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I have been a buyer here for a few months , unfortunately can't buy a whole lot without moving it up. I have seen bigger bids moving in recently . Recent financing improved their cash position until they get the mine running in second half of this year . Good luck !!
Over a mil. in $ volume today at Amex and close to mil. in $ volume at Tsx. More serious money is starting to flow in here now .
POG wow
Volume !!
Book value is the value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.
I did not calculate the book value . Just a rough estimate on new found assets . 3.8 mil ounces of gold AISC with current POG and the streaming deals that add to cost . Anyone know how to id be very interested in that .
More like $3-4 a share after AISC and all other cost like streaming financing deals . Still amazing news . Can an accountant here explain how that will effect book value ?
Twanziga 30500 and Namoya 16000 ounces total 46500 . 230000 for 2016 with 40% weighed in the H1 and based Q4 2015 for Twanziga .
Hope to see run like that NMKTF one day .
$1050 is for Namoya estimate for H1.
Twangiza is much lower .
The 2015 cash cost represented a 19% reduction compared to the 2014, the results of being able to run Twangiza at or above design capacity. The Q4 2015 all-in sustaining costs of $745 per ounce brings the 2015 full-year all-in sustaining cost of $657 per ounce, a 16% decrease compared to the full-year 2014
Yes , dropping $650 to $750 in H2 for Namoya .
Banro Corporation (NYSEMKT:BAA)
Q4 2015 Earnings Conference Call
March 29, 2016 11:00 AM ET
Executives
John Clarke – President and Chief Executive Officer
Kevin Jennings – Senior Vice President and Chief Financial Officer
Analysts
Ross Carden – Polygon
Phil Larson – Millstreet Capital
Presentation
Operator
Good day, ladies and gentlemen. Welcome to Banro Corporation’s Year End 2015 Financial Results Conference Call. I would now like to turn the meeting over to John Clarke, Banro’s President and CEO.
John Clarke
Thank you, Melissa, and thanks to everyone for joining us today. Before we get started, we’d like to emphasize that some of the information discussed in this call, particularly our targets for 2016 and beyond, and our forward-looking plan, is based on information as of today, March 29. As well, our commentary contains forward-looking information that involves risk and uncertainty.
Actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. And certain material factors or assumptions were applied in drawing such a conclusion or making such a forecast and projection. Additional information about the material factors that could cause actual results to differ materially from such a conclusion, forecast or projection and the material factors or assumptions were applied in drawing such a conclusion or making such a forecast or projection is contained in Banro’s regulatory filings, including Banro’s year-end 2015 MD&A and the annual information form.
During today I will provide a broad overview of 2015 together with an operations update for both Twangiza and Namoya. Kevin Jennings, Banro’s CFO, will provide an update on Banro’s financial position.
At the Twangiza mine, our operations for 2015 represented a steady continuity in delivering production above expectations with reducing operating costs. The fourth quarter contributed approximately 30,400 ounces of gold at a cash cost of $601 per ounce, to the 2015 production of approximately 135,500 ounces of gold at a cash cost per ounce of $553 per ounce. This was achieved with a mix of oxide and non-oxide ores in accordance with mining programs outlined in our June 2015 update of mineral resources and mineral reserves, which provided reserve growth at Twangiza, extending the mine life of the current installed operations to 14 years as of 31 December, 2014.
We focused during the past year an evaluation of future optimization and possible future growth of the existing Twangiza operations. We commented in our last call that we have tested those opportunities during Q3 2015 by initiating trials to test the ability to process 100% non-oxide ores that have been pre-crushed. We’ve also evaluated the opportunity to incremental increases in the throughput capacity of Twangiza and will install during 2016 some additional, fine crushing capacity to take Twangiza’s interim capacity through the – 1.85 million tonnes per year from its current 1.7 million tonnes per year design.
With the successful commissioning of the new CAT 777s and associated equipment at Namoya in Q4 2015, we were able to declare commercial production at Namoya, effective 1 January, 2016.
Now I’ll hand the call over to the Banro’s CFO, Kevin Jennings, for an overview of year-end 2015 financial results.
Kevin Jennings
Thank you, John and good morning to all. Since most of you have read the financial results in the press release and the filings, I will go over them briefly and provide you with some commentary on our Q4 and full year-to-date results and some of our expectations for 2016.
In Q4 at Twangiza, we report 30,000 ounces of gold and revenues of just under $35 million were generated from the sales of 31,000 ounces at an average price of $1,106 per ounce. This compares to 29,000 ounces produced in Q4 of 2014 for revenues of $35 million from the sale of 29,000 ounces at an average of $1,202 per ounce. This is an increase of 7% in gold sold over the same quarter of 2014 with a decrease in revenues of 2% over the Q4 2014, primarily due to the gold price being $96 per ounce lower in Q4 2014.
In terms of the key revenue drivers from Q4 to Q3, we saw that has guided in Q3 the Twangiza quarterly mill throughput Q4 was 415,000 tonnes of ore, lower from the record of 440,000 tonnes in Q3. The head grade decreased slightly from 3.07 grams per ton to 2.82 grams per ton, but was partly offset by increased recoveries from 80% to 81%, as the operation loss some of the ability in the mining operations from heavy rains, and the requirement to move more waste to free up available ore faces.
In Q4 cash costs were $601 per ounce and 20% higher than the third quarter of $501 per ounce, primarily due to lower gold production of 4,000 ounces in Q3, while 80% more material was mined in the quarter. 2015 cash costs were $553 per ounce, significantly below the original 2015 cost guidance of $650 to $750 per ounce. And as mentioned before, this cost improvement has primarily been the result of higher ounce production versus our original plan from a more robust mine schedule incorporated with the increased mine reserves announced in the June NI 43-101 reserve update.
Q4 Twangiza all-in sustaining cost of $745 per ounce, increased in the quarter due to higher TMF construction cost and lower production, gold production. The 2015 all-in sustaining cost of $657 per ounce, versus $781 per ounce in 2014 was a function of the improved cash cost performance and the sustaining capital kept in line with the original budget.
The company generated $2 million in EBITDA for the quarter and $56 million for the full-year, in which the quarter was impacted by lower gross margins from lower production and higher mining activity in the quarter. DRC tax assessments levied late in the quarter and higher transaction costs from a Baiyin financing signed at year-end.
2015 net income before non-cash asset impairment was $11 million and the net loss of $74 million for the full year after the non-cash impairment. A total of $84.3 million non-cash asset impairment was taken on the mine under construction balance for the full-year at Namoya, which was an $11 million increase from the previous quarter. This was result of the aggregate adverse impact of lower consensus long-term gold price outlook at year-end, which saw spot prices reaches lowest level for the year and the build-up of capitalized borrowing cost and pre-commercial operating costs from the extended ramp up.
With the improved gold price outlook emerging for 2016, we do not expect any further write downs in the near future. In February, we closed the comprehensive $98.75 million financing, which can be described as a $67.5 million proceeds from a gold streaming agreement for approximately 11% of the Twangiza’s life of mine reserves receiving $150 per ounce. This interest would be reduced by 50% for any incremental reserves and an embedded buyback option for the company after three years.
Also it was a term-loan of $22.5 million at 8.5% interest rates with two subsequent annual renewal periods and $8.75 million equity investment in new common shares providing Baiyin non-IFRS with a 16.6% interest in Banro Corporation. In a private transaction, Baiyin purchased $40 million of the outstanding senior secured notes and $20 million of the outstanding convertible preferred shares. With these two transactions, we have created a new strategic investor in all levels of the Banro capital structure with aligned interest in the profitable growth of the company.
For 2016, the company expects an annual gold production from both Twangiza, Namoya to total 210,000 to 230,000 ounces with the production weighted at approximately 40% in H1 and 60% in H2. At this production level, the company expects consolidated cash costs in the range of $700 to $800 per ounce with cash costs in the higher range in H1 and following below the lower range in H2 consistent with the production volumes stated above.
The site all-in sustaining costs expected to be in the range of $800 to $900 per ounce with the consolidated all-in sustaining costs in the range of $875 to $950 per ounce. The capital requirements for 2016 will be limited primarily to the expansion of the primary crushing at Twangiza, the construction of existing TMF list at Twangiza, phase 1 of the new TMF construction with the completion of the environmental and engineering studies, and preliminary infrastructure to access the TMF site. And lastly the heap leach pad expansion at Namoya and some auxiliary equipment to support mine production.
That concludes my summary of the financial results and I’d like to pass you back to John for his operations’ review.
John Clarke
Thank you, Kevin. Operational highlights, in Q4 2015, the combined Twangiza and Namoya operations produced 46,341 ounces of gold, contributing to the full-year 2015 combined Twangiza and Nomoya operations of 183,369 ounces, which was well within our consolidated production guidance. Twangiza Q4 2015 production of 30,440 ounces contributed to Twangiza’s 2015 annual production with 135,532 ounces, which represented a 38% increase in Twangiza compared to the 2014 annual production. The Namoya Q4 production of 15,901 ounces contributed to Namoya’s 2015 annual production of 47,837 ounces of gold.
Operationally Twangiza Q4 2015 cash costs per ounce was $601 contributing to full-year 2015 cash cost per ounce of $553 and the gold margin of $604 per ounce on the realized average selling price of $1,157 per ounce. The 2015 cash cost represented a 19% reduction compared to the 2014, the results of being able to run Twangiza at or above design capacity. The Q4 2015 all-in sustaining costs of $745 per ounce brings the 2015 full-year all-in sustaining cost of $657 per ounce, a 16% decrease compared to the full-year 2014.
Twangiza continue to be a very stable and reliable operation. The ability to process significant levels of non-oxide material as high overall throughput levels also indicates support for the potential for continued incremental improvements for the existing plants. Our focus at Twangiza remains swatting the existing asset base to generate incremental improvements in throughput and operational efficiencies through relatively limited capital injections. I’m very pleased to report on behalf of the Twangiza team that Twangiza’s loss time injury free in 2015 having achieved over 10 million loss time incident free hours.
We reported in our Q3 update, the testing of processing ore plants with increased levels of non-oxide material while maintaining or exceeding throughput of design capacity. Results demonstrated that throughput is greater than design capacity maybe achievable with pre-crushed non-oxide material. The work resulted in management’s decision to purchase additional mobile fine crushing capacity to have been able to save the Twangiza mills with a finer crushed feed to increase Twangiza’s throughput signed efficiencies. The equipment has been selective and is expected to be operational mid-2016.
During the fourth quarter 2015, the plant of the Twangiza mine processed 415,509 tons of ore compared to 370,882 tons during the fourth quarter of 2014. Indicated head grade of ore processed during the fourth quarter of 2015 was 2.82 grams per ton gold compared to 3.01 grams per ton during the fourth quarter of 2014. Process recovery rate for Q4 was 81% compared with 81.4% during the fourth quarter of 2014.
Q4 2015 gold production was 30,440 ounces compared with 29,445 ounces during the fourth quarter of 2014. Throughout 2015 capital spending at Twangiza was focused on upgrades to mobile fleet and the continued construction of the TMF. Mobile fleet upgrades during the year increased the purchased of secondary equipments for mining operations, load maintenance and the TMF construction. TMF construction occurred throughout the year with increased levels of activities in the second half of the year. TMF construction costs benefited from lower diesel costs and replacing daily high rental companies with owner-operated equipment.
The Twangiza team continued the planning of a new tailings facility appropriate to the new extended mine life afforded by the increased mine reserves reported during Q2 of 2015. A new tailings facility for the longer mine life will provide a lower TMF sustaining cost of operations over the mine life and will allow the current higher sustaining cost tailings facility to eventually become a long-life water storage facility. At year-end, the company was in the process of processing the competitive bids from internationally recognized engineers for the design and build of the new tailings facilities and for the continued third-party reviews of building the existing facilities.
Moving on to Nomaya, Nomaya declared commercial production effective January 1, 2016. During 2016, the Namoya Mine produced 47,837 ounces of gold from a total of 1,416,179 tons of ore, stacked and sprayed on heap leach pads, at an indicated head grade of 1.88 grams per ton. During the first two quarters of 2015, Namoya implemented a number of process design changes, which converted the hybrid CIL/heap leach circuit into agglomerated heap leach. Following the commissioning of the agglomeration drum in the first quarter of 2015, Namoya implemented process upgrades to increase throughput and stacking capabilities, which came online in stages from late in the second quarter to the end of the year.
These upgrades led to daily stacking rates that incrementally increased and stabilized. However, the utilization of the processed circuit in the second half of the year was restricted due to the lack of ore delivery from mining operations. This led to stacked ore volumes being supplemented by low grade ore stockpile material, which decreased the average head grade of ore stacked.
Ore delivery from mining operations in the third quarter was adversely impacted by low excavator availability. Excavator availability improved in September with the commissioning of the first component of the larger mining fleet. The remainder of the larger mining fleet, the CAT 777s were commissioned in phases throughout November with the full mine fleet operational in early December. Commissioning of the larger mining fleet has contributed to improving mining productivity and representing the final step towards Namoya operating in a manner consistent with management expectations.
On exploration, throughout 2015 as the Company focused on the development of Namoya and incremental operational achievements at Twangiza, exploration activities were limited to near mine resource development at Twangiza and Namoya together with low level exploration and ground maintenance activities in the Twangiza Regional, Kamituga, Lugushwa and Namoya Regional projects.
During the second half of 2015, exploration activities increased with near mine exploration drilling at Namoya. High grade drill results intersecting significant mineralization were declared from the first stage of the follow up drill program at the Namoya Summit footwall zone, which borders the Filon B target. And for that I would refer you to Banro’s September 18, 2015 press release for details. In addition, further high grade results from the second phase of the program resulted in the discovery of new mineralization at the Namoya hanging wall area and Filon C in the north eastern and eastern regions of the summit. Again I’d refer you to Banro’s February 24, 2016 press release for details on that.
And closing comments, we will continue to focus on increasing gold production from our operations and containing costs, while increasing the company’s mineral resources to potentially enhance the life of mines, thereby increasing shareholder value.
Throughout 2015, our management team at Twangiza continued to demonstrate our ability to build and operate efficient, low-cost gold operations capable of accommodating the current difficult gold markets.
With Namoya, now in commercial production we expect similar achievements from the Namoya management team. The team looks forward to testing resource and reserve expansion opportunities along strike to debt and within the cost structures close to existing pits to continue to unlock Namoya’s great potential to significant growth and to do so in a safe working environment.
Thank you again for joining us today. I’ll turn the call back to the operator to open this call up for questions. Thank you.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from Ross Carden with Polygon your line is open.
Ross Carden
Hi yes. I just got a couple of questions on Namoya. Is it possible to get a little bit more detail on the mine plan despite 2016 guidance, I’m just really thinking about the grade, recoveries, throughput, just so we can then build that up. Thank you.
John Clarke
Very shortly you’re going to see our Q1 results, which will give you a lead into that. But now, Q1 is a build-up to steady states and then we move through for the rest of the year. That’s about it for now.
Ross Carden
All right. So how can you – but you’re not willing to provide a breakdown of what’s actually behind the guidance?
John Clarke
I would like to provide that when we’ve got Q1 as a part of the program. Go ahead Kevin.
Ross Carden
That didn’t make sense
Kevin Jennings
Yes so what we are looking at is Namoya’s production obviously is a bit back weighted to H2. We would see kind of a cash cost in H1 kind of in the range of $1,000 per ounce to $1,100 per ounce, dropping to H2 between $650 per ounce and $750 per ounce. That is kind of the weighted average of Namoya. So the production is a weighted to Q3 and Q4 as we finish the heap leach pad expansion in the first part of the year and we’ll see the increasing grades in Q3 and Q4 as we also ramp up the mining activity. Obviously, our mining production is ramping up to management expectations.
Ross Carden
But you must know that, you’ve got guidance out, you must know what the, like behind that there’s tons, grade and recovery. And I would have thought that, you will be able to tell us what those are otherwise it’s hard to have any confidence in that, how can we believe those numbers if you’re saying we’ve got to wait till you have the Q1 numbers out before you can even tell us how that looked? I’m struggling to understand that why you’re not providing it?
Kevin Jennings
Yes, you know for the full-year, we anticipate that throughput is at 2.35 million tons per annum and the grade will be above reserve grade which was the reserve grade is 1.9 grams per ton. And that grade will come as we clear some of the waste stripping that maybe we’re a little bit behind last year and get any into access to some of that better grade that we will be putting on in basically mid to second half of the year.
Ross Carden
Okay. I will let somebody else jump on and then I have some follow-ups, but that’s okay for now. Thank you.
John Clarke
Thanks.
Operator
[Operator Instructions] Your next question comes from Phil Larson with Millstreet Capital. Your line is open.
Phil Larson
Hi, guys. Congratulations on the good quarter, and getting the financing done and all that. I had a couple questions on the financing for you.
First off, I was wondering just going through the press release, it looks like you used [ph] about $32 million to pay off the Twangiza forward sales with another $26 million of those proceeds for the Escrow for the bond payments. So I was wondering if you could walk us through the plans for the remaining about $40 million of proceeds.
Kevin Jennings
Okay, yes and we also – we paid off some short-term loans, Escrow bank loan for another $4 million. We cleaned up some of our major project AP [ph] suppliers that was about approximately about $12 million. We are also investing in the crusher expansion project that would be roughly about $4 million for the year.
There were transaction costs with the transaction and then remainder of cash we were using that to obviously fund our capital for each one. As you can see our production, our production is weighted to the second part of the year, but usually you spend your capital in the first part of the year. So that’s that will kind of cover often that funding.
Phil Larson
Okay, great and then another quick one on that. You mentioned that Baiyin purchased some bonds and shares in a private transaction, could you share with us the price of that they bought those at?
Kevin Jennings
Because it’s a private transaction that I’m not at liberty to state what that is that would be something you have to ask Gramercy here at Baiyin.
Phil Larson
Okay, that’s fine. Thanks. And then just one real quick follow-up on the guidance if you don’t mind, can you at least bring out the cash cost by mine, could you just had collocated in the news release?
Kevin Jennings
The cash costs basically between, for Namoya, between $800 and $900 cash cost. Twangiza would be cash cost basically between $600 and $650.
Phil Larson
Excellent, thank you.
Operator
Your next question comes from the line of Ross Carton with Polygon. Your line is open.
Ross Carton
Thanks for taking the follow-ups. Yes just a couple of things, there was a couple of one-off items in the financial that you mentioned there is a couple of funds some Congo as it finds. I just wanted a bit more color on that.
And then also you mentioned that there is some impact from, I think that was an issue with some artisanal miners with the disruption that happened there that definitely was there. I just wanted to know what – how we should think about that, sort of that’s my first question.
Kevin Jennings
Okay, so in terms of the DRC taxes, fines and penalties late in November of 2016, there was number of demands repayment for the DRC tax authorities. Tax assessments performed during H2 on tax years 2012, 2013 and 2014 were they have been ongoing discussions in differences in interruptive positions taken by the company historically, versus the tax authorities. So the company has set up suitable provision that we believe is prudent to cover the lightly outcomes of these discussions. And as you know, the company is not subject to new taxes under mining convention, but many of these issues relate to new tax introduced in last five years.
Ross Carton
Right, I guess. Is there any – what is the provision that you have on that, is there any – if you think about the worse case scenario, are there any potential further payment that will be made, always that cath up for that so is that the maximum possible now?
Kevin Jennings
Yes, the provision – we believe it’s the best of management’s estimate at this point so…
Ross Carton
Got it. Okay, and then the second part of that question I had was on the impact from the disruption with artisanal line is I was just curious on that really?
Kevin Jennings
Yes. I’ll pass that on to John.
John Clarke
I can take that one Ross.
Ross Carton
Thanks.
John Clarke
Yes artisanal mine is has an impact during Feb – during January beginning that sort of into February, it was short-term impact. We had some equipment that had – as on is after that incursion that’s at reserves. With medium and long-term we don’t expect any impact from what went on. And we will focus for the rest of the year on making up the limited impact that we had into January beginning of February.
Ross Carton
All right.
John Clarke
It’s something that occurred, something which has now passed us a lot of interaction between us and the relevant local authorities recognizing the importance of our operations to the region and it is resolved [indiscernible] quickly.
Ross Carton
Okay. And then the second question is how is your working capital? I know that you’ve told us in the past and it consuming around fact that brought the current working capital that you’ve got, would you consider that to be fairly normalized level or do you feel like, you still need to catch up on the payments and there needs to be some cash use to normalize or some cash allowance?
John Clarke
I think with this last financing we did make very good progress on the payables. I think most people are pretty happy. And in terms of our cash position this is the best cash position we’ve had in may be probably, since I’ve been here.
Ross Carton
Okay, all right. That’s all I had. Thank you.
Operator
As we have no further questions I will now turn the call back to John Clarke.
John Clarke
Thank you very much. Thanks to all our participants, thanks for the questions. I would like to remind you this call is available for replay over the next two weeks. Same numbers that can be found at end of yesterday’s press release. If you have any additional questions, please contact us on ir@banro.com and we will do our best to get back to you and respond. Thank you very much.
Operator
Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.
• Any ideas floating around of an April rate hike are likely off the table as Federal Reserve Chair Janet Yellen says caution in further rate hikes is "especially warranted" at the current time. Not only that, but the central bank has "considerable scope" for further stimulus, if needed, she says.
Great escape !! That was close
Thanks for your excellent research.
Any idea talking to him what was the time frame for the recent financing deal ? From first contact to closing ?
• He has been in this business a long time and he has never seen had such intense and thorough due diligence and vetting as the Chinese did for their recent financial deal with Banro.
This cannot go on forever time for gold is coming .
http://www.usatoday.com/story/money/markets/2016/03/09/7-year-bull-makes-investors-16t-richer/81515958/
The ECB staff has cut its growth and inflation projections, and sees risks skewed to the downside, says Mario Draghi in opening remarks at his press conference.
• The central bank earlier fired its bazooka, cutting rates, boosting QE, and announcing four new LTRO operations.
• Staff sees inflation at just 0.1% this year vs. its previous forecast of 1%. For 2017, inflation is now seen at 1.3% vs. 1.6% previously.
• Rates will remain at present or lower levels for "an extended period," says Draghi.
The Chinese are really not known for great long term business relationships . Could easily play out like Gold One . JMHO
Unlikely maybe . Why not make a offer ? Since they own shares now
It would be a win win situation for them . Make a offer when POG is still low and Namoya not at full capacity. They still have a chance to steal the company before end of the year the PPS might be more fair value . If management does not accept the buyout offer , they just increased value of their shares by a lot . They could use the Canadian company that they wanted to have a JV with a while back.
https://en.m.wikipedia.org/wiki/China_National_Gold_Group_Corporation
Survivors. Ha
Last run to .32 felt like deja vu from last year to .40 for some here . There were $ millions bought between .30 and .40 in 2015 . Majority of them have sold and moved on .
Lot of investors lost a ton here in last 3-5 years . 3 months ago with POG, delisting and the cash position the company had it takes time to regain the trust with investors.
Thanks for posting this . Could be massive if we would start reversing the impairment charges as the POG goes up .
Or they timed the deal to perfection. Exactly when POG and PPS was close to the bottom . At some point they will make a offer here for sure . Sell or not either way it will increase their $$ value.
.37 @ TSX
3x the average daily volume already at TSX , seems to drive this now .
Damn
Gap and run .
• Whole Foods Market (NASDAQ:WFM): FQ1 EPS of $0.46 beats by $0.06.
• Revenue of $4.83B (+3.4% Y/Y) beats by $20M.
• Shares +7.38%.
I think the Tsx is dragging us down 4x the average trading volume .
Most inspiring and eye opening tv series ever made . I love how poetically he tells the story in the original series . Truly great man
I was thinking they will make a offer for the 2 mines when Namoya will come commercial and try to steal the properties from cash desperate company without dealing with the debt but the this deal changed everything . Looks like they set up for right time to buy the whole thing. When ?
It looks like the writer had the article almost ready to go before the latest financing news and then edited the last part quickly in .
Banro Raises Almost $100M - Does This Mean The Company Is Now Out Of The Woods?
Jan. 5, 2016 12:04 PM ET
Summary
Banro was running on fumes and needed a fresh cash injection - which it has now found.
75% of the refinancing consists of equity and equity-related investments, as Banro's ability to add more debt to the balance sheet was limited.
I consider a term loan with an interest rate of 8.5% for a DRC project pretty decent.
Additionally, based on the current gold price and expected production rate at Twangiza, the payback period on the streaming deal will be quite long.
Taking everything into consideration, I don't think Banro could have negotiated a better deal than what's currently on the table.
Introduction
Back in 2015 I have written three articles wherein I kept an eye on the developments of Banro (NYSEMKT:BAA) as the company's operations looked pretty interesting (and even intriguing) but the balance sheet could use a decent clean-up. Even though Banro is a small company, these articles immediately drew almost 40 companies and I promised my dear readers to keep them posted on my expectations and views on the company.
Banro has recently released an invasive financing package that provides a total cash injection of almost $100M to reduce the working capital issues and to provide some additional liquidity to the company.
Breaking the financing deal down in parts
It sure looks like Banro needed several months to complete the negotiations which will basically provide a cash injection of almost $99M. The majority of the cash will be injected through a debt and equity issue, but there also is a streaming component. I'll break the financing deal down in parts.
A) The debt
Banro has entered into an agreement with RFW and with funds managed by Gramercy whereby Banro will borrow an initial $22.5M as part of a term loan at an interest rate of 8.5% in the first two years of the issue, followed by 3M LIBOR + 8% after the second anniversary of the term loan. What's interesting is that this is initially a short-term loan (repayable on November 30th of this year), but the maturity date of this term loan can be extended by up to three years if Banro continues to meet certain financial standards. This basically means the term loan will be a current liability throughout the entire term and will always have an impact on Banro's working capital position.
Source: company presentation
Additionally, RFW and Gramercy have entered into agreements with existing debtholders of Banro, and have acquired $40M of senior (secured) bonds and $20M of preferred shares that were issued in 2012 and 2014 respectively. This basically means RFW will be on the hook for approximately $82.5M in debt (and preferred securities) of Banro, and that's a pretty big commitment if you'd ask me!
B) The equity issue
Of course, in any debt situation, the upside potential for the debt investor remains limited and the best case scenario consists of receiving all interest payments as well as the principal amount of the loans. That's why it isn't surprising to see RFW also asking to be allowed to purchase shares. As part of the agreement, Banro will issue 50 million new shares to raise $8.75M, and a basic calculation learns us this equates to $0.175 per new Banro share. This might sound cheap, but it actually was the market price right before the deal was announced, so it doesn't look like RFW got a real bargain.
C) The streaming deal
The streaming deal probably is the most important part of Banro's recapitalization program. As its ability to add even more debt to its balance sheet was limited, Banro had to raise the cash as part of some equity-related capital raise. Of course, as a 20% dilution raises less than $9M, Banro had to be creative in finding more cash.
Source: company presentation
A streaming deal really was the only option left. The buyer of the stream has wired $67.5M as a prepayment for the current and future gold production. As long as the gold price remains lower than $1150/oz, Banro will have to deliver 12.5% of its total gold production for an ongoing payment of $150/oz. The percentages will be slashed by 50% after the Twangiza mine has produced 1.14 million ounces (which should happen by 2024 based on the current production rate). Banro has the right to repurchase the gold stream after the third anniversary by making a cash payment resulting in an internal rate of return of 17.5% for the buyer of the stream.
So what does this mean for Banro shareholders?
Banro knew the majority of the fresh cash would have to be found as part of some 'equity' solution as its net debt position (short term + long term debt - cash ) was $180M (excluding the preferred shares), which already is quite high.
Source: company presentation
First of all, the term loan has pretty good terms as an interest rate of 8.5% for a DRC-based gold mine in the current gold climate is actually pretty good (considering Banro isn't exactly a debt-free company either). The interest expenses will increase by less than $2M per year, and that's a small price to pay!
The equity infusion will have a bigger impact as the future profits and cash flows will have to be shared over 302M shares instead of 252M shares. That's a 20% dilution, but again, Banro didn't really have another option…
Source: company presentation
The streaming deal actually also looks pretty decently structured considering the geopolitical risks of operating a gold mine in the DRC which isn't exactly a first tier mining country (and yes, that's an understatement). Based on an undiscounted and pre-tax calculation, the buyer of the stream would need approximately 4.3 years using an annual production rate of 140,000 ounces per year (a pretty aggressive assumption, considering the production rate will be lower as you can see on the previous image) and a gold price of $1050/oz
If you'd apply an 8% discount rate (which I'd think is even quite low considering the location of the mine), the payback period would be approximately 5 years.
The inflowing $99M in cash will definitely help to boost the cash position from the silly $4M Banro had left as of at the end of September of this year. The working capital position should increase from a negative -$58M to a positive $18M (a pro forma calculation based on the financial situation at the end of the previous quarter).
Investment thesis
I don't think this financing deal will be a complete surprise for the majority of Banro's shareholders, as everybody agreed that 'something' would have to be done to give the company more room to breathe. After now having analyzed the terms of the recent financing pretty carefully, I think Banro got a pretty sweet deal, considering the circumstances. An 8.5% interest rate on a loan is pretty good for ANY DRC project, and a payback period of 5 years on the gold stream agreement is also pretty good for Banro, considering I used extremely conservative inputs.
I used a gold production rate of 140,000 ounces at Twangiza whilst the average production rate will very likely be just 100,000-125,000 ounces per year in the next few years, so the real payback period (using an 8% discount rate for the streaming company) will very likely be in excess of 6 years. So, yes, this is a good deal for Banro.
It looks like the investors in the stream (with a Chinese fund as main participant!) are betting on an increase in the gold price in order to generate a meaningful return on their investment. After having combed through all of the details of this deal, I think I can say this is a good deal for Banro, and it's actually a better one than what I would have expected! Now Banro has plenty of cash to ramp up the production rate at the Namoya mine, which holds the key to a successful future for Banro.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
http://seekingalpha.com/article/3790956-banro-raises-almost-100m-does-this-mean-the-company-is-now-out-of-the-woods
This should ease the debt and delisting fear . What a news !! Opens up a lot of speculation.
Please share your prediction I more detail . Thanks
The listing in TSX is secure so even if we get delisted from NYSE to OTC and get a F ,we are still going to be tracking the price on TSX. Less exposure and volume here in the States .
Banro Corporation (NYSEMKT:BAA)
Q3 2015 Earnings Conference Call
November 12, 2015 11:00 AM ET
Executives
John Clarke – President and Chief Executive Officer
Kevin Jennings – Chief Financial Officer
Analysts
Travis Hogan – Riva Ridge
Presentation
Operator
Good morning, ladies and gentlemen. And welcome to Banro Corporation Third Quarter 2015 Financial Results Conference Call. After the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. Please note that this call is being recorded today, Thursday, November 12, 2015 at 11 AM Eastern Time.
I would now like to turn the meeting over to John Clarke, Banro's President and CEO. Please go ahead, Mr. Clarke.
John Clarke
Thank you, Melissa, and thanks to everyone for joining us here today. Before we get started, as normal I would like to emphasize that some of the information discussed in this call, particularly our targets for 2015 and beyond, and our forward-looking plan, is based on information as of today, November 12. As well, our commentary contains forward-looking statements that involve risk and uncertainty.
Actual results may differ materially from those contained in these statements. For a discussion of these risks and uncertainties, please look at the forward-looking statements disclosure in the financial results press release issued yesterday and in Banro's regulatory filings, including the Q3 2015 MD&A. During today’s call, I’ll provide a broad overview of the third quarter 2015 together with an operations update for both Twangiza and Namoya. Kevin Jennings, Banro's CFO will provide an update on Banro's financial position subsequently.
At the Twangiza mine, our operations in Q3 2015 represented a steady continuity in delivering production above expectations with reducing operating costs. The third quarter contributed approximately 35,000 ounces of gold at a cash cost of $501 per ounce to year-to-date production of approximately 105,000 ounces of gold at a cash cost of $539 per ounce.
This was achieved with a mix of oxide and non-oxide ores in accordance with mining programs outlined in our June 2015 update of mineral resources and mineral reserves. As you remember, the updates provided reserve growth of Twangiza extend the mine life of the current installed operations to 14 years and provide a foundation for future optimization and the possible future growth of this existing Twangiza operations. We tested those opportunities during Q3 2015 by initiating trials to test the ability to process 100% non-oxide ores, that has been pre-crushed; the trials were successful and will be repeated to test future growth opportunities.
We did not manage to ramp up on the Namoya operations during Q3 2015 sufficiently need to achieve commercial production in the third quarter. But the receipt of the larger mining fleet by the end of the quarter which is currently progressing through commissioning, is expected to permit the ramp up to commercial levels of operations to be achieved by year-end.
Now I’ll hand the call over to the Banro CFO, Kevin Jennings. He can give an overview of our Q3 2015 financial results.
Kevin Jennings
Thank you, John and good morning to all. Since most of you have read the financial results press release and filings, I will go over them briefly and provide you with some commentary on our Q3 and year-to-date results and some of our expectations for the remainder of H2 2015.
In Q3 at Twangiza we report 35,000 ounces of gold and revenues of $38.5 million, were generated from the sale of 34,000 ounces at an average price of $1,117 per ounce. This compares to 27,000 ounces produced in Q3 of 2014 for revenues of $33.3 million from the sale of 27,000 ounces at an average price of $1,233 per ounce. This is an increase of 28% in gold sold over the same quarter of 2014 with an increase in revenues of more than 15.6% over Q3 2014 despite the gold price being $116 per ounce lower in the prior year’s quarter.
In terms of the key revenue drivers from Q2 to Q3, we saw the Twangiza increased the quarterly mill throughout in Q3 to a record 442,000 tons of ore milled. The head grade increased slightly from 3.01 grams per ton to 3.07 grams per ton, but was partly offset by reduced recoveries from 82% to 80%, as the operation continues to fine-tune the plant balancing throughput recoveries and the appropriate blend of oxide and non-oxide materials.
In Q3 cash costs were $501 per ounce a large improvement from the previous year and 15% lower than the Q2, primarily due to higher gold production of 500 ounces over Q2 and a non-recurring inventory adjustment in the prior quarter, offsets partly by higher processing costs due to the higher mill throughput.
Q3 year-to-date cash costs were $539 per ounce, significantly below the original 2015 cost guidance of $650 to $750 per ounce. This cost improvement has been primarily the result of higher ounce production versus our original plan from a more robust mind schedule incorporating the increased mine reserves announced in the June NI 43-101 reserve update.
Q3 Twangiza all-in sustaining cost of $608 per ounce and the Q3 year-to-date all-in sustaining cost of $631 per ounce is a function of the improved cash cost trend and the sustaining capital in line with the budget. For this reason, the full year 2015 Twangiza cash cost are expected to be below the $600 per ounce and all-in sustaining cost are expected to be below $700 per ounce. The company generated $20 million in EBITDA for the quarter and $54 million for the Q3 year-to-date, which was $6 million higher than the EBITDA of $14 million in Q3 of 2014.
Net income before non-cash asset impairments was $11 million and the net loss of $12 million in the quarter after the non-cash asset impairment. $23 million non-cash asset impairment was taken on the mine under construction balance at Namoya. This was result of the aggregate adverse impact of lower consensus long term gold pricing as of Q3 and the build-up of capitalized borrowing cost and pre-commercial operating losses from the extended ramp up, due to the delayed financing and the redesign of the plant.
Cash on hand at the end of the quarter was approximately $4 million, compared to $1 million at the end of 2014. And we have reduced trade and other payables from $86 million to $63 million over the course of the year. The capital expenditures recorded for Q3 relates to the commissioning of the mobile fleet at Namoya and the construction of the Tailings Management Facility at Twangiza.
That concludes my summary of the financial highlights and I’d like to pass you back to John for the operations review.
John Clarke
Well thank you Kevin. I’ll recap some of the key statistics and I will comment on operational highlights of our combined operations. In Q3 2015, the combined Twangiza and Namoya operations reduced approximately 47,000 ounces of gold with 35,000 ounces of those coming from Twangiza. This brings a combined year-to-date Q1 through to Q3 production from Twangiza and Nomaya to approximately 137,000 ounces of gold with 105,000 ounces of those coming from Twangiza. The combined ounces reaffirmed the previous dated consolidated gold production guidance for our operations at 175,000 to 195,000 ounces at calendar year 2015.
Twangiza Q3 2015 cash costs per ounce of $501 per ounce can be compared, as stated by Kevin, with the $618 per ounce achieved in Q3 2014. We update cash cost per ounce of $539 that stabilizes a year-to-date gold margin at $634 per ounce on the realized average selling price of $1,173 per ounce.
On the Q3 2015 all-in sustaining costs of $608 per ounce brings the year-to-date all-in sustaining costs to $631 per ounce, which is a 24% decrease year-on-year when compared with the $827 per ounce for the same periods in 2014. Twangiza is proving to be a very stable and reliable operation having achieved more than a year of strong production. The ability to post that significant level of non-oxide material as high overall throughput levels also indicates the potential for continued incremental improvements with the existing plants.
Meanwhile, Twangiza management is continuing to identify and explore new opportunities for operational growth. I am very pleased to report on behalf of Twangiza team, the Twangiza was loss time injury free in Q3 2015, progressing during the quarter to over 21 months and 8.9 million loss time incident free hours.
With continued success in stabilizing production of design capacity, Twangiza management focused in the third quarter on evaluating the processing capabilities of the currently installed plants. This included the processing of ore plants with increased levels of non-oxide material while maintaining or exceeding throughput at design capacity.
Multiday trial was conducted during the quarter to test the ability to run the plant at higher than design throughputs using 100% non-oxide ore that had been pre-crushed. The results demonstrated that throughputs greater than design capacity may be achievable with the pre-crushed non-oxide material. As expected, the recovery rates for non-oxide feed were lower than those being regularly achieved with the blended ores and this testing did contribute to lower overall recoveries in the Q3 2015. Further trials will continue to evaluate this potential throughput enhancement and evaluate throughput enhancements to the existing plants.
During third quarter 2015 the plant at the Twangiza mine processed 441,579 tons of ore compared to the 309 – 394,500 tons during the third quarter 2014. The indicated head grade of the ore processed during the third quarter of 2015 was 3.07 grams per ton compared to 2.60 grams per ton gold during third quarter 2014.
The process recovery rates for Q3 was 79.84% compared to the 82.2% during the third quarter of 2014. The lower recovery reflecting the ore mix available during the quarter, as well as the non-oxide milling trials commented on earlier. Q3 2015 gold production it was approximately 35,000 ounces of gold compared to 27,000 ounces during third quarter 2014.
Capital spending at Twangiza during Q3 2015 was focused on continued upgrades to the mobile fleet and continued construction of the Tailings Management Facility. During the quarter, the Twangiza team continued the planning of a new Tailings Facility appropriate to new extended mine life afforded by the increased mine reserves reported during Q2 2015.
The new tailings facility for the longer mine life will provide a lower tailings management facility sustaining cost of operations open mine life and will allow the current higher sustaining cost tailings facility to eventually become a long life water storage facility.
I’d made some comments about Namoya. During the third quarter 2015, Namoya’s ramp up towards commercial production progressed with stacking levels averaging 149,000 tons per month to a total of 447,000 tons for the quarter. This represents a 35% increase in ore stacked over the second quarter of 2015.
Ore stacked during the quarter was below the design rate of 190,000 tons per month due to lower excavator availability. The low availability of ore from mining activities in the quarter, the opportunity was taken to process ore from low grade stockpiles. This resulted in an average stacked head grade of 1.67 grams per ton of gold. The contained gold stacked on the heap leach increased to approximately 24,000 ounces or approximately 48% over the previous quarter. Due to heap leach operations requiring several months of percolation to fully recover the leachable gold, gold production in the quarter increased by approximately 15% with a total of approximately 12,000 ounces of gold in the third quarter of 2015.
Excavator availability improved in September with the commissioning of the first component of the larger mining fleet, which will significantly improve waste removal activities. The commissioning process of the CAT 777s has been occurring in phases and is well underway. The commissioning process is expected to be completed before the end the month.
Full commissioning of the larger mining fleets along with the continued support from the pre-existing mining fleet is expected to significantly improve mining productivity levels. With increased ore availability at Namoya, stacking levels and grades are expected to increase to commercial production levels in the fourth quarter of 2015. The CIL circuit was not utilized during the third quarter of 2015 as the focus of the operations continues to be the improvements to the heap leach processing circuit.
On the exploration front, exploration activities during the third quarter of 2015 focused on near mine exploration at Namoya, as well as small exploration teams continuing to focus on the new oxide target generation activities in Lugushwa and Kamituga through BLEG and ground maintenance activities.
The near mine exploration at Namoya yielded high grade drill results intersecting significant mineralization, included 16 meters grading 5.35 grams per ton – gold, 15 meters grading 5 grams per ton, and 24.00 meters grading 2.77 grams per ton. The drill program that has yielded these significant mineralized results is ongoing and has been integrated with production related drilling activities to effectively utilize the available resources. Additional drill results in the ongoing drill program are expected in the fourth quarter 2015.
I’d like now to make some closing comments. We will continue to focus on increasing gold production from our operations and containing costs while we increase the company’s mineral resources to potentially enhance the life of our mines thereby increasing shareholder value.
In Q3, our management team at Twangiza has continued to demonstrate our ability to build and operate efficient low-cost gold operations capable of accommodating the current difficult gold markets. We look forward to its similar achievements of Namoya as we focused on bringing Namoya into commercial production while we are also testing resource and reserve expansion opportunities to unlock Namoya’s great potential for the further growth and to do so in a safe working environment.
I would like to thank you all for joining us today and I will turn the call back to our operator to open up for questions. Thank you, Melissa.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from the line of [indiscernible]. Your line is open.
Unidentified Analyst
Yes, Dr. Clarke, I don’t precisely 400,000 shares of Banro. I am quite pleased with this quarter’s report. You have maintained a gold margin with approximately $600 per ounce will passed obviously we’ll see volatile gold price environment and is also closed, I believe, it’s about $116 million in non-diluted financing in 2015. I think it’s obvious, you have a big management team and you will eventually get Namoya when you move this [ph] to Twangiza, yet the equity still trades at severely depressed levels with a market capitalization around $30 million.
On the last conference call, you said that Banro had operational flexibility don’t folded in any gold price environment. I emphasize you said any gold price environment. My question is this given your current visibility on the flexibility of operations and if you hold all input variables constant where they are today. What’s sustained lower gold price could this company handle were in the common shares remaining CATs. Could Banro will handle a year at 950 gold to be precise what gold price would cause you not to be able to make your March 1 bond payment?
John Clarke
That’s a lot of questions. To maintain continued flexibility at such continuing the increasing gold prices. We, like the rest of the industry, would have to increase our production rates. And we would do whatever we need to do and the benefits of increased production rates [indiscernible] for us is the major component of our operating cost being fixed and on a very broad basis for every $10 or so of cost like six or seven of those are fixed.
So if we produce more tons maybe with a marginal change in cut-off grade we can maintain our margins at significantly lower gold prices to be absolutely fixed on a single number such as $950 or $1,000 per ounce is a little difficult because there are so many variables involved of what we can do with marginal increase in our cut-off grade and increased throughputs to produce more ounces at lower operating cost to maintain our margins.
Any other comments?
Kevin Jennings
No, I guess the, like John were saying we haven’t really gone into as you see we were currently mining Twangiza at above reserve grade but if you take into consideration lower grade stockpiling strategy we tend to have the lower grade at the end of the mine. Our first kind of decade of production in that range of kind of a grade of 2.6 grams per ton.
So at 3 grams per ton we’re mining about 10% above reserve grade if we had to basically change the cut-off and increase the grade that’s where we would get that additional production to kind of handle a lower price environment. We have not had the result of that. We just stick to our current low grade our stockpiling strategy but if that has occurred that would resolve and we would kind of increase the grade. The positive thing about Twangiza and Namoya is they’re new mines. So they’re brand new mines and you have more flexibility in terms of that.
And that’s where you’ll see with Namoya going forward now that we have the mobile fleet that is in excess of what our plan mobile fleet size would be we can may move more waste tons and get access to more grade. And obviously that is a new mine and that is what we are focusing on, especially with areas of high grade pockets that are not in our reserve that we’re trying to drill out such as the Namoya Summit and Filon B areas the have higher grade than reserve grade to kind of take advantage of that in the near term or especially next year.
Kevin Jennings
Thanks, Robert.
Unidentified Analyst
Thank you.
Operator
Okay.
Unidentified Analyst
One more question.
John Clarke
Hello.
Kevin Jennings
Go ahead.
Unidentified Analyst
Yes, with regard to the possible de-listing, another plan is to get Namoya up in commercial production and then to design capacity and then into the market will solve the problem, but say for instance the market stays irrational regardless of fixed asset Namoya. How would you handle possible de-listing, would you more likely return to single listing on TSX, or would you consider reverse split?
John Clarke
We’re continuing out listing at the moment clearly share price is a critical issue on status of listing. We’re secure in our listing and on the TSX in any case. Our job is to significantly improve the share price through production opportunities over the next three months, so that it becomes a mute issue. That’s our focus.
Unidentified Analyst
Okay, thank you very much.
Operator
[Operator Instruction] Your next question comes from Travis Hogan with Riva Ridge. Your line is open.
Travis Hogan
Hi, guys. Congrats on a good quarter, just a quick question. So what are the expectations in terms of gold production for Namoya for fourth quarter? And then can you give us some indication as to what – where you expect Namoya to ramp in 2016?
John Clarke
We’ve got long term Twangiza results in Namoya that’s 9,000 plus a month observation and we would expect to be achieving that during 2016. [Indiscernible] we’re seeing our target gold productions are combined operations in the range that we’ve already quoted.
Travis Hogan
Okay, so consistent with prior year guidance.
John Clarke
It is, yes. There is only few months…
Travis Hogan
Okay, thanks.
John Clarke
There’s clearly only few months to go and we’re working hard at it. Thanks Travis.
Operator
And there are no further questions in queue at this time. I turn the call back over to Mr. John Clarke for any closing comments. Actually, there is a question from the line of [indiscernible]. Your line is open.
Unidentified Analyst
Fabulous results out of Twangiza. I’m curious as to your total debt picture. When I’m looking at long term debt, its 166 million somewhat dollars, total assets of $869 million. Is that your total debt or do you have additional debt and how much would it be?
Kevin Jennings
Yes, if you look at the total debt, we have the notes that are $175 million. We have bank loans of approximately $17 million. We have the gold forward sales agreements which are liabilities of $52 million, so that would give you a total number of $244 million of debt on the balance sheet. Now we have preferred dividends of $72 million and we obviously – that would be your debt and preferred for a total of about $315 million to $320 million.
Unidentified Analyst
Okay. Thank you.
John Clarke
Thanks Jeff.
John Clarke
If there is no more questions, I would like to thank for your questions for asking so important questions and thank you for giving us the opportunity to present to you on this quarter the successes of our management team and the targets that they are striving to achieve going forward. Thank you very much.
Operator
This concludes today’s conference call. You may now disconnect.
Whoever does Etrade forecast -0.03 for Q3 and -0.02 for Q4 .
Etrade shows Monday Nov 9th and -0.03 expected per share . For some reason Q2 shows .01 without impairment charge .