U.S. Silver Corporation (TSX:USA, OTCQX:USSIF, Frankfurt:QE2) (“U.S. Silver” or the “Company”) today reported first-quarter earnings of $2.9 million and cash from operating activities of $3.9 million.
“Silver production increased by 11.5% to 551,228 ounces compared to 494,363 in Q1 2011 and while lower than targeted levels was within normal levels of variability experienced at the Galena,” said U.S. Silver’s Executive Chairman Gordon Pridham. “We are also pleased to announce that the electrical upgrade to the Number 3 shaft hoist has been successfully completed on time resulting in enhanced reliability, electrical power savings, and reduced repair and troubleshooting issues. This project is part of our ongoing commitment to invest in the business to ensure long term, safe and reliable production. U.S. Silver reconfirms its annual production guidance of 2.4 million ounces for 2012.”
First Quarter 2012 Summary
(All figures in U.S. dollars unless otherwise noted)
- Silver production increased to 551,228 ounces in the quarter compared to 494,363 ounces in Q1-2011
- Realized silver price decreased to $33.29 in Q1 2012 compared to $37.60 in Q1-2011
- Cash Costs increased to $21.06 in Q1-2012 from $17.97 in Q1-2011 due to increased operating costs including rehabilitation work and lower than targeted production in the quarter.
- Cash on hand at the end of the quarter totaled $26.9 million, largely unchanged from December 31, 2011. Working capital increased to $37.3 million in Q1-2012 from $35.7 million at December 31, 2011. Cash currently stands at $23 million. Working capital changes, our investment program, the share buyback and the delay of shipments associated with the hoist upgrade have contributed to the decline since year end.
Selected Financial Data (in thousands of U.S. dollars, except per share data)
|Three Months Ended March 31, 2012||Three Months Ended March 31, 2011|
|Cost of sales||(16,366)||(10,861)|
|General and administration||(1,478)||(705)|
|Net income for the period||2,853||4,198|
|Basic earnings per share||$0.05||$0.08|
|Cash generated from operating activities||3,945||7,226|
|Cash generated from financing activities||45||1,307|
|Cash used in investing activities||(4,128)||(2,981)|
|Financial Position||March 31, 2012||December 31, 2011|
|Current assets - total||43,233||40,880|
|Current liabilities - total||5,922||5,144|
The Company recorded net income of $2.9 million for Q1-2012 compared to a net income of $4.2 million for Q1-2011. The decrease was primarily attributable to higher cost of sales ($5.5 million), higher general and administrative expense ($0.8 million), higher exploration costs ($0.6 million), and partially offset by a lower income tax expense ($0.9 million), each of which are described in more detail below:
Revenue increased by $3.9 million from $19.1 million in Q1-2011 to $23.0 million in Q1-2012. The 17% increase was due to slightly higher metal prices, $32.62 per ounce of silver in Q1-2012 compared to $31.66 per ounce of silver in Q1-2011 and by the sale of 29.9% more silver ounces (569,027 ounces in Q1-2012 compared to 438,043 sold in Q1-2011). Revenues are recorded based on the provisional prices at the time of the initial acceptance by the customer. Variations between the price recorded at the initial acceptance date by the customer and the final price set under the contracts covering such sales are caused by the fluctuations in the market prices for copper, lead and silver and result in an embedded derivative.
Cost of Sales increased by $5.5 million from $10.9 million in Q1-2011 to $16.4 million in Q1-2012. The 34% increase was primarily due to higher sales volumes and increased labour costs in the quarter.
General and Administration costs increased by $0.8 million from $0.7 million in Q1-2011 to $1.2 million in Q1-2012 due primarily to the increase in share-based compensation expense of $0.6 million.
Exploration costs increased $0.6 million due to the expansion of the exploration program.
Provision for income taxes decreased $0.9 million in Q1-2012 due to lower levels of profitability in the quarter and a lower tax rate.
Summary of Operating Statistics
|Q1 2012||Q4 2011||Q1 2011|
|Tons Milled||Tons Ag/Cu||42,246||41,986||44,350|
|Tons Milled||Tons Ag/Pb||18,727||13,995||10,185|
|Silver Mill Head Grade||Oz/Ton Ag/Cu||11.25||11.09||10.10|
|Silver Mill Head Grade||Oz/Ton Ag/Pb||5.21||6.13||6.38|
|Silver Recoveries||% Ag/Cu||96.37||96.43||96.66|
|Silver Recoveries||% Ag/Pb||94.48||94.43||94.83|
|Realized Silver Price||US$/Oz||$33.29||$25.09||$37.60|
(after by-product credits)
Silver production totaled 551,228 ounces in Q1-2012 which was 11.5% (56,865 ounces) higher than the Q1-2011 production of 494,363 ounces. Lead production increased 24.0% (306,942 pounds) from 1,277,201 pounds in Q1-2011 to 1,584,143 pounds in Q1-2012. Copper production decreased 10.4% (26,923 pounds) from 259,401 pounds in Q1-2011 to 232,478 pounds in Q1-2012. Increased production levels were the result of mining 6,538 more tons (12.0%) in Q1-2012 compared to Q1-2011. Increased silver-copper head grade, partially offset by lower head grade in silver-lead contributed to the higher production rate. Production was below targeted levels due to mine repair activities, including main haulage level rehabilitation that continued to keep mining labour and equipment from production related activities. In addition, several higher grade stopes, available during 2011, were idle due to seismic activity. These stopes are currently under repair and re-development.
The previously announced upgrade to the electrical components of the hoist in the Number 3 shaft at the Galena mine has been completed on time and on budget and normal hoisting activities have resumed after a successful commissioning project over the past two weeks. During the hoist conversion, mining continued at normal rates underground. Ore was stockpiled in the mine and will be processed during May and June. During this period, maintenance crews have inspected and performed repair and maintenance work on the Galena and Coeur mills.
Management’s Discussion & Analysis and Conference Call
This news release should be read in conjunction with U.S. Silver’s first quarter 2012 Unaudited Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis filed with Canadian securities regulators available at www.sedar.com or on the Company’s website at www.us-silver.com.
|May 10, 2012 at 4:30 pm Eastern Time|
Dial in details:
|416-849-0833 or 1-855-859-2056|
ABOUT U.S. SILVER CORPORATION
U.S. Silver, through its wholly owned subsidiaries, owns and/or operates the Galena, Coeur, Caladay and Dayrock silver-lead-copper mines in Shoshone County, Idaho, with the Galena mine being the second most prolific silver mine in US history. Total silver production from U.S. Silver's mining complex has exceeded 220 million ounces of silver production since 1953. U.S. Silver controls a land package now totaling approximately 14,000 acres in the heart of the Coeur d'Alene Mining District. U.S. Silver is focused on expanding the production from existing operations as well as exploring and developing its extensive Silver Valley holdings in the District.
Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Corporation assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to the Corporation. Additional information identifying risks and uncertainties is contained in filings by the Corporation with the Canadian securities regulators, which filings are available at www.sedar.com.