Minefinders Corp (TSE:MFL)(AMEX:MFN), which in January agreed to be bought by Pan American Silver (TSE:PAA)(NASDAQ:PAAS) in a $1.5 billion deal, reported late Thursday that it swung to a fourth quarter profit as gold and silver production increased and precious metals prices rose.
For the three months that ended December 31, 2011, the company, which operates the multi-million ounce Dolores gold and silver mine in Mexico, posted a net income of $59.6 million, or 72 cents per share, compared to a net loss of $6.7 million, or a 10-cent-per-share loss, in the year-ago period.
Adjusted net income per share rose to 29 cents from 17 cents in the prior year’s fourth quarter.
Revenue nearly doubled to $62.0 million from $31.3 million a year earlier. Minefinders sold 37,000 gold equivalent ounces, versus 22,690 ounces in the fourth quarter of 2010.
The company produced 20,531 ounces of gold in the latest quarter, compared to 16,102 ounces a year ago, while silver output rose 80 percent to 918,737 ounces.
Average realized gold prices jumped to $1,676 per ounce from $1,375, while average silver prices realized improved to $30.87 an ounce from $27.72 in the year-ago period.
Meanwhile, total cash costs per gold equivalent ounce sold dropped to $470 from $511 a year earlier.
Cash flow provided by operating activities before changes in working capital, a key metric that is used to gauge a mining company’s ability to fund future activity, came in at $40.4 million.
“We set specific objectives for the company in 2011 and I am very pleased to report that we achieved them,” said president and CEO, Mark Bailey.
“We exceeded our production forecast for the year and despite increasing pressures on operating costs being experienced in our industry, we also met our cash cost forecast for 2011.
“Furthermore, we advanced all of our near-term growth projects.”
At December 31, 2011, the company had $239.2 million in cash, equivalents and short-term investments, and working capital of $310.9 million.
For the full year, the company reported adjusted net income of $82.5 million, or $1.02 per share, versus $6.8 million, or 10 cents per share, in 2010. Revenue for 2011 more than doubled to $241.2 million, on the sale of 155,498 gold equivalent ounces.
Commenting on the Pan American deal, Bailey said: “The proposed combination with Pan American represents an exciting next step for our shareholders as they gain exposure to a diverse portfolio of world class low cost producing and development assets.
“As part of the combined company, Dolores will continue to add value and help Pan American move closer to achieving its goal of becoming the largest, low cost primary silver producer.”
Indeed, the combined company, which will retain the Pan American Silver name, will have a significant mineral reserve base consisting of 350 million ounces of proven and probable silver mineral reserves and 3.0 million ounces of proven and probable gold mineral reserves.
Additional measured and indicated mineral resources amount to 742 million ounces of silver and 2.0 million ounces of gold, with inferred mineral resources of 265 million ounces of silver and 1.4 million ounces of gold, as of the end of December 2010.
The new entity will consist of eight operating mines and an extensive portfolio of development and exploration projects in jurisdictions throughout the Americas, where Pan American currently operates.
For 2012, Minefinders said it expects to produce and sell from its Dolores mine roughly 75,000 to 80,000 ounces of gold, and around 3.5 to 4.0 million ounces of silver.
All of the production is unhedged.
Operating costs and the timing and amount of capital expenditures for 2012 are currently being evaluated in the context of the proposed transaction with Pan American, Minefinders added.
The company’s flagship Dolores mine is located in the Sierra Madre Occidental Range of northern Mexico. The mine has a well-defined deposit and an open-pit mine life of 16 years. Measured and indicated reserves at Dolores amount to 2.6 million ounces of gold and 139.5 million ounces of silver.
Minefinders’ other mining assets are the La Bolsa and La Virginia projects as well as exploration properties at Planchas de Plata in Sonora, northern Mexico, and the adjacent Real Viejo silver project.
