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AuRico Gold Provides Guidance Update And Announces Appointment Of Vice President Operations For Mexico

Stocks in this article: AUQ

Ocampo Mine, Mexico

As previously reported on July 16, 2012, production in the second quarter of 2012 was negatively impacted by an unusually high turnover of skilled labour that significantly reduced underground ore development in the Northeast underground mine. As a result the Company is currently mobilizing two underground mining contractors to support an accelerated underground development program. As part of this initiative, management conducted an operational review focused on implementing a sustainable production growth plan that will result in consistent mine performance.

While early indications from the accelerated development initiatives demonstrate improvement, the Company has adopted a more conservative view with respect to operational estimates for 2012 and 2013. Accompanying this new production forecast, the cash cost profile is expected to increase in the short term reflecting reduced proportional levels of low-cost underground production and a corresponding increase in the level of higher-cost open pit production. As the mine increases the level of low-cost underground production in 2013 and beyond, the cost per ounce profile is expected to reduce significantly.

Capital expenditure estimates have been increased for 2012 and 2013, reflecting the accelerated development work being carried out. This development work is contained within existing life of mine development requirements and is being brought forward to increase developed underground inventory for production to ensure flexibility and reliability of future operations. In addition, reserves originally planned to be mined in 2012 and 2013 have been pushed out into subsequent production periods and the mineral reserve and resource estimate at Ocampo has not changed.

Ocampo remains a key, long life asset for AuRico, with significant potential to identify further reserve and resource additions. This new mine plan, which includes the accelerated underground development program, is expected to reposition Ocampo for the future, in targeting solid, reliable performance and sustainable growth.

    2012 Calendar Year                  Prior Guidance    Revised Guidance
    Production (Aue Oz's)[1]          155,000 to 170,000 115,000 to 125,000
    Cash Costs Per Ounce ($/oz) [1,2]    $540 to $570       $705 to $805
    Cash Costs Per Ounce ($/oz) [1,3]    $540 to $570       $775 to $875
    Capital Expenditure [4]           Up to $50 million  Up to $70 million
    1. Using a gold equivalency ratio of 55:1
    2. Exclusive of Q2 NRV adjustment
    3. Inclusive of Q2 NRV adjustment
    4. Exclusive of discretionary exploration investments
    2013 Calendar Year               Prior Guidance      Revised Guidance
    Production (Aue Oz's)[1]       180,000 to 200,000   125,000 to 155,000
    Cash Costs Per Ounce ($/oz)[1]    $540 to $570         $650 to $750
    Capital Expenditure [2]        Up to $70 million    Up to $75 million
    1. Using a gold equivalency ratio of 55:1
    2. Exclusive of discretionary exploration investments

Young-Davidson Mine, Canada

The Young-Davidson mine recently declared commercial production with the mine and process operations currently achieving targeted levels. The Company has updated gold production forecasts to between 55,000 and 65,000 ounces with a 10,000 ounce decrease being attributable to:

  • a one-month delay in achieving the first gold pour ( April 30 th, 2012) attributable to changes in scope design; and,
  • a ten day power outage due to forest fires in the Kirkland Lake area interrupting power supply to the process operation.

During the period leading up to the declaration of commercial production and the period immediately thereafter, unit operating productivities, unit cost profiles and grade profiles have been in line with expectations. However, with the limited operating history, management has elected to adopt a more conservative approach with respect to the estimated cash cost per ounce profile and has updated the cash cost estimate for 2012. The Company has reaffirmed operational estimates for 2013.

    2012 Calendar Year               Prior Guidance            Revised Guidance
    Production (Au Oz's)            65,000 to 75,000           55,000 to 65,000
    Cash Costs Per Ounce
    ($/oz)                            $450 to $550               $550 to $650
    Capital Expenditure [1]        Up to $227 million         Up to $240 million
    1. Exclusive of exploration, capitalized interest & borrowing costs, and
    capitalized changes in working capital

Young-Davidson will be a key long life, strategic asset for AuRico, with almost 6 million ounces currently delineated in reserves and resources and significant potential to identify additional reserves and resources. The production ramp-up at the Young-Davidson mine is progressing very well and, starting in 2013, the Company is targeting a significant increase in output over a four-year period. Young-Davidson will be the major driver of AuRico's growth profile going forward, as increasingly larger volumes of higher grade material are mined from the underground operation.

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