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EURO Ressources reports earnings for the third quarter and nine months ended September 30,2020

EURO Ressources
·11-min read

NEWS RELEASE

Paris: EUR

EURO RESSOURCES REPORTS EARNINGS FOR THE
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2020

Paris, France, November 5, 2020: EURO Ressources S.A. (“EURO” or “the Company”) (Paris: EUR) today announced its unaudited statutory interim financial results prepared in accordance with International Financial Reporting Standards (“IFRS”) for the nine months ended September 30, 2020. These unaudited interim financial statements were approved by the Board of Directors on November 5, 2020. All financial amounts are expressed in Euros (“€” or “euros”) unless otherwise specified.

Highlights

Under IFRS, EURO reported a net profit of €3.0 million (€0.047 per share) and €11.2 million (€0.179 per share) for the three and nine months ended September 30, 2020, respectively, compared to €3.5 million (€0.056 per share) and €11.7 million (€0.187 per share) for the three and nine months ended September 30, 2019, respectively.

EURO recorded revenues of €16.2 million in the first nine months of 2020 (€3.8 million in the third quarter of 2020) compared to revenues of €18.1 million in the first nine months of 2019 (€5.7 million reported in the third quarter of 2019).

Liquidity and capital resources

Cash at September 30, 2020 totaled €30.2 million as compared to €31.6 million at December 31, 2019. The decrease was mainly due to the dividends and income tax paid, partially offset by cash flow from operating activities.

Marketable securities

EURO holds marketable securities related to mining companies which are part of a volatile market. Share market price exposure risk is related to the fluctuation in the market price of marketable securities. Investments in marketable securities are recorded at fair value.

As at September 30, 2020, marketable securities were comprised of 19,095,345 shares of Orea Mining Corp. (“Orea”) (9.7% of outstanding shares; December 31, 2019: 10.6%) and 3,819,069 shares of Allegiant Gold Ltd. (“Allegiant”) (6.2% of outstanding shares; December 31, 2019: 6.2 %).

During the nine month period ended September 30, 2020, the Company recognized an unrealized gain under IFRS following the increase of the fair value of these marketable securities. Under IFRS, this gain of €0.2 million was recorded in other comprehensive income (loss of €1.5 million during the nine months ended September 30, 2019).


Royalty assets
(Refer to MD&A for more detail)

As at September 30, 2020, the Company’s impairment review indicated that the facts and circumstances did not represent an indication of potential impairment. In May 2019, The French Government declared the Montagne D’Or project not yet compatible with environmental requirements. The statements by the French Government regarding the Compagnie Minière Montagne d’Or (the joint venture) in May 2019, to which the Paul Isnard royalty is attached, have created some uncertainty around the delivery of the various authorizations and permits not yet obtained and required for developing the project, and can potentially affect the operational and financial capacities of the project. Nevertheless, work continues on both the design of the project and the environmental framework around it. According to the press release issued by Orea Mining Corp. on October 8, 2020, the joint venture aims to complete final studies and mining and environmental permit applications before the end of the year. In light of the above, the Company maintains the same assumption as in the impairment test performed as at December 31, 2019. The Company continues to assume that the various authorizations and permits would be granted under conditions that will allow the joint venture to go forward with this project, although the timing is somewhat uncertain. No impairment charges were recorded in the statement of earnings for the third quarter ended September 30, 2020.

RESULTS OF OPERATIONS UNDER IFRS

Nine months ended September 30, 2020 compared to the same period in 2019 (IFRS)

Under IFRS, EURO reported a net profit of €11.2 million (€0.179 per share) for the nine months ended September 30, 2020 compared to €11.7 million (€0.187 per share) for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, EURO accounted for revenues of €16.2 million, a decrease compared to revenues of €18.1 million for the same period in 2019. Revenues were primarily attributable to the Rosebel royalty of €16.2 million (nine months ended September 30, 2019: €18.2 million). The decrease in revenues was mainly due to lower gold production of 136,655 ounces in the first nine months of 2020 compared to 205,255 ounces in the first nine months of 2019 (€6.2 million) due to lower throughput and ore mined resulting from the temporary work stoppage in July 2020 (see news releases dated July 20, 2020 and July 27, 2020), partially offset by the impact of a higher average gold price in the first nine months of 2020 of US$1,691 per ounce of gold compared to US$1,353 per ounce of gold in the first nine months of 2019 (€4.2 million) and the impact of a weakened euro (€0.1 million). There were no other royalties from third parties in French Guiana for the nine months ended September 30, 2020 (first nine months of 2019: -€0.1 million due to a reversal of a previously over estimated royalty receivable).

Operating expenses for the nine months ended September 30, 2020 were €0.48 million compared to €0.42 million in the same period in 2019. The increase was mainly due to higher administrative costs in 2020.

The amortization expense of €0.24 million during the nine months ended September 30, 2020 was lower than the amortization expense of €0.36 million recorded during the same period in 2019, mainly due to lower gold production at the Rosebel mine.

The investment income for the first nine months ended September 30, 2020 was €0.24 million compared to €0.58 million during the same period in 2019. The decrease was mainly due to lower interest rates applied to bank balances in 2020.

EURO recorded a foreign exchange loss of €0.15 million in the first nine months of 2020 compared to a gain of €0.06 million in the first nine months of 2019, mainly due to the revaluation of dividends payable, bank accounts and income tax payable.

EURO recorded an income tax expense of €4.4 million in the nine months ended September 30, 2020 compared to €6.3 million in the same period of 2019. The decrease was mainly due to the tax impact of lower earnings and translation adjustments, partially offset by the tax impact of the change in fair value of the marketable securities.

Third quarter ended September 30, 2020 compared to the same period in 2019 (IFRS)

Under IFRS, EURO reported a net profit of €3.0 million (€0.047 per share) for the third quarter of 2020 compared to €3.5 million (€0.056 per share) for the third quarter of 2019.

Revenues were €3.8 million during the third quarter of 2020, a decrease compared to €5.7 million for the third quarter of 2019. Revenues were only attributable to the Rosebel royalty in the third quarter of 2020 and 2019. The decrease in revenues was mainly due to lower gold production of 28,861 ounces in the third quarter of 2020 compared to 57,511 ounces in the third quarter of 2019 (€2.8 million) due to lower throughput and ore mined resulting from the temporary work stoppage in July 2020 and a strengthened euro (€0.2 million), partially offset by a higher average gold price in the third quarter of 2020 of US$1,909 per ounce compared to US$1,472 per ounce in the third quarter of 2019 (€1.1 million).

During the third quarter of 2020, the Company recorded operating expenses of €0.15 million compared to €0.11 million during the same period in 2019. The increase was mainly explained by higher administrative costs for the third quarter of 2020.

The amortization expense of €0.05 million during the third quarter of 2020 was lower than the amortization expense of €0.10 million recorded during the third quarter of 2019, mainly due to lower production at the Rosebel mine.

The investment income for the third quarter of 2020 was €0.02 million compared to €0.17 million during the same period in 2019. The decrease was mainly due to lower interest rates applied to bank balances in 2020.

EURO recorded an income tax expense of €0.6 million in the third quarter of 2020 compared to €2.2 million in the third quarter of 2019. The decrease was mainly due to the tax impact of lower earnings and translation adjustments.

Outlook

The Rosebel royalty production is anticipated to be between 160,000 ounces and 180,000 ounces in 2020. The range of production guidance has been maintained compared to the second quarter of 2020.

In 2020, the Rosebel royalty is expected to provide revenues to the Company of between approximately €18.8 million and €21.3 million (US$22.2 million and US$25.2 million). These pre-tax numbers assume a gold price of US$1,750 per ounce and an exchange rate of €1 for US$1.18. The impact of changes in the average gold price on EURO’s annual revenues, based on an estimated production of 170,000 ounces, would be approximately US$1.7 million for each US$100 per ounce change in the gold price. The impact of a 5% change in the average foreign exchange rate on EURO’s annual revenues would be approximately €1.0 million. EURO’s cash flow is expected to be primarily affected by income tax payments. The Company maintains certain cash available to pursue opportunities that would enhance the Company's long-term business.

GLOBAL COVID-19 CRISIS

The global COVID-19 pandemic continues to evolve including the continuing imposition of restrictions on the movement of people and goods, social distancing measures, restrictions on group gatherings, quarantine requirements and contact tracing. The Company has been closely monitoring and taking necessary measures to manage the impact of the COVID-19 crisis on all aspects of its operations.

Given the surge of COVID-19 infections in the region, a number of personnel at the Rosebel Gold Mine operations in Suriname were diagnosed with COVID-19. In conjunction with the Surinamese Health Authorities, Rosebel implemented all required preventive measures, including the disinfecting of sleeping quarters and work areas. The beginning of the quarter showed a steeper curve of new cases as the measures were being implemented. These measures were proven to be effective with a flat curve of new cases through the remainder of the third quarter. Strict protocols ensured that personnel exhibiting flu like symptoms were immediately isolated and tested. Positive cases were managed by the Health Authorities, and isolated in governmental quarantine locations in Paramaribo. By the end of the third quarter 2020, 98% of affected personnel had recovered.

As the COVID-19 health and safety protocols were embedded at the Rosebel Gold Mine operations, the workforce was expanded and the operation is expected to reach normal capacity in the first quarter 2021.

About EURO

EURO is a French company whose main assets are a royalty on the Rosebel gold mine production in Suriname (the “Rosebel royalty”), a royalty on the Paul Isnard concessions, and marketable securities. The Rosebel gold mine is 95%-owned by IAMGOLD Corporation (“IAMGOLD”), and is operated by IAMGOLD. The royalty on the Paul Isnard concessions is a net smelter returns production royalty on future production of the Paul Isnard concessions and an area of interest surrounding the concessions in French Guiana, owned under a joint venture agreement between Orea Mining Corp. and Nord Gold SE.

EURO has approximately 62.5 million shares outstanding. At September 30, 2020, IAMGOLD France S.A.S. (“IAMGOLD France”), an indirect wholly owned subsidiary of IAMGOLD, owned approximately 89.71% of all issued outstanding shares of EURO. As at September 30, 2020, IAMGOLD France held 56,058,191 shares representing 112,116,382 voting rights or 94.25% of the voting rights of EURO. This threshold crossing results from a double voting rights allocation.

Statements Regarding Forward-Looking Information: Some statements in this news release are forward-looking statements. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties. There can be no assurance that future developments affecting the Company will be those anticipated by management.

Not for distribution to United States newswire services or for dissemination in the United States. The securities referred to herein have not been registered under the United States Securities Act of 1933, as amended (the Securities Act), and may not be offered or sold in the United States or to a U.S. person absent registration, or an applicable exemption from the registration requirements of the Securities Act.

Additional information relating to EURO Ressources S.A. is available on SEDAR at www.sedar.com. Further requests for information should be addressed to:

Tidiane Barry
Directeur Général
Tel: +1 450 677 0040
Email: tbarry@euroressources.net

Sophie Hallé
Directeur Général Délégué
Tel: +1 450 677 0040
Email : shalle@euroressources.net

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