(All dollar amounts are in thousands and U.S.
dollars unless otherwise indicated)
PERTH, Australia, May 15, 2018 /CNW/ - LeadFX Inc. (the
"Company" or "LeadFX") (TSX: LFX) today reported its first quarter
2018 ("Quarter") financial results.
The Company's principal asset and sole production stage mineral
property is the Paroo Station Lead Mine ("Paroo Station" or the
"Mine") located 30km west of Wiluna in the mid-west of Western Australia. The Mine was placed in care
and maintenance in the first quarter of 2015. The Company
also owns an 83.5% interest in Chief Consolidated Mining Company
("Chief"), an Arizona company with
interests in mineral properties in Utah ("Chief Properties").
The primary focus of the Company has been examining initiatives
to re-start the Mine, most specifically focusing on supporting
InCoR's commitment to complete a definitive feasibility study
("DFS") to assess the viability of constructing and operating a
Hydrometallurgical Facility on site to produce 70,000 tpa of lead
metal in ingot form.
InCoR contracted SNC-Lavalin Australia Pty Ltd ("SNC-Lavalin")
to prepare the DFS and it was successfully completed on
February 28, 2018. The results of the
DFS were outlined in the press release dated February 28, 2018, the Company's Annual
Information Form, Annual Financial Statements and Management
Discussion and Analysis each dated March 28,
2018 and the Independent National Instrument 43-101
Technical Report, titled, "NI 43-101 Technical Report on
the Paroo Station Lead Carbonate Mine, Wiluna, Western
Australia" filed on April 12,
2018.
The DFS demonstrated the technical and economic feasibility of
constructing and operating a Hydrometallurgical Facility at the
Mine. The Hydrometallurgical Facility would involve the leaching
and electrowinning of lead concentrates produced by the existing
mine and milling operation to produce lead ingots. This would have
the effect of eliminating many of the operating and financial risks
that have caused the Mine to be placed on care and maintenance in
the past, as well as improving the overall project economics.
(in thousands of U.S.
dollars, except per share amounts)
|
|
3 months ended March
31,
|
|
|
2018
|
2017
|
Cashflow used in
operations
|
|
(1,098)
|
(932)
|
Cashflow from (used
in) investing activities
|
|
-
|
456
|
Cash flows from
financing activities
|
|
465
|
1,985
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(11)
|
36
|
Net change in
cash
|
|
(644)
|
1,545
|
Cash on
hand
|
|
379
|
2,529
|
Net loss before
tax
|
|
(3,303)
|
(2,871)
|
The net loss before tax for the Quarter year was $3,303 (2017: $2,871). Operating loss for the Quarter was
$2,992 (2017: $1,967) reflecting lower Mine care and
maintenance and general administration costs offset by the
recording of a $1.5 million expense
reflecting the accounting for warrants issued pursuant to the
private placement announced on December 14,
2017.
Cash on hand at the end of the Quarter was $379 (2017: $1,023). The Mine remained on care and
maintenance during the Quarter. The Company's activities during the
Quarter were financed from cash reserves on hand at the start of
the Quarter and tranche 2 of the private placement announced on
December 14, 2017 ($465). There were no cash flows from investing
activities during the Quarter.
Outlook
Additional financing will be required to meet our strategic
growth plans, ongoing costs and loan commitments of the Company.
Subject to arranging financing , the Company is seeking to move
into a an early works program of engineering and design for the
Hydrometallurgical Facility as well as undertaking a further closed
cycle pilot plant. Discussions with project financiers have been
initiated.
Capital Resources, Liquidity and Working Capital
Requirements
As at March 31, 2018 the Company
has a working capital deficit of $25.3
million (December 31, 2017 –
$24.2 million) which includes
$16.3 million (December 31, 2017 – $15.9
million) owing to Sentient under the Second Amended and
Restated Credit Agreement. Neither the Mine nor the Chief
properties are operational or generating revenue.
On February 26, 2018 LeadFX,
Rosslyn Hill Mining Pty Ltd, Ivernia Australia Pty Ltd, Redback
Pipeline Pty Ltd and Sentient entered into an amendment
("Amendment") to the Second Amended and Restated Credit Agreement
to extend the maturity date for re-payment of the indebtedness
outstanding to Sentient. In accordance with the Amendment, the
indebtedness becomes due and payable on the earlier of March 31, 2019 or financial close being achieved
for the financing of the planned Hydrometallurgical Facility at the
Mine. Financial close is defined as being the date on which the
Company has demonstrated it has fully funded the Hydrometallurgical
Facility and conditions to first drawdown on debt facilities, if
any, for the construction of the Hydrometallurgical Facility have
been met. The indebtedness will continue to incur interest at 10%
per annum until its maturity.
Notwithstanding the gross proceeds of the placements described
herein received by the Company during 2017 and 2018 or the sale of
Mining Data in December 2017, the
Company has limited cash available, other than to meet near term
obligations, and will require additional funding in the near
term.
The Company's ability to continue as a going concern is
dependent on a number of factors. The Company will need to raise
funds in order to pay for its ongoing costs of operations as well
as service its working capital deficiency, meet its commitments to
lenders, and meet the costs of care and maintenance. In addition,
the Company will require funding for any potential future restart
of the Mine, construction of a Hydrometallurgical Facility and
development of the Company's mineral project. The amount of funding
required is dependent on several factors including, but not limited
to, the nature of any refinancing of the Second Amended and
Restated Credit Agreement, the nature of any additional
transactions undertaken by the Company to realize the value of the
Company's assets, the outcome of further negotiations with the
Company's lenders, the costs and duration of care and maintenance,
any decision to pursue a Hydrometallurgical Facility at the Mine,
and the cost of bringing the Company's mineral projects into
production.
There is no guarantee or assurance that the Company will be able
to (i) refinance the Second Amended and Restated Credit Agreement,
(ii) secure sufficient financing to fund its commitments to its
lenders, general and administrative costs and the costs of ongoing
care and maintenance, the costs of any potential future restart of
operations or the costs of bringing its mineral projects into
production or (iii) complete any further transactions.
If the Company is unable to obtain sufficient funds and repay
debts from either one or more of these actions, it would affect its
ability to continue as a going concern. A decision to restart the
Mine and construct a Hydrometallurgical Facility will be contingent
on several factors including, but not limited to, a review of the
outcomes of the DFS, forecast capital and operating costs, the LME
lead price, and the USD:AUD foreign exchange rate. A decision to
commence development of the Company's mineral projects will be
contingent on several factors including, but not limited to,
overall project economics, commodity prices, the estimated
recoverable minerals from the mineral projects, the projected cost
to develop these projects and obtaining funding to finance these
costs.
These material uncertainties cast significant doubt as to the
Company's ability to continue as a going concern. As at
March 31, 2018, the consolidated
financial statements do not reflect any adjustments to the carrying
values of assets and liabilities and the reported expenses and
balance sheet classifications that would be necessary should the
going concern assumption be inappropriate. Such adjustments could
be material.
Shares issued and outstanding
As at March 31, 2018, there are
66,753,204 Common Shares, no preferred shares, 8,124,301 Warrants
and 106,666 options outstanding. The full capital structure, not
including out of the money options, as at March 31, 2018 is as follows:
|
Non-Diluted
Equity
|
Fully-Diluted
Equity
|
Common
Shares
Outstanding
|
Interest in
Common
Shares After
Exercise of
Warrants
|
Balance of
InCoR Umbrella
Agreement
Warrants
|
Warrants
exercisable at
C$0.61 per
Common Share
|
Fully-Diluted
Equity
|
Interest in
Fully-
Diluted
Equity
|
Sentient
|
35,225,682
|
52.8%
|
-
|
1,153,554
|
36,379,236
|
48.6%
|
InCoR
|
25,827,466
|
38.7%
|
5,750,000
|
1,220,747
|
32,798,213
|
43.8%
|
Other
|
5,700,056
|
8.5%
|
-
|
-
|
5,700,056
|
7.6%
|
Total
|
66,753,204
|
100.0%
|
5,750,000
|
2,374,301
|
74,877,505
|
100.0%
|
InCoR exercised the first tranche of Warrants totaling
23,000,000 on February 28, 2018
pursuant to the Umbrella Agreement dated June 20, 2017.
Forward looking statements
Certain statements contained in this press release are
forward-looking information within the meaning of applicable
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 timing and length of care and maintenance at the
Mine and future sales, future targets and estimates for production
and sales, the receipt of required additional financing to restart
and operate the Mine, statements relating to the business and
future activities of, and developments related to LeadFX and its
subsidiaries, including the development of water, lead, silver,
industrial minerals and aggregates assets, future business
acquisitions, future lead production, the Company's ability to meet
its working capital needs and debt repayments in the near term, the
circumstances or timing and costs surrounding a restart of the
Mine, forbearance by Sentient pursuant to the Second Amended and
Restated Credit Agreement, as amended in February 2018, timing of and ability to secure
project financing favourable to the Company (if at all) regarding
the proposed Hydrometallurgical Facility, satisfaction of
conditions to the funding of debt facilities regarding the proposed
Hydrometallurgical Facility, design and construction of the
proposed Hydrometallurgical Facility, environmental approvals
regarding the proposed Hydrometallurgical Facility, projections
with respect to cash flows and working capital, the cost and timing
for completion of capital projects necessary for any future
operations, the Company's ability to comply with the transportation
and operating conditions for the Mine, capital expenditures,
operating costs, cash costs, all in sustaining cost estimates,
metallurgical recovery rates, commodity price forecasts,
modification and improvement plans for mining and processing lead
ore at the Mine, tailings management at the Mine, implementation
schedules and forecasts, 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 LeadFX's future business operations,
commodity prices 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 when
in operations, the costs and other capital expenditures required to
maintain 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, the
restart of mining and milling operations, matters relating to
regulatory compliance and approvals, shareholder dilution, matters
relating to public opinion, presence of majority shareholders,
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 production stage 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 notes to the Company's
annual audited consolidated financial statements for the year ended
December 31, 2017 and its
accompanying management's discussion and analysis and elsewhere in
other documents filed from time to time by LeadFX with Canadian
securities regulatory authorities. While LeadFX 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, LeadFX is
under no obligation and does not undertake to update this
information at any particular time.
SOURCE LeadFX Inc.