VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 15, 2008) - Genco Resources Ltd. (TSX:GGC - News;the "Company") is pleased to announce the results for its second quarter and first half ended June 30, 2008 and provided an update on its mining activities. "Subject to a positive Feasibility Study in September, we continue to anticipate significantly expanding production by developing already identified new production centres at the Guitarra Mine in the next few years," said Greg Liller, President. "Our optimism with regard to the proposed expansion is based in part on the significant increase in estimated reserves and resources at La Guitarra announced in June."
Outlook
In July Genco added a third mill shift at the Guitarra Mine and the Company expects to operate at or near 320 tonnes per day for the second half of 2008. At this rate, the milling of ore in the second half 2008 would increase by 55% from 207 tonnes per day in the first half of 2008 and up 126% from 142 tonnes per day in the second half of 2007.
Projected metal sales are approximately 320,000 silver equivalent ounces ("eAg") for the second half of 2008. If achieved, this would represent an increase of 14% from 280,206 eAg ounces in the first half of 2008 and an increase of 24% from 258,804 eAg ounces in the second half of 2007. Production costs are expected to remain stable during the third quarter and rise slightly during the fourth quarter of 2008.
The Feasibility Study for production expansion at the Guitarra Mine is scheduled to be available to Genco in September. Management anticipates the study will offer a positive recommendation for expanding production and construction of a new 3,000 tonne per day mill facility in the first phase. Expanding production would involve the development of three or more new underground production centres and one surface production centre. These new production centres have already been identified. Genco expects current production from the two existing underground sources and development ore will be sufficient to operate the Guitarra Mill at or near proved capacity for the remainder of 2008 and 2009.
Genco expects that general and administrative expenses will continue to be higher than is normal for a company with its production levels as a result of ongoing work related to the completion of Feasibility Study, district exploration, mine expansion and new infrastructure works.
Financial Highlights
- Sales for the second quarter of 2008 were $2,262,857, up 11% from the same period of 2007. For the first half of 2008 sales were $4,336,186, up 21% from the same period of 2007.
- Gross profit for the second quarter of 2008 was $912,440 down 24% from the same period of 2007. For the first half of 2008 gross profit was $667,737 down 56% the same period of 2007.
- Investment in exploration, new mine development and equipment totalled $6,061,941 during the six month period ended June 30, 2008.
- An agreement was reached to sell Genco's shares in the Chief Consolidated Mining Company to Andover Ventures Inc.
Summary Financial and Operational Results
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Three month period Six month period
ended June 30 ended June 30
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2008 2007 2008 2007
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Sales $2,262,857 $2,034,549 $4,336,186 $3,581,575
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Gross Profit $ 912,440 $1,203,560 $ 667,737 $1,514,761
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Net loss $1,023,013 $ 835,877 $2,308,420 $1,674,454
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Loss per share $ 0.02 $ 0.02 $ 0.06 $ 0.05
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Average shares fully diluted 41,348,638 34,973,667 41,273,993 33,602,352
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Tonnes milled per day 204 174 207 188
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eAg ounces sold 146,690 150,155 280,206 261,260
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Silver sales (ounces) 180,220 80,738 194,866 149,692
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Gold sales (ounces) 735 1,390 1,628 2,253
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Average realized silver price US$17.17 US$13.36 US$17.38 US$13.34
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Average realized gold price US$898.67 US$667.00 US$912.53 US$660.39
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When compared with 2007, sales in the second quarter and first half increased mainly because of higher silver and gold prices, while gross profit declined because of higher operating costs largely due to increased energy costs.
As shown in the summary financial results, the net loss was higher for both the second quarter and the first half of 2008. The main reasons for the higher loss were lower gross profits and expenses related to the June 2008 proxy dispute. Partially offsetting these factors was a gain resulting from a fair value adjustment on bonuses payable.
Additional information is disclosed in the Management's Discussion and Analysis and the complete financial statements and notes for the second quarter and first half of 2008. These documents are available online at www.gencoresources.com.
About Genco Resources
Genco's core asset is the producing La Guitarra silver/gold mine, located in the Temascaltepec Mining District of Mexico. The Guitarra mine currently consists of two underground operation centres, La Guitarra and San Rafael, and a flotation mill with a nominal capacity of 340 tonne per day ("t/d") and a proven capacity of 320 t/d. Genco believes significant potential exists to expand production within the 39,714 hectares of mining concessions it currently owns or leases in the Temascaltepec Mining District. Drilling conducted in the District since 2006 has identified significant mineralization and the possibility of developing multiple new underground and surface production centres. The Company has retained Kappes, Cassiday and Associates to prepare a feasibility study to assess the economics of expanding production.
Forward Looking Statements Disclaimer
This news release contains certain forward-looking statements that involve risks and uncertainties, such as statements of Genco's plans, objectives, strategies, expectations and intentions. The words "may", "would", "could", "will", "intend", "plan", "believe", "estimate", "expect" and similar expressions, as they relate to Genco or its management, are intended to identify such forward-looking statements.
Specific forward looking statements in this news release include, but are not limited to, the timing and results of the Feasibility Study at the Guitarra Mine, financing plans, production plans, future expenses and future exploration. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, as noted in filings made with the Canadian securities regulatory authorities.
Should one or more of these risk factors or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended planned, anticipated, believed, estimated or expected. Genco does not intend, and does not assume any obligation, to update these forward-looking statements.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
