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1 October 2013

Vatukoula Gold Mines plc

("Vatukoula" or "the Company")

Operational Update for the Fourth Quarter and Twelve Months ended 31st August 2013

Vatukoula Gold Mines Plc. (AIM:VGM), the AIM-listed gold  producer, is pleased to announce its unaudited preliminary operational results from its 100% owned Vatukoula Gold Mine in Fiji for the fourth quarter ended 31st August 2013 ("Q4") and twelve months ended 31st August 2013.

·        18% reduction incash costs per tonne to US$148 per tonne in the twelve months ended August 2013 from US$180 per tonne during the same period last year

·        29% increase in grade (5.85 g/t) delivered from underground compared to the previous quarter (Q3: 4.53 g/t)


3 months ended Aug 2013 (Q4)

3 months ended May 2013 (Q3)

3 months ended Feb 2013 (Q2)

12 months ended Aug 2013

12 months ended Aug 2012

Total underground tonnes mined (ore, waste & capital)

96,701

94,793

89,341

467,942

477,089

Strike drive development (metres)

395

405

342

1,682

4,034

Capital development (metres)

1,131

976

765

4,498

4,975

Ore processed (tonnes)

111,936

100,182

103,916

428,978

479,524

Average ore head grade (grams/tonne)

3.96

3.48

3.70

3.79

4.24

Total recovery

79.44%

79.76%

74.82%

75.55%

78.34%

Gold produced

11,442

9,005

8,861

39,858

53,152

Gold shipped

11,219

8,704

9,113

39,517

52,616

Unaudited Financial Highlights:

12 months ended August 2013

12 months ended August 2012

Revenue (£'000)

39,080

54,925

EBITDA (£'000)

(5,486)

(1,548)

Cash (used) / generated from operating activities (£'000)

193

6,257

Underlying operating (loss) (£'000)

(12,304)

(6,598)

Cash cost per ounce shipped (US$/ounce)

1,606

1,643

Average realised gold price (US$/ounce)

1,533

1,644

Basic loss per share (pence)

(10.45)

(7.81)

Capital Investment (£'000)

13,884

16,063

Cash and Cash equivalents (£'000)

635

2,437

David Paxton, CEO of Vatukoula Gold Mines, commented:

"During the last twelve months we have embarked on controlling costs and setting the foundation for future growth.  While we finalised the long-term financing announced on 12 August, Q4 production remained at a restricted rate. Nonetheless our continued cost controls and higher grades delivered from underground lowered our cash costs per ounce by some 23% over Q3

Once the Zhongrun agreement has completed we will be able to deliver our Company strategy to grow our production to sustainable and profitable leveland we expect to see the effect of this investment filter through to increases in production in the six months following the completion of the investment with ourlong term production target being achieved in the 12 months after"

Operating Results


3 months ended Aug 2013 (Q4)

3 months ended May 2013 (Q3)

3 months ended Feb 2013 (Q2)

12 months ended Aug 2013

12 months ended Aug 2012

Underground Mining






Total underground tonnes mined (ore, waste & capital)

96,701

94,793

89,341

397,995

477,089

Operating development (metres)

3,199

3,666

3,419

13,644

15,513

Strike drive development (metres)

395

405

342

1,682

4,034

Capital development (metres)

1,131

976

765

4,498

4,975

Total development (metres)

4,725

5,047

4,526

19,823

24,521

Sulphide Plant






Sulphide ore delivered (tonnes)

54,637

59,456

64,023

240,156

304,042

Sulphide head grade (grams/tonne)

5.85

4.53

4.55

5.00

5.12

Oxide Plant






Oxide ore delivered (tonnes)

57,076

40,424

41,017

189,047

176,357

Oxide head grade (grams/tonne)

2.15

2.36

2.36

2.27

1.90

Total (sulphide + oxide)






Ore processed (tonnes)

111,936

100,182

103,916

428,978

479,524

Average ore head grade (grams/tonne)

3.96

3.48

3.70

3.79

4.24

Total recovery

79.44%

79.76%

74.82%

75.55%

78.34%

Gold produced

11,442

9,005

8,861

39,858

53,152

Gold shipped

11,219

8,704

9,113

39,517

52,616







Cash Costs






Cash cost per ounce shipped (US$)

1,393

1,812

1,688

1,606

1,643

Cash cost per tonne mined and milled (US$/tonne)

140

157

148

148

180

Average realised gold price (US$/ounce)

1,317

1,474

1,636

1,533

1,644

Underground Production and Development

Mining operations at the Vatukoula Gold Mine have been maintained at a reduced rate while we wait for the agreed financing to complete. We have continued our priority on ore production and undertaken development when we have had equipment available.

We have started remedial work on the Smith shaft below 19 level. This section of the shaft had been unused since 2006 when the mine was closed by the previous owners. We have accessed the lower levels and are cleaning out the shaft from these levels. Pumping in this area has been maintained and we are lowering the water toward the 23 level. Spillage removal continues in the Philip shaft as and when we have equipment availability. 

Total tonnes of ore, waste and capital mined for the twelve months ended 31st August 2013 decreased by 17% to 397,995 tonnes compared to the twelve months ended 31st August 2012. The lower tonnages were directly driven by the lowered availability of mining equipment as a result of the financial constraints faced by the mine over the last three quarters. For Q4, the total tonnage of ore, waste and capital mined was 2% higher than Q3. Capital development metres decreased 10% for the twelve months ending 31st August 2012 from 4,975 metres in 2012 to 4,498 metres in 2013.

The ore delivered from underground for the twelve months ended 31st August 2012 was 240,156 tonnes, a 21% decrease compared to the same period last year. This reduction in ore delivered was due in part to the reduction of strike drive development during the year, which is typically delivered as ore.  For Q4 the ore delivered increased by 41% to 54,637 tonnes compared to the previous quarter.

The average underground grade for the twelve months was 5.00 grams per tonne, which was lower than the same period last year (5.12 grams per tonne). For Q4 the average underground grade was 5.85 grams per tonne which was higher than Q3 (4.53 grams per tonne).

Surface Production

Production from surface oxides and sulphide waste piles for the twelve months delivered 189,047 tonnes at a grade of 2.39 grams per tonne. For Q4, surface production was 57,076 tonnes at an average grade of 2.15 grams per tonne.  Ore was delivered from both sulphide waste dumps and surface oxide production. Sulphide waste is being processed through the sulphide circuit. The process plant management team have determined that surface sulphide material can be processed in the sulphide process, which results in higher recovery rates.

Vatukoula Treatment Plant ("VTP")

During the twelve months, the VTP processed 428,978 tonnes of ore which was an 11% reduction compared to the same period last year (479,524 tonnes). For Q4 the VTP processed 111,936 tonnes of ore which was 12% higher than Q3 (100,182 tonnes).

The average grade decreased from 4.24 grams of gold per tonne in the twelve months ending August 2012, to 3.79 grams of gold per tonne in the twelve months ending August 2013. This was driven by lower grades delivered from underground. For Q4 the grade increased to 3.96 grams per tonne from 3.48 grams per tonne in Q3, as a result of the higher grades delivered from underground and surface.

Recoveries for the twelve-month period and Q4 ran at 75.5% and 79.4% respectively. For the twelve months the recovery was lower than the comparable period last year as a result of the sulphide nature of the material delivered from the waste dumps. On a quarterly basis the increase in recoveries can be attributed to the increase in grade delivered from underground and surface.

As previously detailed, surface oxide and sulphide production is being maintained while the underground ore production is limited. In the long-run surface mining will be phased out and we expect that recoveries will return to between 81% and 85% depending on grades delivered to the mill.

Unaudited Financial Highlights

Revenue for the twelve months ending 31 August 2013 of £39.1 million was lower than the same period last year (£54.9 million). This decrease was driven by a reduction in VGM's year-on-year sales volume and the lower gold price. The average realised gold price was US$1,533 in the twelve months ended August 2013 compared to US$1,644 per ounce in the same period in 2012.

The net cash generated in operating activities decreased from £6.2 million generated in the twelve months ended August 2012 to £0.2 million generated in the twelve months ended August 2013. Prior to movements in working capital these figures are £0.1 million used and £1.9 million used respectively. The movements in working capital are for the majority composed of a decrease in receivables of £2.9 million as we accelerated the recovery of value added tax over the period and a decrease in our accounts payable by £1.3 million.

Capital investment decreased from £16.1 million in the twelve months ended August 2012 to £13.9 million in the twelve months ended August 2013. This decrease is mainly attributable to substantial decreases in resource drilling activities and the purchase of plant property and equipment, both being driven by the lack of capital available..

Cash costs for Q4 were US$1,393 per ounce shipped (Q3: US$1,812 per ounce shipped). The main reasons for the decrease in the cash costs per ounce is the increase in grade delivered to the mill and the decrease in cash costs per tonne mined and milled from US$157 in Q3 to US$140 in Q4.

Cash costs for the twelve months ending 31 August 2013 were US$1,606 per ounce shipped (US$1,643 per ounce shipped for the same period last year.). Cash costs per tonne reduced significantly from US$180 in twelve months ending 31 August 2012 to US$148 in twelve months ending 31 August 2013, and bodes well for our future cost profile.

Qualified Person

Qualified Person Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approvedthe information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School. Kiran is the Chief Financial Officer of VGM.

-Ends-

Enquiries:



Vatukoula Gold Mines plc



David Paxton

+ 44 (0)20 7440 0643



Kiran Morzaria




W.H. Ireland Limited


Bell Pottinger Pelham



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