Yesterday, Timmins Gold (NYSEMKT:TGD) announced its 3Q 2015 results. In the last section of this article, I am discussing the basic figures included in this report, but, first of all, I have to comment on a few very important announcements made by the company.
In 3Q 2015, TGD recognized a huge impairment charge in the amount of $226,510 thousand. This charge was mainly related to the following issues:
- The San Francisco Mine – an impairment of $177,071 thousand
- Inventory – an impairment of $39,392 thousand
- Exploration properties – an impairment of $6,785 thousand
The San Francisco Mine, located in the State of Sonora, Mexico, is a sole producing asset operated by Timmins. Since commencing its operations, San Francisco delivered 460,020 ounces of gold. According to the last technical report, issued in July 2013, San Francisco was holding reserves of 1,589,000 ounces of gold. These reserves were calculated using a long-term price of gold of $1,250 per ounce, which is 10.3% higher than the price at which gold is trading today. Generally speaking, any gold mining company calculates its mineral reserves using the forecasted, long-term price of gold. If this price goes down, any mining company should consider an impairment charge.