properties that are classified as held for sale as at September 30, 2017 have been reclassified as discontinued operations. Richmont’s operations have been classified between continuing operations and discontinued operations as follows:
Continuing operations – the Island Gold Mine
Discontinued operations – the Beaufor Mine, the Camflo Mill, the Monique Mine, the Wasamac development project and all other mineral claims, mining leases and mining concessions located in the province of Quebec
On September 11, 2017, Alamos Gold Inc. (“Alamos”) announced a friendly acquisition of Richmont, whereby Alamos will acquire all the issued and outstanding shares of Richmont. This transaction is expected to close on, or about, November 23, 2017.
Richmont’s shares trade on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) under the symbol “RIC”. The Corporation is headquartered in Rouyn-Noranda, Quebec and has a corporate office in Toronto, Ontario.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 4 |
THIRD QUARTER AND NINE-MONTH HIGHLIGHTS - CONTINUING OPERATIONS1
Revenues of $36.5 (US$29.2) million for the quarter and $123.4 (US$94.3) million for the nine-month period.
Net earnings of $4.8 (US$3.8) million, or $0.08 (US$0.06) per share for the quarter and $21.7 (US$16.6) million, or $0.34 (US$0.26) per share for the nine-month period.
Record production of 26,659 ounces of gold (22,666 ounces sold) for the quarter and 76,541 ounces of gold (74,849 ounces sold) for the nine-month period, positioning the Island Gold Mine to exceed the high end of annual production guidance of between 87,000 and 93,000 ounces.
Cash costs2 of $666 (US$532) per ounce for the quarter and $637 (US$487) per ounce for the nine-month period. The Island Gold Mine remains on track to beat the lower end of annual cash cost guidance of between $715 and $765 (US$550 to US$590) per ounce.
All-In-Sustaining Costs2 ("AISC") for the Island Gold Mine were $886 (US$708) per ounce for the quarter and $796 (US$609) per ounce for the nine-month period. The operation remains on track to beat the lower end of annual AISC guidance of between $945 and $995 (US$725 to US$765) per ounce.
AISC for continuing operations, including all corporate overhead, was $1,038 (US$829) per ounce for the quarter and $921 (US$704) per ounce for the nine-month period.
Operating cash flow from the Island Gold Mine was $14.5 (US$11.6) million for the quarter and $62.2 (US$47.5) million for the nine-mine period. Operating cash flow2 (before changes in non-cash working capital), including all corporate overhead, was $11.5 (US$9.2) million for the quarter, or $0.18 (US$0.14) per share, and $50.6 (US$38.7) million for the nine-month period, or $0.80 (US$0.61) per share.
The Island Gold Mine generated strong free cash flow of $4.4 (US$3.5) million for the quarter and $31.8 (US$24.3) million for the nine-month period. Net free cash flow2 , including all corporate overhead, was $1.8 (US$1.4) million for the quarter, or $0.03 (US$0.02) per share, and $21.0 (US$16.0) million for the nine-month period, or $0.33 (US$0.25) per share.
Cash balance at the end of the quarter was approximately $90.0 (US$72.1) million. As a result of timing, the finished goods inventory at the end of the quarter consisted of approximately 2,000 gold ounces. These ounces were sold in the fourth quarter.
Year to date, Island Gold has continued to outperform the 2017 Expansion Case Preliminary Economic Assessment (“PEA”) on all key metrics, which demonstrates the significant upside potential of this asset.
The mill expansion to 1,100 tonnes per day advanced during the quarter and the operation is anticipated to achieve the target run rate in the latter part of 2018.
On September 11, 2017, Richmont announced that it had entered into a definitive agreement with Alamos Gold ("Alamos") whereby Alamos will acquire all of the issued and outstanding shares of Richmont pursuant to a plan of arrangement. The transaction is expected to close on, or about, November 23, 2017.
1 | Continuing operations includes the Island Gold Mine and corporate overhead. The Beaufor Mine, the Camflo Mill, the Monique Mine, the Wasamac development project and all other mineral claims, mining leases and mining concessions located in the province of Quebec are reported as discontinued operations. | |
2 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 5 |
KEY FINANCIAL DATA
(in thousands of $, except per-share data) | CAN$ | US$3 | ||||||
Quarter ended | Quarter ended | |||||||
September 30 | September 30 | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Revenues | ||||||||
– continuing operations |
36,549 | 24,053 | 29,174 | 18,431 | ||||
– consolidated |
42,378 | 31,244 | 33,827 | 23,942 | ||||
Net earnings | ||||||||
– continuing operations |
4,803 | 482 | 3,834 | 369 | ||||
– consolidated |
1,733 | 226 | 1,383 | 173 | ||||
Operating cash flow, before | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
11,479 | 5,137 | 9,163 | 3,936 | ||||
– consolidated |
9,706 | 5,839 | 7,747 | 4,474 | ||||
Operating cash flow, after | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
11,822 | 3,380 | 9,436 | 2,590 | ||||
– consolidated |
8,314 | 3,347 | 6,636 | 2,565 | ||||
Net free cash flow1 | ||||||||
– continuing operations |
1,753 | (14,766 | ) | 1,399 | (11,315 | ) | ||
– consolidated |
(3,405 | ) | (16,184 | ) | (2,718 | ) | (12,401 | ) |
KEY PER SHARE DATA | ||||||||
Net earnings | ||||||||
– continuing operations |
0.08 | 0.01 | 0.06 | - | ||||
– consolidated |
0.03 | - | 0.02 | - | ||||
Operating cash flow, before | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
0.18 | 0.08 | 0.14 | 0.06 | ||||
– consolidated |
0.15 | 0.09 | 0.12 | 0.07 | ||||
Operating cash flow, after | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
0.19 | 0.05 | 0.15 | 0.04 | ||||
– consolidated |
0.13 | 0.05 | 0.10 | 0.04 | ||||
Net free cash flow1 | ||||||||
– continuing operations |
0.03 | (0.24 | ) | 0.02 | (0.18 | ) | ||
– consolidated |
(0.05 | ) | (0.26 | ) | (0.04 | ) | (0.20 | ) |
1 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
2 | Average exchange rates used: Quarter ended September 30, 2017 - $1.2528 = US$1 Nine-month period ended September 30, 2017 - $1.3077 = US$1 Quarter ended September 30, 2016 - $1.3050 = US$1 Nine-month period ended September 30, 2016 - $1.3218 = US$1 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 6 |
(in thousands of $, except per-share data) | CAN$ | US$3 | ||||||
Nine months ended | Nine months ended | |||||||
September 30 | September 30 | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Revenues | ||||||||
– continuing operations |
123,363 | 99,378 | 94,336 | 75,184 | ||||
– consolidated |
148,118 | 124,496 | 113,266 | 94,187 | ||||
Net earnings | ||||||||
– continuing operations |
21,683 | 10,758 | 16,581 | 8,139 | ||||
– consolidated |
17,707 | 11,408 | 13,541 | 8,631 | ||||
Operating cash flow, before | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
50,582 | 35,772 | 38,680 | 27,063 | ||||
– consolidated |
51,026 | 38,440 | 39,020 | 29,082 | ||||
Operating cash flow, after | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
51,324 | 32,277 | 39,248 | 24,419 | ||||
– consolidated |
51,344 | 35,515 | 39,263 | 26,869 | ||||
Net free cash flow1 | ||||||||
– continuing operations |
20,929 | (10,868 | ) | 16,004 | (8,222 | ) | ||
– consolidated |
16,367 | (12,082 | ) | 12,516 | (9,140 | ) | ||
KEY PER SHARE DATA | ||||||||
Net earnings | ||||||||
– continuing operations |
0.34 | 0.18 | 0.26 | 0.13 | ||||
– consolidated |
0.28 | 0.19 | 0.21 | 0.14 | ||||
Operating cash flow, before | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
0.80 | 0.59 | 0.61 | 0.45 | ||||
– consolidated |
0.80 | 0.64 | 0.61 | 0.48 | ||||
Operating cash flow, after | ||||||||
changes in non-cash working capital1 |
||||||||
– continuing operations |
0.81 | 0.53 | 0.62 | 0.40 | ||||
– consolidated |
0.81 | 0.59 | 0.62 | 0.44 | ||||
Net free cash flow1 | ||||||||
– continuing operations |
0.33 | (0.18 | ) | 0.25 | (0.14 | ) | ||
– consolidated |
0.26 | (0.20 | ) | 0.20 | (0.15 | ) | ||
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Cash and cash equivalents | 89,9573 | 75,113 | ||||||
Total assets | 262,3973 | 252,493 | ||||||
Non-current long-term debt | 4,2143 | 6,513 | ||||||
Shareholders’ equity | 225,349 | 202,455 | ||||||
Shares outstanding (thousands) | 63,816 | 63,030 |
1 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
2 | Average exchange rates used: Quarter ended September 30, 2017 - $1.2528 = US$1 Nine-month period ended September 30, 2017 - $1.3077 = US$1 Quarter ended September 30, 2016 - $1.3050 = US$1 Nine-month period ended September 30, 2016 - $1.3218 = US$1 |
3 | Excludes balances from discontinued operations. |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 7 |
KEY OPERATING AND FINANCIAL STATISTICS
(in thousands of $, except otherwise indicated) | CAN$ | US$ | |||||||
Quarter ended | Quarter ended | ||||||||
September 30 | September 30 | ||||||||
2017 | 2016 | 2017 | 2016 | ||||||
Continuing operations | |||||||||
Gold sold |
oz |
22,666 | 13,673 | 22,666 | 13,673 | ||||
Gold produced |
oz |
26,659 | 14,031 | 26,659 | 14,031 | ||||
Revenues from mining operations | 36,549 | 24,053 | 29,174 | 18,431 | |||||
Operating costs, including royalties and depreciation | 23,732 | 17,674 | 18,943 | 13,543 | |||||
Exploration | 6,009 | 4,449 | 4,796 | 3,409 | |||||
Net earnings | 4,803 | 482 | 3,834 | 369 | |||||
Average market gold price |
$/oz |
1,601 | 1,742 | 1,278 | 1,335 | ||||
Average realized sale price |
$/oz |
1,608 | 1,756 | 1,284 | 1,346 | ||||
Cash costs1 |
$/oz |
666 | 947 | 532 | 725 | ||||
AISC1 |
$/oz |
886 | 1,319 | 708 | 1,010 | ||||
Discontinued operations | |||||||||
Gold sold |
oz |
3,621 | 4,101 | 3,621 | 4,101 | ||||
Gold produced |
oz |
3,380 | 4,825 | 3,380 | 4,825 | ||||
Revenues from mining operations | 5,829 | 7,191 | 4,653 | 5,510 | |||||
Operating costs, including royalties and depreciation | 8,181 | 6,207 | 6,530 | 4,756 | |||||
Exploration | 493 | 1,241 | 394 | 951 | |||||
Net earnings (loss) |
$ |
(3,070 | ) | (256 | ) | (2,491 | ) | (196 | ) |
Average market gold price |
$/oz |
1,601 | 1,742 | 1,278 | 1,335 | ||||
Average realized sale price |
$/oz |
1,607 | 1,751 | 1,283 | 1,342 | ||||
Cash costs1 |
$/oz |
1,929 | 1,408 | 1,540 | 1,079 | ||||
AISC1 |
$/oz |
2,491 | 1,890 | 1,989 | 1,448 |
1 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 8 |
(in thousands of $, except otherwise indicated) | CAN$ | US$ | |||||||
Nine months ended | Nine months ended | ||||||||
September 30 | September 30 | ||||||||
2017 | 2016 | 2017 | 2016 | ||||||
Continuing operations | |||||||||
Gold sold |
oz |
74,849 | 59,851 | 74,849 | 59,851 | ||||
Gold produced |
oz |
76,541 | 59,237 | 76,541 | 59,237 | ||||
Revenues from mining operations |
$ |
123,363 | 99,378 | 94,336 | 75,184 | ||||
Operating costs, including | |||||||||
royalties and depreciation |
$ |
74,066 | 66,266 | 56,638 | 50,133 | ||||
Exploration | 15,333 | 12,191 | 11,725 | 9,223 | |||||
Net earnings |
$ |
21,683 | 10,758 | 13,541 | 8,631 | ||||
Average market gold price |
$/oz |
1,636 | 1,666 | 1,251 | 1,260 | ||||
Average realized sale price |
$/oz |
1,644 | 1,657 | 1,257 | 1,254 | ||||
Cash costs1 |
$/oz |
637 | 761 | 487 | 576 | ||||
AISC1 |
$/oz |
796 | 1,016 | 609 | 769 | ||||
Discontinued operations | |||||||||
Gold sold |
oz |
15,006 | 15,050 | 15,006 | 15,050 | ||||
Gold produced |
oz |
14,148 | 15,308 | 14,148 | 15,308 | ||||
Revenues from mining operations | 24,755 | 25,118 | 18,930 | 19,003 | |||||
Operating costs, including | |||||||||
royalties and depreciation | 26,826 | 22,418 | 20,514 | 16,960 | |||||
Exploration | 1,241 | 1,575 | 949 | 1,192 | |||||
Net earnings (loss) |
$ |
(3,976 | ) | 650 | (3,040 | ) | 492 | ||
Average market gold price |
$/oz |
1,636 | 1,666 | 1,251 | 1,260 | ||||
Average realized sale price |
$/oz |
1,647 | 1,667 | 1,259 | 1,261 | ||||
Cash costs1 |
$/oz |
1,512 | 1,412 | 1,157 | 1,068 | ||||
AISC1 |
$/oz |
1,877 | 1,785 | 1,436 | 1,350 |
1 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
Richmont Mines’ financial statements are reported in Canadian dollars (“CAN$” or “$”); the Corporation also discloses financial and operating statistics in United States dollars (“US$”). The Corporation’s operating results and cash flows are affected by changes in the CAN$ and US$ exchange rate, as precious metal revenues are earned in US$ and the majority of the operating costs are in CAN$.
On a quarterly basis, the CAN$ to US$ exchange rate is adjusted to reflect the actual quarterly rate and year-to-date rate as at the end of each quarter.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 9 |
OUTLOOK
PRODUCTION OUTLOOK AND COST GUIDANCE FOR 2017
The Island Gold Mine reported record production of 26,659 ounces of gold (22,666 ounces sold) for the quarter and 76,541 ounces of gold (74,849 ounces sold) for the nine-month period. Production in the quarter was positively impacted by higher than planned grade of 10.04 grams per tonne. Cash costs for the quarter were $666 (US$532) per ounce and $637 (US$487) per ounce for the nine-month period. The Island Gold Mine is now well positioned to exceed the high-end of annual production guidance of 87,000-93,000 ounces, at costs below the low end of the cash cost guidance of $715-765 (US$550-590) per ounce.
On September 11, 2017, the Corporation entered into the following definitive agreements:
Sale of all its Quebec based assets including the Beaufor Mine to Monarques Gold Corporation (“Monarques”). This transaction was closed on October 2, 2017.
Arrangement agreement with Alamos Gold Inc. (“Alamos”), whereby Alamos will acquire all of the issued and outstanding shares of Richmont. This transaction is expected to close on, or about, November 23, 2017.
REVIEW OF FINANCIAL RESULTS
A) | FOR THE QUARTER ENDED SEPTEMBER 30, 2017 |
Revenues from continuing operations for the third quarter were $36.5 (US$29.2) million, an increase of 52% over the prior year quarter. The Corporation sold 22,666 ounces of gold from continuing operations during the quarter at an average realized price of $1,608 (US$1,284) per ounce, versus 13,673 ounces of gold sold at an average realized sale price of $1,756 (US$1,346) per ounce during the third quarter of 2016.
Net earnings from continuing operations were $4.8 (US$3.8) million for the quarter, an increase of $0.5 (US$0.4) million over the Q3 2016. On a per share basis, net earnings were $0.08 (US$0.06) as compared to $0.01 (US$0.00) in the third quarter of 2016. The increase in net earnings is primarily a result of higher revenues, partially offset by an increase in exploration costs, depreciation and depletion, and taxes. Exploration costs during the quarter of $6.0 million were 35% higher than the same quarter of 2016. Depreciation and depletion costs increased 66% due to the corresponding increase in gold ounces sold during the quarter as compared to Q3 2016. Third quarter net earnings were also positively impacted by $2.0 million received from Argonaut Gold Inc. (“Argonaut”), pursuant to an agreement entered into in October 2013 under which Argonaut received exploration and surface mining rights to a maximum depth of 400 metres on certain Richmont claims that border the Magino Gold Project. Consolidated net earnings were $1.7 (US$1.4) million (including net loss of $3.1 (US$2.5) million from discontinued operations), compared to net earnings of $0.2 (US$0.2) million in the third quarter of 2016, which included a net loss of $0.3 (US$0.2) million from discontinued operations. Consolidated net earnings per share were $0.03 (US$0.02) as compared to $- (US$-) in the same quarter of 2016.
In the third quarter of 2017, cash costs per ounce from continuing operations decreased by 30% to $666 (US$532), from $947 (US$725) in the same quarter of 2016, primarily due to higher grades and improved productivities, resulting in lower unit operating costs.
Corporate AISC per ounce from continuing operations decreased by 29% to $1,038 (US$829) in the quarter, as compared to $1,463 (US$1,120) in the same quarter of 2016. The decrease resulted from a reduction in cash costs and an increase in ounces of gold sold, partially offset by an increase in corporate G&A costs. Quarterly sustaining costs at the Island Gold Mine of $5.0 (US$4.0) million were in-line with the same quarter of 2016.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 10 |
Corporate G&A of $4.0 (US$3.2) million in the third quarter increased by 58% from the $2.5 (US$1.9) million in the prior year quarter, primarily due to higher consulting and professional fees related to the agreement with Alamos.
During the third quarter, project capital expenditures related to continuing operations were $10.0 (US$8.0) million, including $2.2 million of accelerated underground mine development, $1.1 million of mill expansion, $6.3 million of mine and mill infrastructure, and $0.4 million of capital lease payments on mine mobile equipment. Non-sustaining exploration costs were $6.0 (US$4.8) million, primarily related to the Island Gold Mine.
SUSTAINING, PROJECT AND EXPLORATION COSTS1
(in millions of $) | Island Gold | Corporate | Consolidated | |
Mine | Beaufor | & Others | ||
Sustaining costs | ||||
Underground development |
1.5 | 1.1 | - | 2.6 |
Exploration & delineation drilling |
0.4 | 0.3 | - | 0.7 |
Other sustaining costs |
3.1 | 0.6 | - | 3.7 |
Corporate G&A |
- | - | 4.0 | 4.0 |
Total sustaining costs | 5.02 | 2.0 | 4.0 | 11.0 |
Project capital | ||||
Accelerated underground development |
2.2 | - | - | 2.2 |
Mill expansion |
1.1 | 1.1 | ||
Other project capital |
6.7 | - | - | 6.7 |
Total project capital | 10.0 | - | - | 10.0 |
Non-sustaining exploration and project evaluation | 5.83 | 0.2 | 0.2 | 6.2 |
Total project capital & exploration | 15.8 | 0.2 | 0.2 | 16.2 |
1 | Includes continuing and discontinued operations |
2 | Sustaining costs of $5.0 million at the Island Gold Mine have been capitalized. |
3 | Non-sustaining exploration costs of $5.8 million at the Island Gold Mine are expensed. |
For the third quarter, the mining and income tax expense totaled $0.2 million, which is related to a $0.7 million increase in deferred income and mining tax liabilities offset by a $0.5 million increase in deferred income and mining tax assets. During the third quarter of 2016, the Corporation recorded mining and income tax recovery of $0.9 million, which includes a $0.3 million increase in deferred mining taxes offset by a reduction of $1.2 million of taxes for the year.
Higher revenues positively impacted operating cash flow for the third quarter. Operating cash flow (after changes in non-cash working capital) totaled $8.3 (US$6.6) million, or $0.13 (US$0.10) per share, as compared to $3.3 (US$2.6) million, or $0.05 (US$0.04) per share, in the same quarter of 2016.
Net free cash flow1 from continuing operations for the third quarter was $1.8 (US$1.4) million or $0.03 (US$0.02) per share, as compared to $(14.8) (US$(11.3)) million or $(0.24) (US$(0.18)) per share in the same quarter of 2016. Consolidated net free cash flow for the quarter was $(3.4) (US$(2.7)) million, as compared to $(16.2) (US$(12.4)) million in the same quarter of 2016. On a per share basis, consolidated net free cash flow was $(0.05) (US$(0.04)) as compared to $(0.26) (US$(0.20)) in the third quarter of 2016.
1 | Non-IFRS performance measure. Refer to the Non-IFRS Performance Measures section on page 22. |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 11 |
B) | FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2017 |
Production from continuing operations for the nine-month period was 76,541 ounces of gold, a 29% increase over the prior year period production of 59,237 ounces. The higher production was primarily related to an 18% increase in mill throughput and an 8% higher head grade as compared to the prior year period.
Revenues from continuing operations for the nine-month period were $123.4 (US$94.3) million, an increase of 24% over the prior year period. The Corporation sold 74,849 ounces of gold from its continuing operations during the nine-month period, at an average realized price of $1,644 (US$1,257) per ounce, versus 59,851 ounces of gold sold at an average realized sale price of $1,657 (US$1,254) per ounce during the same period of 2016.
Net earnings from continuing operations were $21.7 (US$16.6) million during the nine-month period, an increase of 102% over net earnings from continuing operations of $10.8 (US$8.1) million during the same period of 2016. On a per share basis, net earnings were $0.34 (US$0.26) as compared to $0.18 (US$0.13) in the nine-month period of 2016. The increase in net earnings is primarily a result of higher revenues, offset by an increase in exploration costs, depreciation and depletion, and taxes.
Exploration costs for the nine-month period of $15.3 million were 26% higher than the same period of 2016, due to an increase in underground drilling. Depreciation and depletion costs increased by 25% due to the increase in the gold ounces sold during the period as compared to the same period of 2016. Net earnings were also positively impacted by the receipt of $2.0 million, pursuant to a 2013 agreement with Argonaut. Consolidated Net earnings for the nine-month period was $17.7 (US$13.5) million, as net earnings from continuing operations were offset by a net loss from discontinued operations of $4.0 (US$3.1) million. On a per share basis, consolidated net earnings were $0.28 (US$0.21) as compared to $0.19 (US$0.14) in the same period of 2016.
Cash costs per ounce for continuing operations for the nine-month period decreased by 16% to $637 (US$488), as compared to $761 (US$576) in the same period of 2016, due to higher grades and higher productivities at the Island Gold Mine resulting in lower unit operating costs.
AISC per ounce for continuing operations for the nine-month period decreased by 19% to $921 (US$704) from the $1,134 (US$858) in the same period of 2016, as a combined result of lower cash costs and lower sustaining costs at the Island Gold Mine, and higher ounces of gold sold during the period, partially offset by an increase in corporate G&A costs.
Corporate G&A costs during the period increased to $11.2 (US$8.6) million from $8.8 (US$6.6) million in the prior year period. The increase of $2.4 million reflects higher salaries attributable to the greater number of employees, and higher professional fees in the current period.
Project capital expenditures at the Island Gold Mine were $22.0 (US$16.8) million, including $11.0 million of accelerated underground development costs, $2.1 of mill expansion, $7.8 million of mine and mill infrastructure and $1.1 million of capital lease payments on mine mobile equipment. Non-sustaining exploration expense was $14.4 (US$11.0) million, spent primarily at the Island Gold Mine.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 12 |
SUSTAINING, PROJECT AND EXPLORATION COSTS1
(in millions of $) | Island Gold | Beaufor | Corporate | Consolidated |
Mine | & Others | |||
Sustaining costs | ||||
Underground development |
3.5 | 3.1 | - | 6.6 |
Exploration & delineation drilling |
1.6 | 0.5 | - | 2.1 |
Other sustaining costs |
6.8 | 1.9 | - | 8.7 |
Corporate G&A |
- | - | 11.2 | 11.2 |
Total sustaining costs | 11.92 | 5.5 | 11.2 | 28.6 |
Project capital | ||||
Accelerated underground development |
11.0 | - | - | 11.0 |
Mil expansion |
2.1 | - | - | 2.1 |
Other project capital |
8.9 | - | - | 8.9 |
Total project capital | 22.0 | - | - | 22.0 |
Non-sustaining exploration and project evaluation | 14.43 | 0.6 | 0.9 | 15.9 |
Total project capital & exploration | 36.4 | 0.6 | 0.9 | 37.9 |
1 | Includes continuing and discontinued operations |
2 | Sustaining costs of $11.9 million at the Island Gold Mine have been capitalized. |
3 | Non-sustaining exploration costs of $14.4 million at the Island Gold Mine are expensed. |
For the nine-month period of 2017, mining and income tax expense was $3.3 million, which included a $2.5 million increase in deferred income and mining tax liabilities and an $0.8 million decrease in deferred income and mining tax assets. For the nine-month period of 2016, mining and income tax expense was $1.5 million, which included a $2.2 million increase in deferred mining taxes, offset by a reduction of $0.2 million from the previous year.
Operating cash flow for the nine-month period was positively impacted by higher revenues during the quarter. Operating cash flow (after changes in non-cash working capital) was $51.0 (US$39.3) million, or $0.81 (US$0.62) per share, as compared to $35.5 (US$26.9) million, or $0.59 (US$0.44) per share, in the same period of 2016.
Net free cash flow from continuing operations for the nine-month period was $20.9 (US$16.0) million or $0.33 (US$0.25) per share, as compared to $(10.9) (US$(8.2)) or $(0.18) (US$(0.14)) per share for the same period of 2016. Consolidated net free cash flow for the period was $16.4 (US$12.5) million, as compared to net free cash outflow of $12.1 (US$9.1) million, in the same period of 2016. On a per share basis, consolidated net free cash flow was $0.26 (US$0.20) as compared to $(0.20) (US$(0.15)) in the nine-month period of 2016. The increase in net free cash flow is attributable to higher operating cash flows combined with lower investments in property, plant and equipment during the period.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 13 |
REVIEW OF OPERATING MINES
Island Gold Mine
Quarter ended | Nine months ended | |||||||
September 30 | September 30 | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Total mined (tonnes) | 140,706 | 139,832 | 474,494 | 467,279 | ||||
Ore mined (tonnes) | 84,405 | 67,647 | 280,555 | 228,164 | ||||
Development ore / total ore (%) | 29 | % | 44 | % | 35 | % | 49 | % |
Waste mined (tonnes) | 56,301 | 72,185 | 193,939 | 239,115 | ||||
Ratio: Waste / ore mined | 0.67 | 1.07 | 0.69 | 1.05 | ||||
Gold Produced | ||||||||
Ore processed (tonnes) | 85,101 | 58,836 | 254,044 | 214,666 | ||||
Ore processed (tpd) | 925 | 640 | 931 | 783 | ||||
Head grade (g/t) | 10.04 | 7.70 | 9.65 | 8.91 | ||||
Gold recovery (%) | 97.0 | 96.3 | 97.1 | 96.4 | ||||
Ounces produced | 26,659 | 14,031 | 76,541 | 59,237 | ||||
Gold Sold | ||||||||
Ounces sold | 22,666 | 13,673 | 74,849 | 59,851 | ||||
Average selling price per ounce | 1,608 | 1,756 | 1,644 | 1,657 | ||||
Cash costs per ounce | 666 | 947 | 637 | 761 | ||||
AISC per ounce | 886 | 1,319 | 796 | 1,016 | ||||
Average selling price per ounce (US$) | 1,284 | 1,346 | 1,257 | 1,254 | ||||
Cash costs per ounce (US$) | 532 | 725 | 488 | 576 | ||||
AISC per ounce (US$) | 708 | 1,010 | 610 | 769 | ||||
Sustaining costs | 4,984 | 5,090 | 11,933 | 15,283 | ||||
Project and non-sustaining exploration costs | 15,820 | 16,966 | 36,370 | 39,293 |
Total ore mined during the quarter was 84,405 tonnes. Long-hole stope mining continued mainly in the first and second mining horizons and development in ore was advanced in the higher-grade third mining horizon. Development ore was 24,123 tonnes for the quarter, 29% of the total ore mined versus an overall 2017 plan of 36%. Development ore for the nine-month period was 98,612 tonnes, or 35% of the total ore mined, in-line with plan.
Total waste mined during the quarter was 56,301 tonnes (193,939 tonnes year to date), a ratio of 0.67:1 over total ore mined. Ore development in the third horizon and exploration development was prioritized resulting in lower than planned waste development in the western section of the main ramp. During the quarter, the west ramp was pushed down towards the 710 metre level reaching the main ventilation raise. A total of 794 metres equivalent of waste development was completed during the quarter. Due to the focus on exploration development, the 620 metre and 840 metre level exploration drifts advanced 628 metres during the nine-month period.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 14 |
Mill throughput averaged 925 tpd as the mill processed 85,101 tonnes of ore during the quarter, which was 45% higher than the 58,836 tonnes (640 tpd) of ore processed in the third quarter of 2016. The prior year quarter was impacted by a planned 25-day shutdown for electrical upgrades. Average milled grade for the quarter was 10.04 g/t gold, 30% higher than the 7.70 g/t gold processed in the same quarter of 2016. Higher mill throughput and higher grades resulted in record quarterly gold production of 26,659 ounces, which was 90% higher than gold production from the same quarter of 2016. A 4-day planned shutdown was completed during the quarter to change the classification system (cyclones) and complete other improvements in the grinding and crushing circuits. As a result, the mill is now operating at an average of nearly 1,000 tpd. Gold production for the nine-month period was 76,541 ounces, a 29% increase over the same period of 2016, resulting from 18% higher mill throughput and 8% higher grades.
Third quarter revenues of $36.5 (US$29.2) million were 52% higher than the $24.1 (US$18.4) million in the same quarter of 2016, resulting mainly from 66% more ounces of gold sold, which more than offset the impact of lower average realized gold price during the quarter. 22,666 ounces of gold were sold at an average realized sale price of $1,608 (US$1,284) per ounce, as compared to 13,673 ounces of gold sold at an average realized sale price of $1,756 (US$1,346) per ounce in the third quarter of 2016. Revenues for the nine-month period were $123.4 (US$94.3) million, 24% higher than the same period of 2016, resulting mainly from 25% more ounces of gold sold. 74,849 ounces of gold were sold during the nine-month period at an average realized sale price of $1,644 (US$1,257) per ounce, as compared to 59,851 ounces of gold sold at an average realized sale price of $1,657 (US$1,254) per ounce in the same period of 2016.
Third quarter operating costs, including royalties and depreciation, increased by 34% as compared to the same quarter of 2016 as a result of higher tonnes mined and milled. However, unit operating costs per tonne milled decreased by 13% as compared to the same period of 2016, as a result of increased productivities and economies of scale. Depreciation and depletion costs increased by 66% due to the increase in gold ounces sold during the quarter as compared to Q3 2016. Operating costs for the nine-month period increased by 12%, as compared to the same period of 2016, but decreased by 12% on per unit basis.
Exploration costs during the quarter and the nine-month period were 65% and 32% higher, respectively, as compared to the same periods of 2016, due to increased focus on exploration drilling at the Island Gold Mine.
Cash costs per ounce for the third quarter, including royalties, were $666 (US$532), 30% lower than the $947 (US$725) realized in the same quarter of 2016. Cash costs per ounce for the nine-month period were $637 (US$488), 16% lower than the $761 (US$576) realized in the same period of 2016. Lower cash costs resulted from higher grades, and lower operating costs per tonne.
AISC per ounce for the third quarter and the nine-month period were lower than the same periods in 2016, due to lower cash costs and higher ounces of gold sold as compared to the corresponding periods of 2016. AISC for the third quarter was $886 (US$708) per ounce, 33% lower than the $1,319 (US$1,010) in same quarter of 2016. Sustaining costs for the quarter were $5.0 (US$4.0) million, in-line with the same period of 2016. AISC for the nine-month period was $796 (US$610) per ounce,22% lower than $1,016 (US$769) during the same period of 2016, due to higher gold ounces sold and lower sustaining costs during the period. The Island Gold Mine spent $11.9 (US$9.1) million on sustaining costs during the nine-month period, 22% lower than the $15.3 (US$11.6) million spent in the same period of 2016.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 15 |
Project capital for the quarter and the nine-month period were lower due to lower deferred development costs, as the mine focussed on ore development and exploration development. Project capital for the third quarter was $10.0 (US$8.0) million, 26% lower than the $13.5 (US$10.3) million spent in the same quarter of 2016. For the nine-month period, project capital was $22.0 (US$16.8) million as compared to $28.4 (US$21.5) million in the same period of 2016.
The Island Gold Mine achieved underground mine and mill productivities of 1,028 and 931 tonnes per day year to date (1,055 and 946 tonnes per operating day), respectively, as compared to the 1,000 tonnes per day and 900 tonnes per day considered in the PEA. A 7-day underground shutdown was completed during the quarter to leverage the better than planned mine over mill performance to date and various underground mine infrastructure improvements were completed during the quarter, as a result of which the mill is now operating at an average of nearly 1,000 tonnes per day.
The mill upgrade to 1,100 tonnes per day mill is currently underway and advancing well on schedule. A ball mill has been sourced and is currently being refurbished, detailed engineering has been completed and earthworks started in the third quarter. The mill target run rate is anticipated to be achieved in the latter part of 2018. Upgrade of the mining infrastructure to support the expanded capacity has advanced in the third quarter. Surface fans have been upgraded to increase mine ventilation and new underground pumping stations have been commissioned. Additional mining equipment, such as trucks and scoops, have been ordered with deliveries estimated for the first half of 2018.
Beaufor Mine (Discontinued Operations)
Quarter ended | Nine months ended | |||||||
September 30 | September 30 | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Ore mined (tonnes) | 22,656 | 25,916 | 85,318 | 81,312 | ||||
Gold Produced | ||||||||
Ore processed (tonnes) | 22,590 | 27,426 | 84,013 | 85,025 | ||||
Head grade (g/t) | 4.73 | 5.62 | 5.36 | 5.28 | ||||
Gold recovery (%) | 98.5 | 97.3 | 97.7 | 98.0 | ||||
Ounces produced | 3,380 | 4,825 | 14,148 | 14,143 | ||||
Gold Sold | ||||||||
Ounces sold | 3,621 | 4,101 | 15,006 | 13,879 | ||||
Average selling price per ounce | 1,607 | 1,751 | 1,647 | 1,674 | ||||
Cash costs per ounce | 1,929 | 1,408 | 1,512 | 1,431 | ||||
AISC per ounce | 2,491 | 1,890 | 1,877 | 1,835 | ||||
Average selling price per ounce (US$) | 1,283 | 1,342 | 1,259 | 1,266 | ||||
Cash costs per ounce (US$) | 1,540 | 1,079 | 1,157 | 1,083 | ||||
AISC per ounce (US$) | 1,989 | 1,448 | 1,436 | 1,389 | ||||
Sustaining costs | 2,037 | 1,979 | 5,487 | 5,611 |
On September 11, 2017, the Corporation announced a definitive agreement with Monarques Gold Corporation to sell all of the Corporation’s Quebec based assets including the Beaufor Mine and the Camflo Mill. This transaction was subsequently closed on October 2, 2017. Current and prior period results for the Beaufor Mine have been reclassified as discontinued operations.
Total ore mined during the third quarter was 22,656 tonnes, a decrease of 13% from the 25,916 tonnes mined during the same quarter of 2016.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 16 |
The Camflo Mill processed 22,590 tonnes of ore from the Beaufor Mine during the quarter, as compared to the 27,426 tonnes processed in the same quarter of 2016. Average grade milled was 4.73 g/t gold for the quarter, 16% lower than the 5.62 g/t gold in the same quarter of 2016. Production for the quarter was 3,380 ounces, a 30% decrease over the 4,825 ounces produced in the same quarter of 2016, due to lower mill throughput and lower grades in the quarter. Gold production of 14,148 ounces during the nine-month period of 2017 was in line with the same period of 2016.
Revenues of $5.8 (US$4.7) million represent a decrease of 19% from the $7.2 (US$5.5) million in the same quarter of 2016, primarily as a result of 12% fewer ounces of gold sold. Gold ounces sold for the third quarter totaled 3,621 ounces at an average realized price of $1,607 (US$1,283) per ounce, as compared to gold sales of 4,101 ounces at an average realized price of $1,751 (US$1,342) per ounce in the same quarter of 2016. For the nine-month period, revenues were $24.8 (US$18.9) million, 6% higher than the $23.3 (US$17.6) million reported in the same period of 2016, as a result of 8% higher ounces of gold sold in 2017.
Cash costs per ounce in the third quarter were $1,929 (US$1,540), 37% higher than the $1,408 (US$1,079) in the same quarter of 2016, resulting primarily from lower grades during the quarter and higher mine operating costs. Cash costs per ounce for the nine-month period were $1,512 (US$1,157), 6% higher than the $1,431 (US$1,083) in the same period of 2016 due to higher operating costs.
AISC per ounce for the quarter were $2,491 (US$1,989), 32% higher than the same quarter of 2016, attributable to lower ounces of gold sold. AISC per ounce for the nine-month period were $1,877 (US$1,436), in line with the same period of 2016, as lower sustaining costs offset the impact of higher ounces of gold sold during the period.
EXPLORATION EXPENSE1
Quarter ended | Nine months ended | |||||||
(in thousands of $) | September 30 | September 30 | ||||||
2017 | 2016 | 2017 | 2016 | |||||
Exploration expense – Mine | ||||||||
Island Gold |
5,778 | 3,509 | 14,429 | 10,903 | ||||
|
||||||||
Exploration expense - Other properties | ||||||||
Other |
4 | 5 | 11 | 19 | ||||
Project evaluation |
266 | 195 | 1,021 | 539 | ||||
Exploration and project evaluation before depreciation and exploration tax credits | 6,048 | 3,709 | 15,461 | 11,461 | ||||
Depreciation | 3 | 10 | 18 | 22 | ||||
Exploration tax credits, including adjustments | (42 | ) | 730 | (146 | ) | 708 | ||
6,009 | 4,449 | 15,333 | 12,191 |
1 | Excluding exploration expenses recorded at the discontinued operations |
ISLAND GOLD MINE
Exploration costs at the Island Gold Mine for the quarter were $5.8 (US$4.6) million. During the quarter, approximately 16,043 metres of surface drilling and 10,890 metres of underground drilling were completed. The 2017 exploration drilling program currently underway continues to build on positive results achieved in 2016 and is mainly focused on expanding near-mine resources located outside the Expansion Case PEA area, both laterally and at depth.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 17 |
Deep Directional Exploration Drilling Program:
The 2016 deep drilling program identified a new large inferred resource block of 760,000 tonnes at a grade of 9.53 g/t gold (approximately 230,000 ounces, capped at 70 g/t gold) in the down plunge extension of the main deposit, located between the 1,050 and the 1,300 metre levels. The main objective of the 2017 deep directional exploration drilling program is to prove the high-grade extension of the new resource block to a minimum vertical depth of 1,500 metres.
Drilling in the quarter was focused around and between three significant intercepts that were released in July. These intercepts included Hole MH8-4 that intersected 19.85 g/t gold over 8.4 metres in the eastern portion of the down plunge extension of the deposit, approximately 1,300 metres below surface; Hole MH2A-12 that intersected 11.67 g/t gold over 9.42 metres; and Hole MH2A-13 that intersected 8.86 g/t gold over 6.39 metres at a depth of 1,350 metres. (All assays are reported with estimated true widths and capped at 70 g/t gold)
These three new high-grade, wide intercepts confirm that the down plunge extension of the main Island Gold deposit continues to a minimum vertical depth of 1,350 metres and remains open at depth. Mineralization in this area remains consistent with the main portion of the deposit.
Eastern Lateral Exploration and Infill Drilling Program:
The 2016 drilling program successfully added two new inferred resource blocks in the eastern lateral extension, located approximately 300 metres east of the Expansion Case PEA area, between the 340 and the 750 metre levels. The largest inferred resource block contains approximately 290,000 tonnes at a grade of 10.35 g/t gold (approximately 95,000 ounces of gold, capped at 70 g/t gold).
Infill drilling is on-going in the upper part of the new resource block from the 340 metre level with encouraging results to date. The extension of the 620 metre level exploration drift has advanced as planned and infill drilling in the lower part of the block has begun.
Another surface drill rig is currently working further to the east, approximately 2,000 metres from the second dyke, to test the lateral extension of the main mineralized structure.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 18 |
QUARTERLY RESULTS – PREVIOUS EIGHT QUARTERS
2017 | 2016 | 2015 | ||||||||||||||
(in thousands of $, unless otherwise stated) | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||
PRINCIPAL FINANCIAL DATA | ||||||||||||||||
Revenues1 | 36,549 | 49,919 | 36,895 | 35,771 | 24,053 | 32,856 | 42,469 | 19,967 | ||||||||
Net earnings (loss)1 | 4 803 | 11,494 | 5,386 | 5,137 | 482 | 2,587 | 7,689 | (5,634 | ) | |||||||
Operating cash flow, after changes in non-cash working capital1 |
11,823 | 29,110 | 10,391 | 13,239 | 3,380 | 13,678 | 15,219 | 3,291 | ||||||||
Investments in property, plant and equipment1 |
10,069 | 9,938 | 10,388 | 14,144 | 18,146 | 10,518 | 14,481 | 21,614 | ||||||||
Average CAN$/US$ exchange rate | 1.2528 | 1.3450 | 1.3238 | 1.3341 | 1.3050 | 1.2886 | 1.3732 | 1.3354 | ||||||||
KEY PER-SHARE DATA | ||||||||||||||||
Total operating cash flow | 0.13 | 0.48 | 0.20 | 0.20 | 0.05 | 0.25 | 0.30 | 0.12 | ||||||||
Continuing operations | 0.19 | 0.46 | 0.17 | 0.21 | 0.05 | 0.23 | 0.26 | 0.06 | ||||||||
Discontinued operations | (0.06 | ) | 0.02 | 0.03 | (0.01 | ) | 0.00 | 0.02 | 0.04 | 0.06 | ||||||
Total operating cash flow (US$) | 0.10 | 0.36 | 0.15 | 0.15 | 0.04 | 0.19 | 0.22 | 0.09 | ||||||||
Net earnings (loss), basic | 0.03 | 0.17 | 0.09 | 0.02 | 0.00 | 0.04 | 0.15 | (0.07 | ) | |||||||
Continuing operations | 0.08 | 0.19 | 0.09 | 0.08 | 0.01 | 0.04 | 0.14 | (0.10 | ) | |||||||
Discontinued operations | (0.05 | ) | (0.02 | ) | 0.00 | (0.06 | ) | (0.01 | ) | 0.00 | 0.01 | 0.03 | ||||
Net earnings (loss), basic (US$) | 0.02 | 0.12 | 0.07 | 0.01 | 0.00 | 0.03 | 0.11 | (0.05 | ) | |||||||
Net earnings (loss), diluted | 0.03 | 0.16 | 0.08 | 0.02 | 0.00 | 0.04 | 0.14 | (0.07 | ) | |||||||
Continuing operations | 0.08 | 0.18 | 0.08 | 0.08 | 0.00 | 0.04 | 0.13 | (0.10 | ) | |||||||
Discontinued operations | (0.05 | ) | (0.02 | ) | 0.00 | (0.06 | ) | 0.00 | 0.00 | 0.01 | 0.03 | |||||
Net earnings (loss), diluted (US$) | 0.02 | 0.11 | 0.06 | 0.01 | 0.00 | 0.03 | 0.10 | (0.05 | ) | |||||||
OUNCES OF GOLD SOLD2 | 26,287 | 35,040 | 28,528 | 27,759 | 17,774 | 24,888 | 32,239 | 21,576 | ||||||||
KEY PER-OUNCE OF GOLD DATA2 | ||||||||||||||||
Average selling price ($) | 1,608 | 1,688 | 1,624 | 1,589 | 1,754 | 1,628 | 1,629 | 1,474 | ||||||||
Average cash costs ($)3 | 840 | 725 | 791 | 952 | 1,054 | 895 | 800 | 1,028 | ||||||||
Sustaining costs ($) | 419 | 232 | 333 | 277 | 541 | 427 | 294 | 632 | ||||||||
All-in sustaining costs ($)3 | 1,259 | 957 | 1,124 | 1,229 | 1,595 | 1,322 | 1,094 | 1,660 | ||||||||
Average selling price (US$) | 1,284 | 1,255 | 1,227 | 1,191 | 1,344 | 1,263 | 1,186 | 1,104 | ||||||||
Average cash costs (US$)3 | 670 | 539 | 598 | 714 | 808 | 695 | 583 | 770 | ||||||||
Sustaining costs (US$) | 334 | 172 | 251 | 208 | 415 | 331 | 214 | 473 | ||||||||
All-in sustaining costs (US$)3 | 1,004 | 711 | 849 | 922 | 1,223 | 1,026 | 797 | 1,243 |
1 | Financial information, such as revenues, net earnings (loss), operating cash flow, and investments in property, plant and equipment are exclusive of discontinued operations. |
2 | Operation data, such as ounces of gold sold, cash costs and AISC include the results of both continuing and discontinued operations. |
3 | Non-IFRS measures. Refer to Non-IFRS Performance Measures section on page 22. |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 19 |
FINANCIAL CONDITION1
As at September 30, | As at December 31, | ||||
2017 | 2016 | ||||
Current assets | 104,758 | 84,698 | Current assets increased primarily due to the increase in cash and bank balances, inventories at the Island Gold Mine and investments in shares of Monarques Gold, pursuant to the agreement to sell Quebec-based assets to Monarques. | ||
Long-term assets | 157,639 | 151,801 | The increase in long-term assets reflects the investments in property, plant and equipment at the mine site offset by reduction in deferred income and mining tax assets. | ||
Total assets | 262,397 | 236,499 | |||
Current liabilities | 27,457 | 23,696 | Current liabilities increased mainly due to higher accruals at the end of quarter, related to professional fees and higher tax liability offset by the payment of 2016 annual bonus and retention awards granted to several key personnel in March 2012. | ||
Long-term liabilities | 14,893 | 13,980 | Increase in deferred income and mining tax liabilities partially offset by a decrease in lease obligations during the nine-month period. | ||
Total liabilities | 42,350 | 37,676 | |||
Shareholders’ equity | 225,349 | 202,455 | Shareholders’ equity increased primarily due to net earnings during the period and due to the exercise of stock options. |
1 | Excludes assets and liabilities of discontinued operations as at December 31, 2016 and September 30, 2017. |
LIQUIDITY AND CAPITAL RESOURCES
The Corporation’s strategy is based on achieving positive cash flows from operations to internally fund operating, capital and project development requirements. Material increases or decreases in the Corporation’s liquidity and capital resources will be substantially determined by the success or failure of the Corporation’s operations, exploration, and development programs, the ability to obtain equity or other sources of financing, the price of gold, and currency exchange rates.
The Corporation’s cash balance of $90.0 million compared to $75.1 million at December 31, 2016 reflects the strong operating cash flows and the lower than expected level of investment in property, plant and equipment during the nine-month period. As expected, the cash balance was lower than the $95.9 million at the end of the second quarter, due to increased level of capital expenditures in the third quarter. In the opinion of management, the Corporation's cash position, along with cash flows from operations, are sufficient to support the Corporation's normal operating requirements and capital commitments on an ongoing basis.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 20 |
OUTSTANDING SHARE CAPITAL
The following table sets out the common shares, stock options, restricted share units and deferred share units of the Corporation that are outstanding as at the date of this MD&A:
November 7, 2017 | ||
Common shares | 63,818,351 | |
Stock options | 2,088,433 | |
Restricted share units | 357,854 | |
Deferred share units | 111,437 | |
66,376,075 |
COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Corporation enters into contracts that give rise to commitments. The following table summarizes the Corporation’s contractual obligations:
(in millions of $) | Payments due by period | |||||||||
2020 and | ||||||||||
Contractual obligations | 2017 | 2018 | 2019 | after | Total | |||||
Finance lease obligations | 0.6 | 2.2 | 2.0 | 0.7 | 5.5 | |||||
Contract payment holdbacks | - | 1.0 | - | - | 1.0 | |||||
Asset retirement obligations | - | - | - | 3.0 | 3.0 | |||||
Operating leases | 0.1 | 0.1 | 0.1 | 0.1 | 0.4 | |||||
Total | 0.7 | 3.3 | 2.1 | 3.8 | 9.9 |
1 | Excludes contractual obligations related to discontinued operations. |
There were no changes to the Corporation’s commitments and contingencies from December 31, 2016 to September 30, 2017 with the exception of the commitments mentioned below. For further information, regarding commitments and contingencies in effect as of December 31, 2016, please refer to the 2016 Management’s Discussion and Analysis, filed February 21, 2017 and available on the SEDAR website (www.sedar.com).
On October 6, 2016, the Corporation received a notice of arbitration from the owner of a royalty agreement. Arbitration was held from June 26 to June 30, 2017 in BC. The Corporation lost the arbitration and decided to go in appeal of the decision following their lawyer recommendation. A provision has been accounted for in the financial statements in this respect.
OFF-BALANCE-SHEET TRANSACTIONS
The Corporation does not have any off-balance-sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
The Corporation does not have any transactions with related parties.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 21 |
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements requires the use of estimates and the formulation of assumptions that have a significant impact on revenues and expenses as well as on the amounts of assets and liabilities. Elements such as mineral reserves, basis of depletion of mining sites in production, asset retirement obligations, impairment test of property, plant and equipment, income taxes and deferred mining taxes, share-based remuneration expense, dismantling costs and severance costs, recoverability of credits relating to resources and credits on duties refundable for losses, provisions and contingent liabilities, start of advanced exploration phase and start of commercial production are estimates that management considers the most significant, which could differ materially and affect operating results. A detailed discussion of these estimates is provided in the annual management’s discussion and analysis, filed on February 21, 2017 and available on the SEDAR website (www.sedar.com).
FINANCIAL INSTRUMENTS
In order to minimize the risks associated with fluctuations in the price of gold and exchange rates, Richmont Mines may from time to time, use derivative financial instruments or gold hedging contracts. As at September 30, 2017 and 2016, Richmont Mines had no gold hedging contracts and no currency exchange contracts. For the quarters and the nine-month period ended September 30, 2017 and 2016, no gain or loss related to derivative financial instruments or to gold hedging contracts were recorded in the financial statements.
The Corporation has classified its cash and cash equivalents and receivables (except taxes receivable and workers’ compensation receivable) and other financial asset as loans and receivables, and its payables, accruals and provisions (except salaries and related benefits payable), advance royalty payments, finance lease obligations, contract payment holdbacks and the closure allowance as financial liabilities. All financial instruments are measured at fair value with the exception of the loans and receivables and financial liabilities, which are measured at amortized cost.
Cash and cash equivalents, receivables and payables, accruals and provisions are recorded at book value and represent their approximate fair value, as these items will be realized or settled in the short term. The fair value of other financial asset, advanced royalty payments, finance lease obligations, contract payment holdbacks and closure allowance was determined by calculating the discounted cash flows using market interest rates for financial instruments with similar characteristics. The fair value of the other financial asset, advanced royalty payments, the finance lease obligations, the contract payment holdbacks and the closure allowance approximate the book value.
ACCOUNTING POLICIES
The interim consolidated financial statements have been prepared in accordance with the accounting policies adopted in the Corporation’s last annual financial statements for the year ended December 31, 2016. The accounting policies have been applied consistently throughout the Corporation for the purposes of preparation of these interim consolidated financial statements. There are no new accounting policies in effect for annual periods beginning on or after January 1, 2017.
NON-IFRS PERFORMANCE MEASURES
Cash cost per ounce, operating cash flow before changes in non-cash working capital, operating cash flow before changes in non-cash working capital per share, operating cash flow after changes in non-cash working capital per share, net free cash flow, net free cash flow per share, and all-in sustaining costs are non-IFRS performance measures, and may not be comparable to similar measures presented by other companies. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, the Corporation and certain investors use this information to evaluate the Corporation's performance. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 22 |
The net free cash flow and net free cash flow per share are comprised of the Corporation’s operating cash flow after changes in non-cash working capital, less investments in property, plant and equipment.
The following table is a reconciliation of operating cash flow to net free cash flow on a consolidated basis:
Quarter ended | Nine months ended | |||||||
(in thousands of $, except per share amounts) | September 30 | September 30 | ||||||
2017 | 2016 | 2017 | 2016 | |||||
Operating cash flow (as per statement of cash flows) | 8,314 | 3,347 | 51,344 | 35,515 | ||||
Investments in property, plant and equipment | (11,719 | ) | (19,531 | ) | (34,977 | ) | (47,597 | ) |
Net free cash flow | (3,405 | ) | (16,184 | ) | 16,367 | (12,082 | ) | |
Basic weighted average number of shares outstanding | ||||||||
(thousands) |
63,778 | 62,760 | 63,474 | 60,393 | ||||
Net free cash flow per share | (0.05 | ) | (0.26 | ) | 0.26 | (0.20 | ) |
The following table is a reconciliation of operating cash flow to net free cash flow of continuing operations:
Quarter ended | Nine months ended | |||||||
(in thousands of $, except per share amounts) | September 30 | September 30 | ||||||
2017 | 2016 | 2017 | 2016 | |||||
Operating cash flow (as per statement of cash flows) | 8,314 | 3,347 | 51,344 | 35,515 | ||||
Operating cash flow related to discontinued operations | ||||||||
(as per note 8 of financial statements) |
3,508 | 33 | (20 | ) | (3,238 | ) | ||
Investments in property, plant and equipment | (10,069 | ) | (18,146 | ) | (30,395 | ) | (43,145 | ) |
Net free cash flow | 1,753 | (14,766 | ) | 20,929 | (10,868 | ) | ||
Basic weighted average number of shares outstanding | ||||||||
(thousands) |
63,778 | 62,760 | 63,474 | 60,393 | ||||
Net free cash flow per share | 0.03 | (0.24 | ) | 0.33 | (0.18 | ) |
“Cash costs” is a common performance measure in the gold mining industry, but does not have any standardized definition. The Corporation reports cash cost per ounce based on ounces sold. Cash costs include mine site operating costs, administration, royalties and by-product credits but are exclusive of depreciation, accretion expense, interest on capital leases, capital expenditures, and exploration and project evaluation costs. (Refer to Table “Reconciliation of cost of sales to cash costs and to all-in sustaining costs per ounce sold for the quarters and nine-month periods ended September 30, 2017 and 2016”). At the end of 2016, cash cost per ounce calculation has been revised to include by-product credits and exclude interest on capital leases. Prior quarter cash costs have been restated to reflect these changes and to remain comparable.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 23 |
All-In Sustaining Costs or “AISC” is an extension of the existing “cash costs” metrics and incorporates costs related to sustaining production. The Corporation believes that, although relevant, the cash costs measure does not capture the sustaining expenditures incurred, and therefore, may not present a complete picture of the Corporation’s operating performance or its ability to generate free cash flows from its operations. AISC includes cost of sales, excluding depreciation, and includes by-product credits, sustaining capital expenditures, sustaining exploration and evaluation costs, corporate general and administrative costs, and environmental rehabilitation accretion and depreciation.
The following table provides a reconciliation of cost of sales to cash costs and to all-in sustaining costs, on a consolidated basis:
RECONCILIATION OF COST OF SALES TO CASH COSTS AND TO ALL-IN SUSTAINING COSTS PER OUNCE SOLD
FOR THE QUARTERS AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016
Quarter ended September 30, 2017 | Island Gold | Beaufor | Corporate | Total RIC | |||
(in thousands of $, except per ounce amounts) | |||||||
Gold sold (ounces) |
22,666 | 3,621 | - | 26,287 | |||
Cost of sales |
23,732 | 8,181 | - | 31,913 | |||
Depreciation and depletion |
(7,752 | ) | (1,189 | ) | - | (8,941 | ) |
Adjustment of royalties from prior years |
(784 | ) | - | - | (784 | ) | |
By-product credits |
(93 | ) | (11 | ) | - | (104 | ) |
Cost of sales, net of depreciation expense and by-product credits |
15,103 | 6,981 | - | 22,084 | |||
Cash costs ($/ounce) |
666 | 1,929 | - | 840 | |||
Sustaining costs |
4,984 | 2,037 | - | 7,021 | |||
Corporate general and administration costs |
- | - | 3,988 | 3,988 | |||
All-in sustaining costs |
20,087 | 9,018 | 3,988 | 33,093 | |||
|
|||||||
All-in sustaining costs ($/ounce) |
886 | 2,491 | 152 | 1,259 |
Quarter ended September 30, 2016 | Island Gold | Beaufor | Corporate | Total RIC | |||
(in thousands of $, except per ounce amounts) | |||||||
Gold sold (ounces) |
13,673 | 4,101 | - | 17,774 | |||
Cost of sales |
17,675 | 6,206 | - | 23,977 | |||
Depreciation and depletion |
(4,677 | ) | (420 | ) | - | (5,097 | ) |
By-product credits |
(50 | ) | (11 | ) | - | (61 | ) |
Cost of sales, net of depreciation expense and by-product credits |
12,948 | 5,775 | - | 18,723 | |||
Cash costs ($/ounce) |
947 | 1,408 | - | 1,054 | |||
Sustaining costs |
5,090 | 1,979 | 33 | 7,102 | |||
Corporate general and administration costs |
- | - | 2,532 | 2,532 | |||
All-in sustaining costs |
18,038 | 7,754 | 2,565 | 28,357 | |||
|
|||||||
All-in sustaining costs ($/ounce) |
1,319 | 1,890 | 144 | 1,595 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 24 |
Nine-month period ended September 30, 2017 | Island Gold | Beaufor | Corporate | Total RIC | |||||
(in thousands of $, except per ounce amounts) | |||||||||
Gold sold (ounces) |
74,849 | 15,006 | - | 89,855 | |||||
Cost of sales |
74,066 | 26,826 | - | 100,892 | |||||
Depreciation and depletion |
(25,602 | ) | (4,100 | ) | - | (29,702 | ) | ||
Adjustment of royalties from prior years |
(480 | ) | - | - | (480 | ) | |||
By-product credits |
(314 | ) | (41 | ) | - | (355 | ) | ||
Cost of sales, net of depreciation expense and by-product credits |
47,670 | 22,685 | - | 70,355 | |||||
Cash costs ($/ounce) |
637 | 1,512 | - | 783 | |||||
Sustaining costs |
11,933 | 5,487 | - | 17,420 | |||||
Corporate general and administration costs |
- | - | 11,246 | 11,246 | |||||
All-in sustaining costs |
59,603 | 28,172 | 11,246 | 99,021 | |||||
|
|||||||||
All-in sustaining costs ($/ounce) | 796 | 1,877 | 125 | 1,101 | |||||
Nine-month period ended | |||||||||
September 30, 2016 | Island Gold | Beaufor | Monique | Corporate | Total RIC | ||||
(in thousands of $, except per ounce amounts) | |||||||||
Gold sold (ounces) |
59,851 | 13,879 | 1,171 | - | 74,901 | ||||
Cost of sales |
66,266 | 20,998 | 1,420 | - | 88,684 | ||||
Depreciation and depletion |
(20,469 | ) | (1,122 | ) | (33 | ) | - | (21,624 | ) |
By-product credits |
(228 | ) | (30 | ) | (3 | ) | - | (261 | ) |
Cost of sales, net of depreciation expense and by-product credits |
45,569 | 19,846 | 1,384 | - | 66,799 | ||||
Cash costs ($/ounce) |
761 | 1,431 | 1,182 | - | 892 | ||||
Sustaining costs |
15,283 | 5,611 | 5 | 58 | 20,957 | ||||
Corporate general and administration costs |
- | - | - | 8,782 | 8,782 | ||||
All-in sustaining costs |
60,852 | 25,457 | 1,389 | 8,840 | 96,538 | ||||
|
|||||||||
All-in sustaining costs ($/ounce) |
1,016 | 1,835 | 1,186 | 118 | 1,289 |
RISKS AND UNCERTAINTIES
In the normal course of operations, the mining industry involves exposure to numerous risks that can affect the performance of corporations such as Richmont Mines. A detailed discussion of these risks is given in the annual Management’s Discussion and Analysis, dated February 17, 2017, filed February 21, 2017, and available on the SEDAR website (www.sedar.com).
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) based on the Internal Control – Integrated Framework (2013) developed by COSO (Committee of Sponsoring Organizations of the Treadway Commission).
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 25 |
The Corporation’s DC&P are designed to provide reasonable assurance that material information relating to the Corporation is made known to the CEO and CFO during the reporting period and the information required to be disclosed by the Corporation under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. The Corporation’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, including policies and procedures to ensure that financial records are accurately maintained and fairly reflect the transactions of the Corporation.
The Corporation’s management, under the supervision of, and with the participation of, the CEO and the CFO, has evaluated its DC&P and ICFR and concluded that, as of September 30, 2017, they were designed effectively to provide reasonable assurance regarding required disclosures and the reliability of financial reporting and the preparation of financial statements for external purposes. Due to the inherent limitations associated with any such controls and procedures, management recognizes that, no matter how well designed and operated its DC&P and ICFR controls and procedures can provide only reasonable assurance that the objectives of the Corporation’s DC&P and ICFR will be met, and they may not prevent or detect misstatements on a timely basis.
There have been no material changes to the Corporation’s DC&P or ICFR or in other factors that could affect internal controls during the quarter and the nine-month period ended September 30, 2017.
NATIONAL INSTRUMENT 43-101
The geological data in this document have been reviewed by Mr. Daniel Adam, Geo., Ph.D, Vice-President, Exploration, an employee of Richmont Mines Inc., and a qualified person as defined by National Instrument 43-101. Please refer to the SEDAR website (www.sedar.com) for full reports and additional corporate documentation, including the technical reports entitled:
“Technical Report on the Mineral Reserve and Resource Estimate as of December 31, 2016 for the Island Gold Mine” dated March 17, 2017 and effective as of December 31, 2016.
“Island Gold Mine technical report and expansion case preliminary economic assessment” dated July 13, 2017 and effective as of May 29, 2017.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis contains forward-looking statements. These statements relate to future events or the Corporation’s future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “continue”, or the negative of these terms or other comparable terminology. Forward-looking statements in this Management’s Discussion and Analysis include, without limitation, statements relating to the Corporation’s expectations of gold production, cash costs, all-in sustaining costs, exchange rates and the future price of gold. These statements are only predictions. In addition, this Management’s Discussion and Analysis may contain forward-looking statements attributed to third party industry sources. Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Important factors that could cause such a difference include, among others things, changes in the prevailing price of gold, the Canadian-United States exchange rate, grade of ore mined and unforeseen difficulties in mining operations that could affect revenue and production costs. Other factors such as uncertainties regarding government regulations could also affect the results. Additional factors are discussed in the section entitled “Risk factors” in the Corporation’s annual management’s discussion and analysis report dated February 17, 2017, filed February 22, 2017, and available on SEDAR (www.sedar.com). Other risks may be detailed in Richmont Mines’ Annual Information Form, Annual Report and periodic reports. Except as may be required by law or regulation, the Corporation undertakes no obligation and disclaims any responsibility to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 26 |
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING RESOURCE ESTIMATES AND CIVIL LIABILITIES AND JUDGMENTS
Resource estimates
The resource estimates in this Management’s Discussion and Analysis were prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) adopted by the Canadian Securities Administrators. The requirements of NI 43-101 differ significantly from the requirements of the United States Securities and Exchange Commission (the “SEC”). In this Management’s Discussion and Analysis, we use the terms “Measured,” “Indicated” and “Inferred” Resources; although these terms are recognized and required to be used in Canada, the SEC does not recognize them. The SEC permits U.S. mining corporations, in their filings with the SEC, to disclose only those mineral deposits that constitute “reserves.” Under United States standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally extracted at the time the determination is made. United States investors should not assume that all or any portion of a Measured or Indicated Resource will ever be converted into “reserves.” Furthermore, “Inferred Resources” have a great amount of uncertainty as to their existence and whether they can be mined economically or legally, and United States investors should not assume that “Inferred Resources” exist or can be legally or economically mined, or that they will ever be upgraded to a more certain category.
Potential unenforceability of civil liabilities and judgments
The Corporation is incorporated under the laws of the Province of Quebec, Canada. All of the Corporation's directors and officers as well as the experts named in the Form 40-F are residents of Canada. Also, all of the Corporation's assets and most of the assets of these persons are located outside of the United States. As a result, it may be difficult for shareholders to initiate a lawsuit within the United States against these non-U.S. residents, or to enforce U.S. judgments against the Corporation or these persons. The Corporation's Canadian counsel has advised the Corporation that a monetary judgment of a U.S. court predicated solely upon the civil liability provisions of U.S. federal securities laws would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. This result may not always be the case. It is less certain that an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.
As a “foreign private issuer”, the Corporation is exempt from the Section 14 proxy rules and Section 16 of the U.S. Securities Exchange Act of 1934 and this may result in shareholders having less complete and timely data.
The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data. The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data in this regard.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 27 |
Compliance with Canadian Securities Regulations
This quarterly report is intended to comply with the requirements of the Toronto Stock Exchange and applicable Canadian securities legislation, which differ in certain respects from the rules and regulations promulgated under the United States Securities Exchange Act of 1934, as amended (“Exchange Act”), as promulgated by the SEC.
U.S. investors are urged to consider the disclosure in our annual report on Form 40-F, File No. 001-14598, as filed with the SEC under the Exchange Act, which may be obtained from us (without cost) or from the SEC’s website: http://sec.gov/edgar.shtml.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 28 |
CONSOLIDATED FINANCIAL STATEMENTS
(All dollar figures are in thousands of Canadian dollars, unless otherwise stated)
CONTENTS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 31 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | 32 |
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | 34 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | 35 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 36 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 30 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian dollars)
(Unaudited) | Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
$ | $ | $ | $ | |||||||||
CONTINUING OPERATIONS | ||||||||||||
Revenues |
36,549 | 24,053 | 123,363 | 99,378 | ||||||||
Cost of sales (note 2) |
23,732 | 17,674 | 74,066 | 66,266 | ||||||||
GROSS PROFIT | 12,817 | 6,379 | 49,297 | 33,112 | ||||||||
OTHER EXPENSES (REVENUES) | ||||||||||||
Exploration and project evaluation (note 3) |
6,009 | 4,449 | 15,333 | 12,191 | ||||||||
Administration (note 4) |
3,988 | 2,532 | 11,189 | 8,782 | ||||||||
Gain on disposal of long-term assets |
(2,006 | ) | (96 | ) | (1,946 | ) | (5 | ) | ||||
Other revenues |
(8 | ) | (5 | ) | (20 | ) | (10 | ) | ||||
7,983 | 6,880 | 24,556 | 20,958 | |||||||||
OPERATING EARNINGS (LOSS) | 4,834 | (501 | ) | 24,741 | 12,154 | |||||||
Financial expenses (note 6) | 157 | 84 | 423 | 328 | ||||||||
Financial revenues (note 7) | (323 | ) | (190 | ) | (667 | ) | (478 | ) | ||||
EARNINGS (LOSS) BEFORE MINING AND INCOME TAXES |
5,000 | (395 | ) | 24,985 | 12,304 | |||||||
MINING AND INCOME TAXES (RECOVERY) |
197 | (877 | ) | 3,302 | 1,546 | |||||||
|
||||||||||||
NET EARNINGS FROM CONTINUING OPERATIONS |
4,803 | 482 | 21,683 | 10,758 | ||||||||
NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 8) |
(3,070 | ) | (256 | ) | (3,976 | ) | 650 | |||||
|
||||||||||||
NET EARNINGS AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
1,733 | 226 | 17,707 | 11,408 | ||||||||
|
||||||||||||
EARNINGS (LOSS) PER SHARE |
||||||||||||
Basic | ||||||||||||
Earnings from continuing operations |
0.08 | 0.01 | 0.34 | 0.18 | ||||||||
Earnings (loss) from discontinued operations |
(0.05 | ) | (0.01 | ) | (0.06 | ) | 0.01 | |||||
Basic net earnings | 0.03 | - | 0.28 | 0.19 | ||||||||
Diluted | ||||||||||||
Earnings from continuing operations |
0.07 | 0.01 | 0.33 | 0.17 | ||||||||
Earnings (loss) from discontinued operations |
(0.05 | ) | (0.01 | ) | (0.06 | ) | 0.01 | |||||
Diluted net earnings | 0.02 | - | 0.27 | 0.18 | ||||||||
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (in thousands) |
63,778 | 62,760 | 63,474 | 60,393 | ||||||||
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (in thousands) |
65,145 | 64,431 | 64,832 | 62,028 |
The accompanying notes are an integral part of the interim consolidated financial statements.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 31 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands of Canadian dollars)
(Unaudited) | Share | Contributed | Total | |||||||||
capital | surplus | Deficit | equity | |||||||||
$ | $ | $ | $ | |||||||||
BALANCE AT DECEMBER 31, 2016 | 217,837 | 14,283 | (29,665 | ) | 202,455 | |||||||
Issue of common shares | ||||||||||||
Exchange of restricted share units |
561 | (561 | ) | - | - | |||||||
Exercise of share options |
4,609 | (1,551 | ) | - | 3,058 | |||||||
Share-based compensation | - | 2,129 | - | 2,129 | ||||||||
Transactions with Richmont Mines shareholders | 5,170 | 17 | - | 5,187 | ||||||||
Net earnings and total comprehensive income for the period |
- | - | 17,707 | 17,707 | ||||||||
BALANCE AT SEPTEMBER 30, 2017 | 223,007 | 14,300 | (11,958 | ) | 225,349 |
The accompanying notes are an integral part of the interim consolidated financial statements.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 32 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands of Canadian dollars)
(Unaudited) | Share | Contributed | Total | |||||||||
capital | surplus | Deficit | equity | |||||||||
$ | $ | $ | $ | |||||||||
BALANCE AT DECEMBER 31, 2015 | 181,712 | 14,022 | (42,132 | ) | 153,602 | |||||||
Issue of shares | ||||||||||||
Bought-deal placement |
31,096 | - | - | 31,096 | ||||||||
Exchange of restricted share units |
236 | (236 | ) | - | - | |||||||
Exchange of deferred share units |
564 | - | - | 564 | ||||||||
Exercise of share options |
3,587 | (1,173 | ) | - | 2,414 | |||||||
Exercise of warrants |
2,429 | (439 | ) | - | 1,990 | |||||||
Common shares issue costs | (2,023 | ) | - | - | (2,023 | ) | ||||||
Share-based compensation | - | 1,686 | - | 1,686 | ||||||||
Transactions with Richmont Mines shareholders | 35,889 | (162 | ) | - | 35,727 | |||||||
Net earnings and total comprehensive income for the period |
- | - | 11,408 | 11,408 | ||||||||
BALANCE AT SEPTEMBER 30, 2016 | 217,601 | 13,860 | (30,724 | ) | 200,737 |
The accompanying notes are an integral part of the interim consolidated financial statements.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 33 |
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian dollars)
(Unaudited) | September 30, | December 31, | ||||
2017 | 2016 | |||||
$ | $ | |||||
(Audited) | ||||||
ASSETS | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents |
89,957 | 75,113 | ||||
Receivables |
3,318 | 4,105 | ||||
Subscription receipts for shares of a publicly-traded company |
2,000 | - | ||||
Exploration tax credits receivable |
314 | 168 | ||||
Inventories (note 9) |
9,169 | 10,019 | ||||
Assets held for sale |
17,323 | - | ||||
122,081 | 89,405 | |||||
RESTRICTED DEPOSITS AND OTHER FINANCIAL ASSET (note 12 a) | 864 | 838 | ||||
PROPERTY, PLANT AND EQUIPMENT (note 10) | 154,424 | 159,127 | ||||
DEFERRED INCOME AND MINING TAX ASSETS | 2,351 | 3,123 | ||||
TOTAL ASSETS | 279,720 | 252,493 | ||||
LIABILITIES | ||||||
CURRENT LIABILITIES | ||||||
Payables, accruals and provisions |
22,469 | 21,411 | ||||
Income and mining taxes payable |
1,321 | 339 | ||||
Current portion of long-term debt (note 11) |
2,335 | 5,961 | ||||
Current portion of asset retirement obligations (note 12 b) |
36 | 130 | ||||
Deferred Share Units payable (note 5 c) |
1,296 | 549 | ||||
Liabilities related to assets held for sale |
12,021 | - | ||||
39,478 | 28,390 | |||||
LONG-TERM DEBT (note 11) | 4,214 | 6,513 | ||||
ASSET RETIREMENT OBLIGATIONS (note 12 b) | 3,005 | 10,038 | ||||
DEFERRED INCOME AND MINING TAX LIABILITIES | 7,674 | 5,097 | ||||
TOTAL LIABILITIES | 54,371 | 50,038 | ||||
EQUITY | ||||||
Share capital (note 13) |
223,007 | 217,837 | ||||
Contributed surplus |
14,300 | 14,283 | ||||
Deficit |
(11,958 | ) | (29,665 | ) | ||
TOTAL EQUITY | 225,349 | 202,455 | ||||
TOTAL LIABILITIES AND EQUITY | 279,720 | 252,493 |
The accompanying notes are an integral part of the interim consolidated financial statements.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 34 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(Unaudited) | Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
$ | $ | $ | $ | |||||||||
OPERATING ACTIVITIES | ||||||||||||
Net earnings for the period |
1,733 | 226 | 17,707 | 11,408 | ||||||||
Adjustments for: |
||||||||||||
Depreciation and depletion |
9,059 | 5,206 | 30,113 | 22,000 | ||||||||
Income and mining taxes received (paid) |
27 | (34 | ) | 949 | (548 | ) | ||||||
Interest revenues |
(324 | ) | (190 | ) | (676 | ) | (482 | ) | ||||
Interest on finance lease obligations |
87 | 96 | 288 | 274 | ||||||||
Share-based compensation |
898 | 971 | 2,964 | 3,498 | ||||||||
Retention award payments |
- | - | (1,750 | ) | - | |||||||
Adjustment to closure allowance |
- | - | (41 | ) | 30 | |||||||
Accretion expense – asset retirement obligations |
29 | 17 | 87 | 52 | ||||||||
Gain on disposal of long-term assets |
(2,006 | ) | (96 | ) | (1,940 | ) | (5 | ) | ||||
Mining and income taxes (recovery) |
203 | (357 | ) | 3,325 | 2,213 | |||||||
9,706 | 5,839 | 51,026 | 38,440 | |||||||||
Net change in non-cash working capital items (note 14) |
(1,392 | ) | (2,492 | ) | 318 | (2,925 | ) | |||||
Cash flows from operating activities | 8,314 | 3,347 | 51,344 | 35,515 | ||||||||
INVESTING ACTIVITIES | ||||||||||||
Subscription receipts for shares of a publicly-traded company |
(2,000 | ) | - | (2,000 | ) | - | ||||||
Restricted deposits |
124 | - | 124 | - | ||||||||
Interest received |
292 | 198 | 633 | 472 | ||||||||
Other financial asset |
- | - | (200 | ) | - | |||||||
Property, plant and equipment – Island Gold Mine |
(10,069 | ) | (18,113 | ) | (30,395 | ) | (43,087 | ) | ||||
Property, plant and equipment – Beaufor Mine |
(1,382 | ) | (1,245 | ) | (4,028 | ) | (3,546 | ) | ||||
Property, plant and equipment – Other |
(268 | ) | (173 | ) | (554 | ) | (964 | ) | ||||
Disposition of property, plant and equipment |
2,006 | - | 2,088 | - | ||||||||
|
||||||||||||
Cash flows used in investing activities |
(11,297 | ) | (19,333 | ) | (34,332 | ) | (47,125 | ) | ||||
FINANCING ACTIVITIES | ||||||||||||
Advance royalty payment |
- | - | - | (1,000 | ) | |||||||
Payments of asset retirement obligations |
(14 | ) | (562 | ) | (82 | ) | (568 | ) | ||||
Issue of common shares |
122 | 764 | 3,058 | 35,500 | ||||||||
Common shares issue costs |
- | (21 | ) | - | (2,023 | ) | ||||||
Interest paid |
(92 | ) | (92 | ) | (297 | ) | (265 | ) | ||||
Payments of finance lease obligations |
(1,811 | ) | (777 | ) | (3,678 | ) | (2,207 | ) | ||||
Cash flows used in financing activities | (1,795 | ) | (688 | ) | (999 | ) | 29,437 | |||||
Net change in cash | (4,778 | ) | (16,674 | ) | 16,013 | 17,827 | ||||||
Cash, beginning of period | 95,904 | 95,529 | 75,113 | 61,028 | ||||||||
Cash and cash equivalents, end of period | 91,1261 | 78,855 | 91,1261 | 78,855 |
1 | Cash and cash equivalents include $1,169 in assets held for sale |
The accompanying notes are an integral part of the interim consolidated financial statements.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 35 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three-month and nine-month periods ended September 30, 2017 and 2016 (in thousands of Canadian dollars)
(Unaudited)
1. | General information and compliance with IFRS |
Richmont Mines Inc. (“the Corporation”) is incorporated under the Business Corporations Act (Quebec) and is engaged in mining, exploration and development of mining properties, principally gold.
These interim consolidated financial statements have been prepared by the Corporation’s management in accordance with International Financial Reporting Standards (“IFRS”), as established by the International Accounting Standards Board and in accordance with IAS 34 “Interim Financial Reporting”. They do not include all the information required in annual consolidated financial statements in accordance with IFRS. These interim consolidated financial statements must be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016.
The preparation of interim consolidated financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment when applying the Corporation’s accounting policies.
2. | Cost of sales |
The cost of sales includes the following items:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Operating costs | 13,566 | 12,421 | 44,005 | 43,548 | |||||||||
Royalties | 2,414 | 576 | 4,459 | 2,249 | |||||||||
Depreciation and depletion | 7,752 | 4,677 | 25,602 | 20,469 | |||||||||
23,732 | 17,674 | 74,066 | 66,266 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 36 |
3. | Exploration and project evaluation |
The exploration and project evaluation expenses were incurred for the following mines and properties:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Island Gold Mine | 5,778 | 3,509 | 14,429 | 10,903 | |||||||||
Other properties | 4 | 5 | 11 | 19 | |||||||||
Project evaluation | 266 | 195 | 1,021 | 539 | |||||||||
Exploration and project evaluation before depreciation and exploration tax credits |
6,048 | 3,709 | 15,461 | 11,461 | |||||||||
Depreciation | 3 | 10 | 18 | 22 | |||||||||
Exploration tax credits, including adjustments | (42 | ) | 730 | (146 | ) | 7081 | |||||||
6,009 | 4,449 | 15,333 | 12,191 |
1 | In the second quarter of 2016, the Corporation filed its 2015 income tax returns and reduced its current taxes by using carried forward fiscal expenses instead of using exploration tax credits, as it had been originally planned and recorded in 2015. |
|
|
4. | Administration |
The administration expenses include the following items:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Salaries, directors’ fees and related benefits | 1,223 | 1,017 | 3,766 | 2,867 | |||||||||
Share-based compensation | 898 | 815 | 2,876 | 3,231 | |||||||||
Consultants and professional fees | 1,106 | 139 | 2,312 | 827 | |||||||||
Depreciation | 40 | 93 | 120 | 211 | |||||||||
Miscellaneous | 721 | 468 | 2,115 | 1,646 | |||||||||
3,988 | 2,532 | 11,189 | 8,782 |
5. | Share-based compensation |
a) | Share option plans |
In effect since May 2012, the Corporation’s long-term incentive plan permits the granting of options, restricted share units (“RSUs”), share appreciation rights (“SARs”) and retention awards (“Retention Awards”) to directors, officers, other employees, consultants and others providing ongoing services to the Corporation.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 37 |
The policy of the Corporation is to set the exercise price of each option granted at the market price at closing of the Corporation’s stock on the Toronto Stock Exchange, on the day prior to the day of grant. Vesting is set at one third one year after the grant date, one third on the second anniversary of the grant date, and one third on the third anniversary of the grant date, with expiry of the option five years after the date of grant. Prior to 2015, options that vested 20% on the grant date and vested cumulatively thereafter on every anniversary date over a period of four years, and expiring five years after the date of grant; or options that vested on August 8, 2016 and expiring five years after the date of grant; or options that vested 100% on the grant date and expiring five years after the date of grant.
A summary of the status of options outstanding under the Corporation’s plan at September 30, 2017 and changes during the three-month and nine-month periods then ended, is presented below:
Three months ended | Nine months ended | ||||||||||||
September 30, 2017 | September 30, 2017 | ||||||||||||
Weighted | Weighted | ||||||||||||
Number of | average | Number of | average | ||||||||||
options | exercise price | options | exercise price | ||||||||||
(in thousands) | $ | (in thousands) | $ | ||||||||||
Options outstanding, beginning of the period | 1,469 | 5.77 | 1,835 | 4.78 | |||||||||
Granted | - | - | 297 | 10.24 | |||||||||
Exercised | (23 | ) | 2.05 | (566 | ) | 4.84 | |||||||
Forfeited | - | - | (120 | ) | 5.30 | ||||||||
Options outstanding, end of period | 1,446 | 5.83 | 1,446 | 5.83 | |||||||||
Exercisable options, end of period | 526 | 4.13 | 526 | 4.13 |
The following table summarizes information about the options issued under the Corporation’s plan at September 30, 2017:
Options outstanding at | Exercisable options at | ||||||||||||||||
September 30, 2017 | September 30, 2017 | ||||||||||||||||
Weighted | |||||||||||||||||
Exercise | average | Weighted | Weighted | ||||||||||||||
price | Number of | remaining | average | Number of | average | ||||||||||||
options | contractual life | exercise price | options | exercise price | |||||||||||||
(in thousands) | (years) | $ | (in thousands) | $ | |||||||||||||
$1.08 to $1.29 | 132 | 1.2 | 1.09 | 71 | 1.09 | ||||||||||||
$2.19 to $2.34 | 22 | 1.9 | 2.29 | 2 | 2.34 | ||||||||||||
$2.51 to $3.31 | 162 | 2.2 | 3.12 | 128 | 3.07 | ||||||||||||
$3.73 to $4.20 | 473 | 2.4 | 3.91 | 225 | 3.94 | ||||||||||||
$6.09 | 200 | 3.4 | 6.09 | 53 | 6.09 | ||||||||||||
$8.79 to $10.87 | 457 | 4.2 | 10.21 | 47 | 10.37 | ||||||||||||
1,446 | 2.9 | 5.83 | 526 | 4.13 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 38 |
During the nine-month period ended September 30, 2017, the Corporation granted 297,000 share options to officers (360,000 to a director, an officer and employees for the nine-month period ended September 30, 2016). The weighted average fair value of these share options at the grant date, calculated using the Black-Scholes option pricing model was $4.55 ($3.36 for the nine-month period ended September 30, 2016).
b) | Restricted share units |
The Corporation’s plan permits the granting of RSUs. Upon vesting, each RSU is exchanged for one common share of the Corporation. The fair value of each RSU is equal to the fair value of one common share of the Corporation at the date of grant. The fair value is amortized over the vesting period of three years. Two types of RSUs are issued: (1) RSUs that vest in thirds one year after the grant date, then vest cumulatively thereafter on every anniversary date over a total period of three years, (2) RSUs that fully vest at the earliest of three years after the grant date or upon the Director leaving the Board.
A summary of the status of RSUs outstanding under the Corporation’s plan at September 30, 2017 and 2016, and changes during the three-month and nine-month periods then ended, is presented below:
Number of restricted share units (in thousands) |
|||||||||||||
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
Restricted share units outstanding, beginning of the period |
399 | 396 | 338 | 193 | |||||||||
Granted | - | - | 154 | 265 | |||||||||
Released for common shares | (3 | ) | (4 | ) | (90 | ) | (63 | ) | |||||
Forfeited | (4 | ) | (7 | ) | (10 | ) | (10 | ) | |||||
Restricted share units outstanding, end of period |
392 | 385 | 392 | 385 |
During the nine-month period ended September 30, 2017, the Corporation granted 154,018 RSUs to officers and employees at an average fair value of $10.81 (265,180 in the comparable period of 2016 at an average fair value of $6.32).
c) | Deferred share units |
In May 2015, the Corporation established a deferred share unit (DSU) plan for directors. The value of an outstanding DSU, on any particular date, is equal to the market value of a common share of the Corporation at such date. DSUs are granted to directors and must be retained until the director leaves the Corporation’s Board of Directors (Board), at which time, the Board elects one or any combination of the following payment methods: (a) issuing common shares from treasury, (b) purchase shares on the market or (c) paying cash. If the Board does not elect for the payment method, the obligation is automatically settled in cash.
DSU’s are initially measured on the grant date at fair value and recognized as an obligation. The obligation is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognized in the consolidated income statement. The Corporation values the obligation based on the market price at closing of the Corporation’s stock on the Toronto Stock Exchange.
In the nine-month period ended September 30, 2017, the Corporation granted 48,437 DSUs to directors (110,000 in the comparable period of 2016), and recorded a compensation expense of $747 ($1,396 in the comparable period of 2016). As at September 30, 2017, 111,437 DSUs were outstanding (63,000 as at December 31, 2016) for which the compensation liability was $1,296 ($549 as at December 31, 2016).
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 39 |
d) | Options outside the Corporation’s plan |
In addition, 800,000 inducement options were granted on October 16, 2014 to the incoming CEO. In compliance with TSX rules, these are considered outside of the Corporation’s plan. These options vested in thirds on December 1st, 2015, and thereafter on December 1st 2016 and 2017, and expire five years after the date of grant. These options have an exercise price of $2.46. During the nine-month period ended September 30, 2017, 130,000 were exercised (none in the comparable period of 2016). As at September 30, 2017, 645,000 options are outstanding and 378,333 are exercisable (266,666 on September 30, 2016).
6. | Financial expenses |
The financial expenses consist of the following items:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Interest on finance lease obligations | 78 | 96 | 271 | 274 | |||||||||
Accretion expense – asset retirement obligations | 12 | 6 | 35 | 19 | |||||||||
Foreign exchange loss (gain) | 67 | (18 | ) | 117 | 35 | ||||||||
157 | 84 | 423 | 328 |
7. | Financial revenues |
The financial revenues consist of the following item:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Interest on cash | 323 | 190 | 667 | 478 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 40 |
8. | Net earnings (loss) from discontinued operations |
On September 11, 2017, the Corporation announced that it had entered into a definitive agreement with Monarques Gold Corporation (Monarques), pursuant to which Monarques will acquire Richmont’s Quebec based assets including the Beaufor Mine, the Camflo Mill and the Wasamac development project as well as all other mineral claims, mining leases and mining concessions located in the province of Quebec (Quebec assets). On October 2, 2017, the Corporation confirmed that is has closed the transaction. As a result, revenues, expenses, earning and losses relating to the discontinuation of this operation have been segregated from the Corporation’s results from continuing operations, and are shown as a single line item in the consolidated statements of comprehensive income. The assets and the liabilities are also presented as a single line item in the consolidated statements of financial position. Furthermore, the letters of credit related to the Quebec assets were canceled when the transaction closed.
Operational results and charges related to the Quebec assets are summarized as follows:
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Revenues | |||||||||||||
Revenues from precious metals | 5,829 | 7,191 | 24,755 | 25,118 | |||||||||
Cost of sales | 8,181 | 6,207 | 26,826 | 22,418 | |||||||||
Gross profit (loss) | (2,352 | ) | 984 | (2,071 | ) | 2,700 | |||||||
Other expenses (revenues) | |||||||||||||
Exploration and project evaluation | 493 | 644 | 1,241 | 1,575 | |||||||||
Administration | - | - | 57 | - | |||||||||
Loss on disposal of long-term assets | - | - | 6 | - | |||||||||
Other expenses | 507 | 180 | 1,640 | 2,515 | |||||||||
Other revenues | (314 | ) | (115 | ) | (1,121 | ) | (2,736 | ) | |||||
Financial expenses | 27 | 11 | 68 | 33 | |||||||||
Financial revenues | (1 | ) | - | (9 | ) | (4 | ) | ||||||
712 | 720 | 1,882 | 1,383 | ||||||||||
Earnings (loss) before mining and income taxes | (3,064 | ) | 264 | (3,953 | ) | 1,317 | |||||||
Mining and income taxes | 6 | 520 | 23 | 667 | |||||||||
Net earnings (loss) from discontinued operations | (3,070 | ) | (256 | ) | (3,976 | ) | 650 |
Cash flows used in discontinued operations
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Cash flows from (used) operating activities | (3,508 | ) | (33 | ) | 20 | 3,238 | |||||||
Cash flows used in investing activities | (1,542 | ) | (1,385 | ) | (4,457 | ) | (4,448 | ) | |||||
Cash flows used in financing activities | (313 | ) | (90 | ) | (590 | ) | (91 | ) | |||||
(5,363 | ) | (1,508 | ) | (5,027 | ) | (1,301 | ) |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 41 |
Assets and liabilities related to Quebec assets are summarized as follows:
September 30, | ||||
2017 | ||||
$ | ||||
Assets | ||||
Cash and cash equivalents | 1,169 | |||
Receivables | 1,038 | |||
Inventories | 2,449 | |||
Property, plant and equipment | 12,667 | |||
17,323 | ||||
Liabilities | ||||
Payables, accruals and provisions | 3,271 | |||
Closure allowance | 558 | |||
Finance lease obligations | 668 | |||
Asset retirement obligations | 7,524 | |||
12,021 |
9. | Inventories |
The inventories include the following items:
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
$ | $ | ||||||
(Audited) | |||||||
Precious metals | 1,040 | 260 | |||||
Ore | 4,539 | 4,492 | |||||
Supplies | 3,590 | 5,267 | |||||
9,169 | 10,019 |
During the nine-month periods ended September 30, 2017 and September 30, 2016, there was no write-down of inventories and no reversal of write-down.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 42 |
10. | Property, plant and equipment |
The property, plant and equipment includes the following items:
Mining sites in production | Corporate office and others | Total | |||||||||||||||||||||||||
Mining properties | Development costs | Buildings and refining equipment | Equipment | Total | Lands, buildings and leasehold improvements | Equipment and mobile equipment | Total | ||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Gross carrying amount | |||||||||||||||||||||||||||
Balance at January 1, 2017 | 5,411 | 180,807 | 36,797 | 74,482 | 297,497 | 1,705 | 690 | 2,395 | 299,892 | ||||||||||||||||||
Additions | - | 19,115 | 3,986 | 13,410 | 36,511 | - | - | - | 36,511 | ||||||||||||||||||
Disposals and write-off | - | - | (299 | ) | (210 | ) | (509 | ) | - | - | - | (509 | ) | ||||||||||||||
Transfers | - | - | - | 160 | 160 | - | (160 | ) | (160 | ) | - | ||||||||||||||||
Deposits on equipment | - | - | - | 1,714 | 1,714 | - | - | - | 1,714 | ||||||||||||||||||
Assets held for sale | (1,293 | ) | (34,764 | ) | (7,631 | ) | (20,244 | ) | (63,932 | ) | (454 | ) | (1 | ) | (455 | ) | (64,387 | ) | |||||||||
Balance at September 30, 2017 | 4,118 | 165,158 | 32,853 | 69,312 | 271,441 | 1,251 | 529 | 1,780 | 273,221 | ||||||||||||||||||
Depreciation and depletion | |||||||||||||||||||||||||||
Balance at January 1, 2017 | 2,467 | 87,727 | 16,110 | 33,209 | 139,513 | 675 | 577 | 1,252 | 140,765 | ||||||||||||||||||
Depreciation and depletion | 404 | 17,554 | 3,989 | 8,036 | 29,983 | 80 | 51 | 131 | 30,114 | ||||||||||||||||||
Disposals and write-off | - | - | (193 | ) | (169 | ) | (362 | ) | - | - | - | (362 | ) | ||||||||||||||
Transfers | - | - | - | 150 | 150 | - | (150 | ) | (150 | ) | - | ||||||||||||||||
Assets held for sale | (1,271 | ) | (28,241 | ) | (6,468 | ) | (15,740 | ) | (51,720 | ) | - | - | - | (51,720 | ) | ||||||||||||
Balance at September 30, 2017 | 1,600 | 77,040 | 13,438 | 25,486 | 117,564 | 755 | 478 | 1,233 | 118,797 | ||||||||||||||||||
Carrying amount at September 30, 2017 | 2,518 | 88,118 | 19,415 | 43,826 | 153,877 | 496 | 51 | 547 | 154,424 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 43 |
11. | Long-term debt |
Long-term debt includes the following financial liabilities:
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
$ | $ | ||||||
(Audited) | |||||||
Finance lease obligations | 5,549 | 8,683 | |||||
Contract payment holdbacks | 1,000 | 1,500 | |||||
Closure allowance | - | 599 | |||||
Long-term retention awards | - | 1,692 | |||||
6,549 | 12,474 | ||||||
Current portion | 2,335 | 5,961 | |||||
4,214 | 6,513 |
In March 2012, the Corporation signed agreements with several employees considered as key personnel. These agreements incorporated a retention payment (“Retention Awards”) provided certain conditions were met by the employee, most notably that the employee continued his or her employment with the Corporation until March 2017. These retention payments have been paid in March 2017 in the amount of $1,750 and the expense recorded in 2017 is $58 ($415 in the comparable period of 2016).
12. | Asset retirement obligations |
The Corporation’s production and exploration activities are subject to various federal and provincial laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Corporation conducts its operations so as to protect public health and the environment. The Corporation has recorded the asset retirement obligations of its mining sites on the basis of management’s best estimates of future costs, based on information available on the reporting date. Best estimates of future costs are the amount the Corporation would reasonably pay to settle its obligation on the closing date. Future costs are discounted using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the liability. Such estimates are subject to change based on modifications to laws and regulations or as new information becomes available.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 44 |
a) | Restricted deposits and other financial asset, and letters of credit |
As at September 30, 2017, the Corporation has $714 in restricted deposits with the Ontario government and a credit facility is available to the Corporation up to an amount of $6,100 for the issuance of letters of credit as guarantees for the settlement of asset retirement obligations. The credit facility has a fixed annual fee of 0.95% (0.95% in 2016). The following table provides the allocation of restricted deposits and letters of credit issued as at September 30, 2017 and December 31, 2016:
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
$ | $ | ||||||
(Audited) | |||||||
Restricted deposits | |||||||
Island Gold Mine (Island Gold Deep and Lochalsh property) |
714 | 721 | |||||
Beaufor Mine |
- | 107 | |||||
Other |
- | 10 | |||||
714 | 838 | ||||||
Other financial asset | 150 | - | |||||
864 | 838 | ||||||
Letters of credit1 | |||||||
Camflo Mill |
3,339 | 3,339 | |||||
Island Gold Mine (Kremzar property) |
979 | 979 | |||||
Monique Mine |
948 | - | |||||
Beaufor Mine |
793 | 793 | |||||
6,059 | 5,111 |
1 | Letters of credit are secured by a first rank movable mortgage for a maximum amount of $6,785, guaranteed by equipment which has a net carrying value of $40,267 as at September 30, 2017 ($30,736 as at December 31, 2016). |
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b) | Distribution of the asset retirement obligations |
The following table sets forth the distribution of the asset retirement obligations as at September 30, 2017 and December 31, 2016:
September 30, | December 31, | ||||||
2017 | 2016 | ||||||
$ | $ | ||||||
(Audited) | |||||||
Island Gold Mine | 3,005 | 2,969 | |||||
Francoeur Mine | 36 | 50 | |||||
Camflo Mill | - | 4,137 | |||||
Monique Mine | - | 1,676 | |||||
Beaufor Mine | - | 1,336 | |||||
3,041 | 10,168 | ||||||
Current portion | 36 | 130 | |||||
3,005 | 10,038 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 45 |
13. | Share capital |
Authorized: Unlimited number of common shares with no par value
Three months ended | Nine months ended | ||||||||||||
September 30, 2017 | September 30, 2017 | ||||||||||||
Number | Number | ||||||||||||
of shares | Amount | of shares | Amount | ||||||||||
(thousands) | $ | (thousands) | $ | ||||||||||
Issued and paid: Common shares | |||||||||||||
Balance, beginning of period | 63,760 | 222,813 | 63,030 | 217,837 | |||||||||
Issue of common shares for cash: Exercise of share options |
53 | 181 | 696 | 4,609 | |||||||||
Shares issued in exchange of restricted share units |
3 | 13 | 90 | 561 | |||||||||
Balance, end of period | 63,816 | 223,007 | 63,816 | 223,007 |
Issue of shares
During the nine-month period ended on September 30, 2017, the Corporation issued 695,727 common shares following the exercise of stock options (711,284 during the nine-month period ended on September 30, 2016) and received cash proceeds in the amount of $3,058 ($2,414 in the comparable period of 2016). Contributed surplus was reduced by $1,551 which represents the recorded fair value of the exercised stock options ($1,173 in the comparable period of 2016).
During the nine-month period ended on September 30, 2017, the Corporation issued 90,615 common shares following the vesting of restricted share units (62,797 in the comparable period of 2016). Contributed surplus was reduced by $561 which represents the recorded fair value of the restricted share units ($236 in the comparable period of 2016).
14. | Consolidated statements of cash flows |
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
$ | $ | $ | $ | ||||||||||
Net change in non-cash working capital items | |||||||||||||
Receivables |
(446 | ) | 99 | (157 | ) | 740 | |||||||
Exploration tax credits receivable |
(42 | ) | 740 | (146 | ) | 902 | |||||||
Inventories |
(543 | ) | (2,824 | ) | (1,600 | ) | (806 | ) | |||||
Payables, accruals and provisions |
(361 | ) | (507 | ) | 2,221 | (3,761 | ) | ||||||
(1,392 | ) | (2,492 | ) | 318 | (2,925 | ) | |||||||
Supplemental information | |||||||||||||
Change in payables, accruals and provisions related to property, plant and equipment |
2,259 | (424 | ) | 2,144 | (2,127 | ) |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 46 |
15. | Segmented information |
The Corporation operates gold mines at different sites in Quebec and Ontario. These operating sites are managed separately given their different locations. The Corporation assesses the performance of each segment based on earnings before taxes. Accounting policies for each segment are the same as those used for the preparation of the consolidated financial statements.
There was no difference in 2017 compared to annual financial statements of 2016 on the basis of segmentation or the basis of evaluation of segmented results.
Three months ended September 30, 2017 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate | Discontinued | ||||||||||||||||
statement of comprehensive | Quebec | Ontario | segments | and others | operation | Total | |||||||||||||
income | $ | $ | $ | $ | $ | $ | |||||||||||||
Revenues | 5,829 | 36,549 | 42,378 | - | (5,829 | ) | 36,549 | ||||||||||||
Cost of sales | 8,181 | 23,732 | 31,913 | - | (8,181 | ) | 23,732 | ||||||||||||
Gross profit (loss) | (2,352 | ) | 12,817 | 10,465 | - | 2,352 | 12,817 | ||||||||||||
Exploration and project evaluation | 483 | 5,778 | 6,261 | 241 | (493 | ) | 6,009 | ||||||||||||
Administration | - | - | - | 3,988 | - | 3,988 | |||||||||||||
Gain on disposal of long-term assets | - | (2,006 | ) | (2,006 | ) | - | - | (2,006 | ) | ||||||||||
Other expenses | 507 | - | 507 | - | (507 | ) | - | ||||||||||||
Other revenues | (314 | ) | (8 | ) | (322 | ) | - | 314 | (8 | ) | |||||||||
676 | 3,764 | 4,440 | 4,229 | (686 | ) | 7,983 | |||||||||||||
Operating earnings (loss) | (3,028 | ) | 9,053 | 6,025 | (4,229 | ) | 3,038 | 4,834 | |||||||||||
Financial expenses | 23 | 90 | 113 | 71 | (27 | ) | 157 | ||||||||||||
Financial revenues | (1 | ) | (56 | ) | (57 | ) | (267 | ) | 1 | (323 | ) | ||||||||
Earnings (loss) before taxes and discontinued operations |
(3,050 | ) | 9,019 | 5,969 | (4,033 | ) | 3,064 | 5,000 | |||||||||||
Addition to property, plant and equipment |
1,650 | 10,069 | 11,719 | - | - | 11,719 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 47 |
Nine months ended September 30, 2017 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate | Discontinued | ||||||||||||||||
statement of comprehensive | Quebec | Ontario | segments | and others | operation | Total | |||||||||||||
Income | $ | $ | $ | $ | $ | $ | |||||||||||||
Revenues | 24,755 | 123,363 | 148,118 | - | (24,755 | ) | 123,363 | ||||||||||||
Cost of sales | 26,826 | 74,066 | 100,892 | - | (26,826 | ) | 74,066 | ||||||||||||
Gross profit (loss) | (2,071 | ) | 49,297 | 47,226 | - | 2,071 | 49,297 | ||||||||||||
Exploration and project evaluation | 1,068 | 14,429 | 15,497 | 1,077 | (1,241 | ) | 15,333 | ||||||||||||
Administration | - | - | - | 11,246 | (57 | ) | 11,189 | ||||||||||||
Loss (gain) on disposal of long-term assets |
6 | (1,946 | ) | (1,940 | ) | - | (6 | ) | (1,946 | ) | |||||||||
Other expenses | 1,640 | - | 1,640 | - | (1,640 | ) | - | ||||||||||||
Other revenues | (1,121 | ) | (20 | ) | (1,141 | ) | - | 1,121 | (20 | ) | |||||||||
1,593 | 12,463 | 14,056 | 12,323 | (1,823 | ) | 24,556 | |||||||||||||
Operating earnings (loss) | (3,664 | ) | 36,834 | 33,170 | (12,323 | ) | 3,894 | 24,741 | |||||||||||
Financial expenses | 57 | 306 | 363 | 128 | (68 | ) | 423 | ||||||||||||
Financial revenues | (9 | ) | (58 | ) | (67 | ) | (609 | ) | 9 | (667 | ) | ||||||||
Earnings (loss) before taxes and discontinued operations |
(3,712 | ) | 36,586 | 32,874 | (11,842 | ) | 3,953 | 24,985 | |||||||||||
Addition to property, plant and equipment |
4,582 | 30,395 | 34,977 | - | - | 34,977 | |||||||||||||
September 30, 2017 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate | Discontinued | ||||||||||||||||
statement of financial | Quebec | Ontario | segments | and others | operation | Total | |||||||||||||
position | $ | $ | $ | $ | $ | $ | |||||||||||||
Current assets | 4,656 | 18,358 | 23,014 | 86,400 | (4,656 | ) | 104,758 | ||||||||||||
Restricted deposits and other financial asset |
- | 864 | 864 | - | - | 864 | |||||||||||||
Property, plant and equipment | 12,193 | 153,519 | 165,712 | 1,379 | (12,667 | ) | 154,424 | ||||||||||||
Deferred income and mining tax assets |
- | - | - | 2,351 | - | 2,351 | |||||||||||||
Assets held for sale | - | - | - | - | 17,323 | 17,323 | |||||||||||||
Total assets | 16,849 | 172,741 | 189,590 | 90,130 | - | 279,720 | |||||||||||||
Current liabilities | 3,663 | 21,308 | 24,971 | 6,161 | (3,675 | ) | 27,457 | ||||||||||||
Long-term debt | 1,226 | 3,214 | 4,440 | 1,000 | (1,226 | ) | 4,214 | ||||||||||||
Asset retirement obligations | 5,512 | 3,005 | 8,517 | 1,608 | (7,120 | ) | 3,005 | ||||||||||||
Deferred income and mining tax liabilities |
- | - | - | 7,674 | - | 7,674 | |||||||||||||
Liabilities related to assets held for sale |
- | - | - | - | 12,021 | 12,021 | |||||||||||||
Total liabilities | 10,401 | 27,527 | 37,928 | 16,443 | - | 54,371 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 48 |
Three months ended September 30, 2016 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate | Discontinued | ||||||||||||||||
income statement | Quebec | Ontario | segments | and others | operation | Total | |||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||
Revenues | 7,191 | 24,053 | 31,244 | - | (7,191 | ) | 24,053 | ||||||||||||
Cost of sales | 6,207 | 17,674 | 23,881 | - | (6,207 | ) | 17,674 | ||||||||||||
Gross profit (loss) | 984 | 6,379 | 7,363 | - | (984 | ) | 6,379 | ||||||||||||
Exploration and project evaluation | 631 | 3,509 | 4,140 | 953 | (644 | ) | 4,449 | ||||||||||||
Administration | - | - | - | 2,532 | - | 2,532 | |||||||||||||
Gain on disposal of long-term assets |
- | - | - | (96 | ) | - | (96 | ) | |||||||||||
Other expenses | 180 | - | 180 | - | (180 | ) | - | ||||||||||||
Other revenues | (115 | ) | (5 | ) | (120 | ) | - | 115 | (5 | ) | |||||||||
696 | 3,504 | 4,200 | 3,389 | (709 | ) | 6,880 | |||||||||||||
Operating earnings (loss) | 288 | 2,875 | 3,163 | (3,389 | ) | (275 | ) | (501 | ) | ||||||||||
Financial expenses | 11 | 102 | 113 | (18 | ) | (11 | ) | 84 | |||||||||||
Financial revenues | - | - | - | (190 | ) | - | (190 | ) | |||||||||||
Earnings (loss) before taxes and discontinued operations |
277 | 2,773 | 3,050 | (3,181 | ) | (264 | ) | (395 | ) | ||||||||||
Addition to property, plant and equipment |
1,385 | 18,113 | 19,498 | 33 | - | 19,531 |
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 49 |
Nine months ended September 30, 2016 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate Discontinued | |||||||||||||||||
income statement | Quebec | Ontario | segments | and others | operation | Total | |||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||
Revenues | 25,118 | 99,378 | 124,496 | - | (25,118 | ) | 99,378 | ||||||||||||
Cost of sales | 22,418 | 66,266 | 88,684 | - | (22,418 | ) | 66,266 | ||||||||||||
Gross profit (loss) | 2,700 | 33,112 | 35,812 | - | (2,700 | ) | 33,112 | ||||||||||||
Exploration and project evaluation | 1,514 | 10,903 | 12,417 | 1,349 | (1,575 | ) | 12,191 | ||||||||||||
Administration | - | - | - | 8,782 | - | 8,782 | |||||||||||||
Loss (gain) on disposal of long-term assets |
- | 91 | 91 | (96 | ) | - | (5 | ) | |||||||||||
Other expenses | 2,515 | - | 2,515 | - | (2,515 | ) | - | ||||||||||||
Other revenues | (2,736 | ) | (10 | ) | (2,746 | ) | - | 2,736 | (10 | ) | |||||||||
1,293 | 10,984 | 12,277 | 10,035 | (1,354 | ) | 20,958 | |||||||||||||
Operating earnings (loss) | 1,407 | 22,128 | 23,535 | (10,035 | ) | (1,346 | ) | 12,154 | |||||||||||
Financial expenses | 33 | 293 | 326 | 35 | (33 | ) | 328 | ||||||||||||
Financial revenues | (4 | ) | (2 | ) | (6 | ) | (476 | ) | 4 | (478 | ) | ||||||||
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Earnings (loss) before taxes and discontinued operations |
1,378 | 21,837 | 23,215 | (9,594 | ) | (1,317 | ) | 12,304 | |||||||||||
Addition to property, plant and equipment |
4,452 | 43,087 | 47,539 | 58 | - | 47,597 | |||||||||||||
December 31, 2016 | |||||||||||||||||||
Segmented information | Exploration, | ||||||||||||||||||
concerning the consolidated | Total | corporate | |||||||||||||||||
statement of financial | Quebec | Ontario | segments | and others | Total | ||||||||||||||
position | $ | $ | $ | $ | $ | ||||||||||||||
Current assets | 4,707 | 20,862 | 25,569 | 63,836 | 89,405 | ||||||||||||||
Restricted deposits | 107 | 721 | 828 | 10 | 838 | ||||||||||||||
Property, plant and equipment | 10,696 | 146,903 | 157,599 | 1,528 | 159,127 | ||||||||||||||
Deferred income and mining tax assets | - | - | - | 3,123 | 3,123 | ||||||||||||||
Total assets | 15,510 | 168,486 | 183,996 | 68,497 | 252,493 | ||||||||||||||
Current liabilities | 4,614 | 17,034 | 21,648 | 6,742 | 28,390 | ||||||||||||||
Long-term debt | 1,599 | 4,914 | 6,513 | - | 6,513 | ||||||||||||||
Asset retirement obligations | 7,069 | 2,969 | 10,038 | - | 10,038 | ||||||||||||||
Deferred income and mining tax liabilities | - | - | - | 5,097 | 5,097 | ||||||||||||||
Total liabilities | 13,282 | 24,917 | 38,199 | 11,839 | 50,038 |
16. | Approval of Financial Statements |
The interim consolidated financial statements for the period ending September 30, 2017 were approved for publication by the Board of Directors on November 7, 2017.
RICHMONT MINES INC. | REPORT TO SHAREHOLDERS Q3 2017 | Page 50 |
www.richmont-mines.com
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE OF RICHMONT MINES INC.
I, Renaud Adams, President and Chief Executive Office of Richmont Mines Inc., certify the following:
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Richmont Mines Inc. (the “issuer”) for the interim period ended September 30, 2017. |
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2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
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3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
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4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (c. V-1.1, r. 27), for the issuer. |
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5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings |
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(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
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(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
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(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
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(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
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5.1 | Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is « Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) ». |
1
5.2 | ICFR – material weakness relating to design: N/A |
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1st, 2017 and ended on September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: November 8, 2017
Renaud Adams (signed)
Renaud Adams
President and Chief Executive Officer
2
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE OF RICHMONT MINES INC.
I, Robert Chausse, Chief Financial Officer of Richmont Mines Inc., certify the following:
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Richmont Mines Inc. (the “issuer”) for the interim period ended September 30, 2017. |
|
|
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
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3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
|
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4. | Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (c. V-1.1, r. 27), for the issuer. |
|
|
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings |
|
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
|
(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
|
(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
|
(b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
|
5.1 | Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is « Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) ». |
1
5.2 | ICFR – material weakness relating to design: N/A |
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1st, 2017 and ended on September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: November 8, 2017
Robert Chausse (signed)
Robert Chausse
Chief Financial Officer
2
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