Yukon-Nevada rises on Q1, financing news

Yukon-Nevada Gold (YNG-T) shares jumped 31% in late day trading to 56¢ on news of its first quarter results and recent $59-million financing, which would be used to upgrade its Jerrit Canyon gold mine in Nevada.

A day before it announced its first quarter results on May 25, the junior said it would rake in $44.9 million from the exercise of share purchase warrants, and another $14.4 million from a private place with Deutsche Bank.

The total proceeds from both transactions would allow the company to finish its 2011/12 capital expenditure and upgrade program at the Jerrit Canyon mine, which consists of a milling facility and two underground mines: Smith and SSX.

Some of the upgrades the company plans to do include: building a new lined tailings storage facility and secondary water storage; installing another quench tank during the two-week annual maintenance shutdown periods; and adding more spare parts for mill maintenance and repairs. The miner would also buy more underground equipment, to help kick start the SSX mine.

The company estimates that SSX would produce 1,200 tons a day, once it’s up and running.

Currently, the Smith gold mine churns out 1,000 tons per day, since re-opening in late 2009, after some delay.

Yukon-Nevada says both mines combined would daily generate 2,200 tons grading 0.22 oz. gold per ton. But it plans to ramp up production by adding ore purchased from Newmont (NMC-T, NEM-N) and ore from its stockpile to increase throughput to 4,000 tons per day, which would help the company reach its first production milestone of generating 150,000 oz. gold per year by the end of 2011.

The Jerrit Cayon mine produced 14,447 oz. gold in the first quarter, which was about 30% less than the previous quarter’s production of 18,770 oz. The company says the reduction resulted from severe winter conditions and a lack of materials and supplies, which led to shut downs during the period.

The company sold 13,650 oz. of gold from Jerritt Canyon for about US$19 million for the quarter, a boost from gold sales of US$10 million on 9,108 oz. sold in the first quarter of 2010, however, lower than the previous quarter’s sales of US$29.8 million.  

However, the miner saw a profit of US$28.9 million in the first quarter of 2011, compared to a loss of US$41.9 million in the year-ago period. Yukon-Nevada says the profit came thanks to a US$51-million gain in the “fair value of warrants recorded as derivative liabilities”, following the company’s switch from Canadian GAAP to the International Financial Reporting Standards.

In March, the company reduced the exercise prices of its unlisted share purchase warrants for a 30-day period, ending on April 13, 2011. In that period, about 59 million warrants where exercised for revenue of $12.5 million.

Following the April 13 deadline, the company said on May 24 that Orifer, a major shareholder of Yukon-Nevada, agreed to transfer its current warrants for a nominal amount to several institutional investors including Deutsche Bank, on the condition that the warrants would be exercised immediately.

The bank will exercise 80 million Yukon-Nevada warrants for $25 million, and other investors will exercise 60.4 million warrants for proceeds of $19.3 million.

Deutsche Bank also agreed to buy 33.5 million units at 43¢ apiece for $14.4 million in a private placement. Each unit contains one Yukon-Nevada share and one warrant, which would have a two-year term and is exercisable for one share at 55¢. The private placement still requires regulatory approvals.