LONDON (Alliance News) - Patagonia Gold PLC Friday said its loss swelled in 2015 after its operations became unprofitable due to lower production and higher operating costs, as the company seeks to develop or acquire an asset to replace its soon-to-be closed Lomada mine in Argentina.
The miner operating within in the southern Patagonia region of Argentina, Chile and Uruguay said its pretax loss widened to USD18.5 million in 2015 from the USD6.8 million loss booked in 2014 as revenue dropped, making its operations unprofitable, and costs increased.
Patagonia said revenue fell to USD26.1 million from the USD35.9 million generated a year earlier, which swung the company to a gross loss of USD3.6 million from a USD9.8 million gross profit.
Exploration costs and administrative expenses were slightly higher in the year, offset by a rise in finance income and lower finance costs.
The miner has a string of development projects but currently is producing gold only from the Lomada mine in Argentina, which produced 21,521 ounces of gold during the year sold at an average price of USD1,165 per ounce.
Last year, Patagonia produced 29,347 ounces of gold and the gold price achieved was considerably higher at USD1,251 per ounce.
Patagonia did not release its average cash costs for 2015, but said the cash cost in the first quarter of 2016 was USD625 per ounce. In 2014, the average cash cost varied in the first to the second half but was in the region of USD655 to USD807 per ounce. Spot gold stood at USD1,231.30 per ounce early Friday in London.
"In terms of our operation, 2015 has been a challenging year for the mining sector generally, and our Lomada de Leiva gold mine has not been exempt from this. We experienced higher production costs due to an increase in local costs coupled with the fixed exchange rate, together with lower production," said Chairman Carlos Miguens.
Importantly, Lomada produced 9,000 ounces of gold in the first quarter of 2016, demonstrating an improvement since the year end. Based on that rate of production, Patagonia would be on track to deliver around 36,000 ounces of gold this year.
However, the asset is approaching the end of its life and is likely to only be producing gold until the middle of 2017.
"Gold production from Lomada is expected to continue until the end of 2017 even though the mining operation will be suspended from the end of May 2016, as gold is expected to continue to be recovered from the heap leach for at least 12 months thereafter," said Miguens.
As it looks to counter the production that will be lost, Patagonia said it is looking to develop a small-scale heap leach operation at Cap-Oeste during 2016, but said this is subject to funding. Patagonia has also signed an option agreement since the end of the year to potentially acquire the San Jose exploration gold project in Uruguay.
Patagonia said it made USD1.0 million worth of cost savings in 2015, and exited the year with a cash balance of USD1.7 million, dropping from USD5.6 million at the end of 2014.
"In view of the current market conditions, the company continues to endeavour to achieve operating efficiencies and during 2015, Patagonia Gold adopted several measures aimed at achieving cost reductions and optimising its organisational structure," said Chief Executive Christopher van Tienhoven.
"Patagonia Gold retains its investment focus on Argentina and, for this reason, it continues to review opportunities to enhance its participation in the local mining business. The improved market sentiment coupled with the change in government in Argentina pose an excellent opportunity for Patagonia Gold to grow its business in the region," he added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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