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Amara Mining plc: 1st Quarter Results

LONDON, UNITED KINGDOM -- (Marketwired) -- 05/19/14 -- Amara Mining plc (AIM: AMA)

Amara Mining plc
("Amara" or "the Company")

Q1 2014 UPDATE

Amara Mining plc, the AIM-listed West African-focused gold mining company, is pleased to announce an update for the quarter ended 31 March 2014 ("Q1 2014").

HIGHLIGHTS

  • Amara is fully-funded to deliver an initial Feasibility Study ("FS") for its Yaoure Gold Project ("Yaoure") in Q1 2015 following the successful placing and open offer, which raised US$30.5 million
  • Preliminary Economic Assessment ("PEA") for Yaoure demonstrated that a number of throughput scenarios generate compelling returns, underlining that the project is highly flexible and resilient at low gold prices
  • In-fill drilling campaign has commenced at Yaoure, with drilling results expected in late Q2 2014 and two Mineral Resource updates expected in Q3 and Q4 2014
  • First phase of results of optimisation work completed on the Feasibility Study for the Baomahun Gold Project ("Baomahun")
  • 9% increase in production at the Kalsaka/Sega gold mine ("Kalsaka/Sega") compared to Q4 2013 to 16,263 ounces
  • 16% decrease in total cash costs (including royalties) compared to Q4 2013 to US$1,082 per ounce
  • US$4.1 million increase in Kalsaka/Sega EBITDA compared to Q4 2013 to US$3.5 million
  • Cash and liquid assets of US$7.3 million as at 31 March 2014, not including the proceeds of the placing and open offer
  • Company's production guidance of 60,000-70,000 ounces for the full year is maintained although production is now expected to be towards the lower end of the range

John McGloin, Executive Chairman of Amara, commented:

"Q1 2014 has been an important period in Amara's growth due to the release of the Yaoure PEA and the subsequent placing and open offer. Yaoure is now recognised as one of the most exciting development projects in West Africa, with compelling economics that make it one of the few projects that remain resilient at low gold prices. I was delighted with the support the capital raising received and with these new funds, we have commenced the in-fill drilling programme at Yaoure that will allow us to deliver two Mineral Resource updates in H2 2014 and an initial FS in Q1 2015. We also made progress at Baomahun during the quarter, with the first phase of optimisation work showing that the project is a second strong growth opportunity for Amara. Production increased by 72% in Q1 2014 at Kalsaka/Sega compared to Q1 2013 and total cash costs decreased by 11%. Amara is well-positioned for the remainder of 2014 and I look forward to delivering drilling results from Yaoure in the coming months."

OPERATIONAL REVIEW

Yaoure, Côte d'Ivoire

Two important milestones were delivered at Yaoure in Q1 2014: the completion of the PEA and the announcement of the placing and open offer, which raised US$30.5 million, primarily for the advancement of Yaoure.

Based upon the updated 6.3 million ounce Mineral Resource[i], the PEA for Yaoure confirmed that it is a compelling gold development project[ii]. The headline results for an 8 Million tonne per annum ("Mtpa") plant tank leach process demonstrated very strong economic returns. Further optimisation work on the pit design showed that a smaller pit, constrained at an US$800 per ounce gold price, results in a 10% higher average grade and 23% shorter mine life. Combined with a 6.5Mtpa plant, this pit design delivers a stronger post-tax IRR of 33% using a gold price of US$1,250 per ounce and a robust NPV of US$613 million using a discount rate of 8%. In addition, the smaller scenario is more resilient at lower gold prices with a post-tax IRR of 25% at a US$1,100 per ounce gold price, a 9% increase on the 8Mtpa scenario. Both scenarios would place Yaoure in the top 12 gold mines in Africa by production, with the 8Mtpa scenario elevating it to the top 10 with production of 325,000 ounces over a 12 year mine life. Total cash costs are among the lowest in Africa (US$594 per ounce in the 6.5Mtpa scenario), based on Amara's peers' total cash costs in 2013.

The net proceeds of the placing and open offer will allow Amara to conduct an in-fill drilling programme at Yaoure in 2014 and deliver an initial FS in Q1 2015. The 2014 Yaoure drilling campaign commenced in early April 2014 and is expected to be undertaken in two phases:

  • To target the 'information gaps' within the Mineral Resource area to increase the size of the Inferred resource - Mineral Resource updated expected in Q3 2014
  • To upgrade the Inferred resources to the Indicated category to increase the level of confidence in the resource - Mineral Resource update expected in Q4 2014

Baomahun, Sierra Leone

In January 2014 Amara announced the results of the first phase of optimisation work for the Baomahun FS[iii]. This work focused on 'right-sizing' the plant to the deposit to reflect the current market conditions and the outlook for the gold price. Based upon a smaller 1Mtpa scenario, the upfront capital cost is reduced by 40% to US$90 million and the total pre-production capital cost is reduced by 43% to US$143 million compared to the Baomahun FS. In an open pit only scenario, Baomahun's metrics are comparable with other similar gold projects in West Africa, although Baomahun's performance strengthens significantly when an underground component to the project is introduced.

There are three focuses to the on-going optimisation work for Baomahun: expanding in-pit resources through targeted exploration, continuing to undertake low-cost evaluation work on the underground opportunity and further reducing the upfront capital requirement of the project.

Kalsaka/Sega, Burkina Faso

Production Highlights

----------------------------------------------------------------------------
                                 Unit     Q1 2014  Q4 2013  Change   Q1 2013
----------------------------------------------------------------------------
Gold production                   Oz      16,263   14,926     9%      9,481
Gold sold                         Oz      21,888   10,353    111%     8,644
Operating Cash Costs (excl.
 royalties)                  US$/oz prod   1,034    1,235    (16%)    1,167
Total Cash Costs (inc.
 royalties)                  US$/oz prod   1,082    1,300    (17%)    1,215
Average realised gold price  US$/oz sold   1,292    1,281     1%      1,618
EBITDA                           US$m       3.5     (0.6)  +US$4.1m    3.1

As expected, Q1 2014 was a strong quarter for Kalsaka/Sega, with a 9% increase in gold production compared to Q4 2013 (72% increase over Q1 2013) as the high grade material mined at Sega in Q4 2013 was realised in production. However the head grade mined in Q1 2014 was below expectations and accordingly Amara expects production in 2014 to be at the low end of the previous guidance of 60,000-70,000 ounces. Kalsaka/Sega generated an EBITDA of US$3.5 million in Q1 2014, a US$4.1 million increase compared to Q4 2013.

Group Financial Highlights

Income Statement Highlights
---------------------------------------------------------------------------
US$000                                     Q1 2014     Q4 2013     Q1 2013
---------------------------------------------------------------------------

Revenue                                      28,087      13,274      13,990
Gross profit                                    106      (5,380)      1,793
EBITDA                                        1,760        (644)      1,251
Loss before taxation                         (4,578)    (28,212)     (3,021)
Net loss                                     (4,578)    (28,365)     (2,969)


Overall the Group generated a modest EBITDA profit in Q1 2014, driven by the improved production at Kalsaka/Sega off-set by the reduced gold price. A high depreciation charge in the period totalling US$9 million lead to an overall reported operating loss of US$4.3 million.

The closing cash and bullion balance of US$7.3 million was augmented during Q2 by the US$30.5 million fundraising (before expenses), ensuring that Amara is fully funded to deliver the initial Yaoure FS in Q1 2015.

For more information please contact:

Amara Mining plc                       +44 (0)20 7398 1420
John McGloin, Executive Chairman
Peter Spivey, Chief Executive Officer
Pete Gardner, Finance Director
Katharine Sutton, Head of Investor
 Relations
Peel Hunt LLP                          +44 (0)20 7418 8900
(Nominated Adviser & Joint Broker)
Matthew Armitt
Ross Allister
GMP Securities Europe LLP              +44 (0)20 7647 2800
(Joint Broker)
Richard Greenfield
David Wargo
Farm Street Communications             +44 (0)7593 340 107
(Media Relations)
Simon Robinson

About Amara Mining plc
Amara is a gold developer-producer with assets in West Africa. The Company generates cash flow through its Kalsaka/Sega gold mine in Burkina Faso. Amara is focused on unlocking the value in its development projects. At Yaoure in Côte d'Ivoire, this will be done by increasing the confidence in the existing Mineral Resource and economics at the project as the Company progresses it through to Pre-Feasibility Study and Bankable Feasibility Study. At Baomahun, this will be done by gaining an improved understanding of the exploration upside potential and underground opportunity. With its experience of bringing new mines into production and a project pipeline spanning four countries, Amara aims to further increase its production profile with highly prospective opportunities across all assets.

Non IFRS Measures - EBITDA (Earnings Before Interest, Income Taxes, Depreciation and Amortization), cash cost per ounce and average realised gold price are financial measures used by many investors to compare mining companies on the basis of operating results, asset value and the ability to incur and service debt. EBITDA is used because Amara's net income alone does not give an accurate picture of its cash generating potential. Management believes that EBITDA is an important measure in evaluating the Company's financial performance, ability to fund future capital expenditures and repay any future project financing, and in determining whether to invest in Amara. Similarly, cash cost per ounce, pre-tax cash margin and average realised gold price are measures that are considered key measures by Amara in evaluating the Company's operating performance. However, EBITDA, cash cost per ounce and average realised gold price are not measures of financial performance, nor do they have a standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other companies. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of Amara's performance or to cash flows from operating, investing and financing activities of liquidity and cash flows. These measures have been described and presented in this document in order to provide shareholders and potential investors with additional information regarding the Company's operational performance, liquidity and its ability generate funds to finance its operations.

Peter Brown is a "Qualified Person" within the definition of National Instrument 43-101 and has verified the data disclosed in this release, including sampling, analytical and test data underlying the information contained herein, and reviewed and approved the information contained within this announcement. Dr Brown (MIMMM) is the Group Exploration Manager.

[i] See announcement entitled, 'Six Million Ounce Mineral Resource at Yaoure Gold Project', dated 13 December 2013
[ii] See National Instrument 43-101 technical report entitled, 'Technical Report and Preliminary Economic Assessment for Yaoure Gold Project, Côte d'Ivoire, Amara Mining plc', dated 25 April 2014
[iii] See announcement entitled, 'Results of first phase of Baomahun optimisation work', dated 30 January 2014

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