TORONTO, ONTARIO--(Marketwired - Oct. 29, 2013) - Ivernia Inc. (News - Market indicators) -
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All Dollar Amounts are in U.S. Dollars ("US$") Unless Otherwise Indicated
Ivernia Inc. ("Ivernia" or, collectively with its subsidiaries, the "Company") today reported results for three and nine months ended September 30, 2013. Principal activities during the third quarter of 2013 continued around the focused ramping up of operations at the Company's Paroo Station lead mine (the "Mine"), which restarted in early April 2013. Transportation operations continued their staged increased in conjunction with the ramp-up of the operations.
The Company generated a net income of $0.5 million and became cash flow positive in the third quarter with a $1.2 million net increase in cash over the end of the second quarter of 2013, following a record level of quarterly production of bagged concentrate in the third quarter. This compares to a net decrease in cash flow of $3.3 million in the second quarter of 2013 during our first quarter of operations when ramp-up of operations had just commenced.
THIRD QUARTER 2013 HIGHLIGHTS
Financial
- Revenue of $37.2 million on the sale of 27,000 tonnes of concentrate containing 18,000 tonnes of lead in the third quarter of 2013.
- Gross profit of $12.5 million.
- Cash flow positive in the third quarter of 2013, with a $1.2 million net increase in cash over the second quarter of 2013.
- Net profit after tax of $0.5 million.
- On July 1, 2013 we determined that a change in events and circumstances have led to a change in functional currency from the A$ to the US$ at our Australian subsidiaries.
Operational
- Mining, processing and export operations at the Mine recommenced in April 2013 and operated without any significant interruption during the third quarter of 2013.
- The Mine produced 26,000 tonnes of concentrate containing 17,000 tonnes of lead metal. This level of production was a new quarterly record for the Mine since operations changed to bagging concentrate in 2009.
- The Mine remains on track to meet the 2013 guidance released on May 13, 2013 (the "2013 Guidance") for production and sales. For 2013, the Mine expects to produce between 40,000 to 45,000 tonnes of lead contained in concentrate and to sell between 45,000 to 50,000 tonnes of lead contained in concentrate. The Mine remains on target to reach full production levels by the end of 2013.
- The Company announced the appointment of an interim Chief Financial Officer ("CFO") following the departure of the former CFO on September 30, 2013.
FINANCIAL AND OPERATING HIGHLIGHTS
The following table is a summary of Ivernia's financial and operating highlights for the three and nine months ended September 30, 2013 and 2012:
| |
Three months ended
September 30 |
Nine months ended
September 30 |
(in thousands of United States dollars, unless otherwise indicated and per share amounts)
(unaudited) |
2013
$ |
2012
$ |
2013
$ |
2012
$ |
| Financial Highlights |
|
|
|
|
| Revenue(1) |
37,194 |
- |
59,247 |
- |
| Gross profit (loss) |
12,473 |
(2,379) |
8,008 |
(7,121) |
| Net income (loss) |
485 |
310 |
(34,470) |
(10,843) |
| Basic and diluted earnings (loss) per share |
0.00 |
0.00 |
(0.05) |
(0.01) |
| Cash flow from (used in) operating activities |
2,717 |
(5,226) |
(6,323) |
(13,949) |
| Operating Highlights |
|
|
|
|
| Ore milled - (000s tonnes) |
331 |
− |
491 |
− |
| Average head grade - (% lead) |
6.9 |
− |
7.3 |
− |
| Recovery - (%) |
74 |
− |
73 |
− |
| Concentrate produced - (000s dry tonnes) |
26 |
− |
41 |
− |
| Concentrate sold - (000s dry tonnes)(1) |
27 |
− |
44 |
− |
| Lead metal in concentrate produced - (000s tonnes) |
17 |
− |
26 |
− |
| Lead metal in concentrate sold - (000s tonnes)(1) |
18 |
− |
28 |
− |
| Concentrate inventory - (000s dry tonnes) |
7 |
10 |
7 |
10 |
| Average lead price - LME cash settlement- ($/pound) |
0.95 |
0.89 |
0.94(3) |
0.92 |
| Ivernia's average lead sale price - ($/pound) |
0.96 |
− |
0.95 |
− |
| Cash cost per pound sold - ($/pound)(2) |
N/A |
N/A |
N/A |
N/A |
- The Mine was placed on full care and maintenance in April 2011. In April 2013, the Company recommenced mining, processing and transportation operations.
- Cash cost per pound sold is a non-IFRS measure. Cash cost of lead sold is not currently meaningful as the Mine worked through the issues surrounding transportation and then care and maintenance during 2011 through 2013. Once the Mine achieves steady state production run rates information about the cash cost of lead sold will be reintroduced.
- Average lead price London Metal Exchange ("LME") cash settlement is calculated from April 4, 2013 onwards, being the date restart of milling and processing operations.
OPERATIONS REVIEW
Principal activities during the third quarter of 2013 continued around the focused ramping up of operations at the Mine which restarted in early April 2013 after being on care and maintenance since April 2011. During the third quarter, the Mine produced 26,000 tonnes of concentrate containing 17,000 tonnes of lead metal and sold 27,000 tonnes of concentrate containing 18,000 tonnes of lead metal. Transportation operations continued their staged increased in conjunction with the ramp-up of the operations. The major challenges encountered during the quarter were associated with increasing plant stability after the restart of processing operations.
The Company generated a net income of $0.5 million and became cash flow positive in the third quarter with a $1.2 million net increase in cash over the end of the second quarter of 2013, following a record level of quarterly production of bagged concentrate in the third quarter. This compares to a net decrease in cash flow of $3.3 million in the second quarter of 2013 during our first quarter of operations when ramp-up of operations had just commenced.
In the fourth quarter and beyond, to improve its financial results, the Company will continue to focus on increasing concentrate production, improving plant recoveries and advancing cost reduction projects. However, the Company's revenues will continue to be subject to a number of factors; primarily, lead metal prices, A$/US$ exchange rate and demand for lead concentrate.
While the Company anticipates that cash flow from operating activities will be sufficient to fund non-operating activities going forward, including repayment of principal payments under the C$20 million secured loan facility (the "Sprott Facility") with Sprott Resources Lending Partnership ("Sprott"), if management considers cash flow from operating activities to be insufficient to fund non-operating activities going forward or that working capital will not be sufficient to meet the covenants under the Sprott Facility, the Company may need to consider equity or debt financing.
A full discussion of the events for the three year period to March 28, 2013, is contained in the Annual Information Form dated March 28, 2013 ("2012 AIF") under the heading "Three-Year History - Operations", and is incorporated herein by reference. The 2012 AIF is available on the Ivernia web site at www.ivernia.com and on SEDAR at www.sedar.com.
The table below summarizes quarterly mine production, process production, shipments and inventories for the three and nine months ended September 30, 2013:
| |
Three months
ended
September 30,
2013 |
Three months
ended
September 30,
2012 |
Nine months
ended
September 30,
2013 |
Nine months
ended
September 30,
2012 |
| Mining |
|
|
|
|
| Ore mined - 000s tonnes(1) |
350 |
− |
521 |
− |
| Low grade ore mined - 000s tonnes(2) |
- |
− |
- |
− |
| Total ore and waste mined - 000s bcm |
521 |
− |
928 |
− |
| Processing |
|
|
|
|
| Ore milled - 000s tonnes |
331 |
− |
491 |
− |
| Average head grade - % lead |
6.9 |
− |
7.3 |
− |
| Average recovery - % |
74 |
− |
73 |
− |
| Concentrate produced - 000s dry tonnes |
26 |
− |
41 |
− |
| Concentrate grade - % lead |
65 |
− |
64 |
− |
| Lead metal in concentrate produced - 000s tonnes |
17 |
− |
26 |
− |
| Sales and inventories |
|
|
|
|
| Concentrate sold - 000s dry tonnes |
27 |
− |
44 |
− |
| Concentrate grade - % lead |
65 |
− |
64 |
− |
| Lead metal in concentrate sold - 000s tonnes |
18 |
− |
28 |
− |
| Concentrate inventory - 000s dry tonnes |
7 |
10.1 |
7 |
10.1 |
- Ore mined does not include low grade ore.
- Low grade ore is 1.5% to 2.5% lead.
The Mine was not operational during 2012 and the first quarter of 2013. In April 2013, the Company recommenced mining, processing and transportation operations at the Mine.
Mine Production Ramp-up
On April 5, 2013, milling and processing operations recommenced at the Mine and, at the end of April, mining operations recommenced. Performance has continued to steadily improve and ramp up over the third quarter as the workforce continues to gain experience with the ore processing plant. Milling rates, production and plant performance were all generally in line with expectations for the quarter.
The primary focus of site management in the third quarter was to increase workforce skills and stabilize and steadily increase milling rates.
During the third quarter of 2013, the mill treated 331,000 dry metric tonnes of ore with an average head grade of 6.9% lead. The plant recovered an average of 74% of the lead, to produce approximately 26,000 dry metric tonnes of concentrate with an average grade of 65% containing 17,000 tonnes of lead metal. As of September 30, 2013, the Company had 6,600 dry metric tonnes of concentrate inventory of which 2,500 dry metric tonnes of concentrate was at the Mine and the remainder was in transit.
In the third quarter of 2013, the Company faced challenges with variable ore types and ore grades, including high grade clay material. The high variation in processing volumes, ore grades and types and the relatively new plant operating staff lead to lower recoveries than at a normal steady state which is typical and to be expected in a ore processing plant ramp-up. Plant recoveries are expected to increase and stabilize as the plant reduces the variability in ore processed, operator experience increases and the processing plant moves towards steady state. Overall during the third quarter of 2013, the average plant recovery was 74%.
The Mine has now recruited its full complement of personnel. There currently appears to be more availability of skills available in Western Australia given that a number of projects and companies have delayed, reduced or shut down operations in the State.
In the fourth quarter of 2013, the Company will continue to focus on ramping up the mining and processing rates towards full production levels. This will require continued debottlenecking of the processing plant, increasing surge capacity throughout the concentrate handling and logistics chain and a focus on reducing the variability of ore delivered to the processing plant. In addition, the Company is undertaking work to convert the Mine's generator sets in the Mine's onsite power station from diesel fuel to dual fuel diesel-natural gas or pure natural gas. The reduction of diesel consumption is expected to significantly reduce the site's power costs and reduce the Mine's carbon emissions.
Production Outlook
The Company previously provided the 2013 Guidance of expecting to produce between 40,000 and 45,000 tonnes of lead contained in concentrate and to sell between 45,000 and 50,000 tonnes of lead contained in concentrate in 2013.
The Company remains on track to meet the 2013 Guidance. In the fourth quarter of 2013, the Mine expects to produce between 15,000 to 19,000 tonnes of lead contained in concentrate and to sell between 17,000 to 19,000 tonnes of lead contained in concentrate. Full production levels at the Mine are targeted by the end of 2013.
The Company expects to produce and sell, annually, between 80,000 and 85,000 tonnes of lead contained in concentrate for 2014 and beyond ("2014 Guidance").
The 2013 and 2014 Guidance are forward-looking statements based on certain material factors and assumptions. See "Forward-Looking Statements".
Financial Review
Concentrate revenue for the third quarter of 2013 was $37.2 million from the sale of 27,000 tonnes of concentrate containing 18,000 tonnes of lead metal. Concentrate revenue for the first nine months of 2013 was $59.2 million from the sale of 44,000 tonnes of concentrate containing 28,000 tonnes of lead metal.
On July 1, 2013, the Company re-assessed the functional currency at the Mine due to significant operational and financial changes that have occurred since the Mine last operated. The Company applied the change in functional currency from the A$ to US$ at its Australian subsidiaries from July 1, 2013 on a prospective basis.
Capital Resources and Working Capital Requirements
As of September 30, 2013, the Company had approximately $5.5 million in cash and cash equivalents. At current lead prices and foreign exchange rates, the Company expects that it has sufficient working capital to fund the Mine and to maintain a working capital ratio (excluding current payments to Sprott) above 1.25 to 1.00 in accordance with the Sprott Facility. Operations turned cashflow positive in the third quarter of 2013 and the Company expects to remain cash flow positive from operations for 2014. While the Company anticipates that cash flow from operating activities will be sufficient to fund non-operating activities going forward, including repayment of principal payments under the Sprott Facility starting at the end of the first quarter of 2014, the Company's financial condition will remain subject to certain risks and uncertainties as it ramps-up operations over the course of 2013. For instance, ongoing cash flow from operating activities is exposed and continues to be exposed to fluctuations in metal prices, production and shipping rates, the A$/US$ exchange rate and demand for lead concentrate. See "Risk Factors - Funding Requirements" in the 2012 AIF and "Forward-Looking Statements" below. If management considers cashflow from operating activities to be insufficient to fund non-operating activities going forward or that working capital will not be sufficient to meet the covenants under the Sprott Facility, the Company may need to consider equity or debt financing.
Management's Discussion and Analysis and Consolidated Financial Statements
Ivernia's unaudited financial statements and management's discussion and analysis for the three and nine months ended September 30, 2013 will be filed today and will be available on the Ivernia website at www.ivernia.com or SEDAR at www.sedar.com.
About Ivernia
Ivernia is an international base metal mining company and the owner of the Paroo Station Mine in Western Australia.
Ivernia trades under the symbol "IVW" on the Toronto Stock Exchange. Additional information on Ivernia is available on the Company's website at www.ivernia.com and at SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements contained in this news release are forward-looking information within the meaning of securities laws. All statements included herein (other than statements of historical facts) which address activities, events or developments that management anticipates will or may occur in the future are forward-looking statements, including statements as to the following: the 2013 Guidance, 2014 Guidance or other future targets and estimates for production and sales, the Company's ability meet its working capital needs and debt repayments in the near term, projections with respect to cash flows and working capital, any additional financing requirements to operate the Mine, the cost and timing for completion of capital projects necessary for ongoing operations, the Company's ability to comply with the new transportation and operating conditions for the Mine, capital expenditures, operating costs, cash costs, mineral resources, mineral reserves, life of mine, recovery rates, grades and prices, business strategies and measures to implement such strategies, competitive strengths, estimated goals and plans for Ivernia's future business operations, lead market outlook and other such matters. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "contemplate", "target", "believe", "plan", "estimate", "expect", and "intend" and statements that an event or result "may", "will", "can", "should", "could" or "might" occur or be achieved and other similar expressions. These statements are based upon certain reasonable factors, assumptions and analyses made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. However, whether actual results and developments will conform with management's expectations is subject to a number of risks and uncertainties, including factors underlying management's assumptions, such as, expected concentrate sales, the costs and other capital expenditures required to recommence operations and transportation, the timing, need and ability to raise any additional financing and the risks relating to ramping up mining and milling throughput and operations, funding requirements, operations being placed on care and maintenance, matters relating to regulatory compliance and approvals, shareholder dilution, matters relating to public opinion, presence of a majority shareholder and Management Services Agreements, matters related to the Esperance settlement and shipments through the Port of Fremantle, regulatory proceedings and litigation and general operating risks such as metal price volatility, lead carbonate concentrate treatment charges, exchange rates, the fact that the Company has a single mineral property, health and safety, environmental factors, mining risks, metallurgy, labour and employment regulations, government regulations, insurance, dependence on key personnel, constraints on cash distribution from the Mine, the nature of mineral exploration and development and common share price volatility. Additional factors and considerations are discussed in the 2012 AIF and elsewhere in other documents filed from time to time by Ivernia with Canadian securities regulatory authorities. While Ivernia considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. These factors may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and there can be no assurance that the actual results or developments anticipated by management will be realized or, even if substantially realized, that they will have the expected results on the Company. Undue importance should not be placed on forward-looking information nor should reliance be placed upon this information as of any other date. Except as required by law, while it may elect to, Ivernia is under no obligation and does not undertake to update this information at any particular time.
