VANCOUVER, BRITISH COLUMBIA (AMEX: MNG) today announced its
financial results for the second quarter ended September 30, 2007.
For the three month period, Miramar reported a consolidated net
loss of $3.0 million or $0.01 per share compared to net earnings of
$0.4 million or $0.00 per share for the same period in 2006. In the
third quarter of 2007, the Company recorded a write down of $3.5
million on its investment in third party asset backed commercial
paper ("ABCP"). The Company ended the quarter with cash and short
term investments of $83.0 million. In the third quarter of 2007,
the Company re-classified its investments in ABCP of $37.3 million
from cash and cash equivalents to long-term investments.
Third Quarter Highlights
Work in the quarter focused on progressing work at Hope Bay. At
the end of the nine month period, a total of 58,000 meters had been
drilled at Hope Bay with approximately 50 holes awaiting assays.
Site preparation for the Doris Mine continued including the
acquisition and mobilization of construction materials, equipment
and plant facilities. Permitting also advanced with a positive
Water License decision announced in September by the Nunavut Water
Board.
Subsequent to the quarter end the Company signed a support
agreement with Newmont Mining Corporation ("Newmont") for the
acquisition by Newmont Mining B.C. Limited, a wholly owned
subsidiary of Newmont with unanimous support of the Miramar board
of directors, of all of the outstanding shares of the Company for
$6.25 cash per common share. The acquisition will be effected by
way of a take-over bid. The take-over bid circular and director's
circular relating to the offer were mailed to shareholders on
October 31, 2007. The initial expiry date of the bid is December 6,
2007.
Financial Results
For the quarter ended September 30, 2007, the Company had a loss
of $3.0 million or $0.01 per share compared to earnings of $0.4
million or $0.00 per share in 2006. During the third quarter of
2007, the Company assessed the carrying value of its ABCP
investments using an estimate of fair value based on a probability
weighted discounted cash flow analysis. This valuation resulted in
a reduction of $3.5 million to the estimated fair value of the
ABCP. Continuing uncertainties regarding the value of the assets
which underlie the ABCP, and the amount and timing of expected cash
flows could give rise to a further change in the value of the
Company's investment in ABCP which would impact the Company's
earnings.
For the nine month period ended September 30, 2007, the Company
had a loss of $5.0 million or $0.02 per share compared to net
earnings of $1.2 million or $0.1 per share in the same period of
2006.
For details see the full Financial Statements and Management's
Discussion and Analysis attached to this news release.
Additional Information
All dollar amounts referred to herein are expressed in Canadian
dollars. All information previously released on the Hope Bay
Project is available Miramar's website at
http://www.miramarmining.com/.
About Miramar Mining Corporation
Miramar is a Canadian gold company that controls the Hope Bay
project in Nunavut, Canada.
Forward Looking Statements
This press release and the attached financial disclosure contain
forward-looking statements within the meaning of the United States
Private Securities Litigation Reform Act of 1995 including, without
limitation, statements relating to Miramar's strategies, goals and
objectives at the Hope Bay project and the expected results of
exploration work. Forward looking statements are statements that
are not historical facts and are generally but not always,
identified by words such as "expects", "plans", "anticipates",
"believes", "intends", "estimates", "projects", "potential",
"goal", "objective", "strategy", or variations thereof or similar
expressions or statements that events or conditions "will",
"would", "may", "could", or "should" occur.
Forward-looking statements are subject to a variety of risks and
uncertainties which could cause actual events or results to differ
materially from those reflected in the forward-looking statements,
including, without limitation, risks related to fluctuations in
gold prices; uncertainties related to raising sufficient financing
in a timely manner and on acceptable terms to fund the planned
work; changes in planned work resulting from weather, logistical,
technical or other factors; the possibility that results of work
will not fulfill expectations and realize the perceived potential
of the Company's properties, and that commercially viable deposits
may not be identified; uncertainties involved in the interpretation
of drilling results and other tests and the estimation of gold
reserves and resources; the possibility that required permits may
not be obtained on a timely manner or at all; the possibility that
capital and operating costs may be higher than currently estimated
and may preclude commercial development or render operations
uneconomic; the possibility that the estimated recovery rates may
not be achieved; risk of accidents, equipment breakdowns and labour
disputes or other unanticipated difficulties or interruptions; the
possibility of cost overruns or unanticipated expenses in work
programs or mine closures; the risk of environmental contamination
or damage resulting from Miramar's operations and other risks and
uncertainties, including those described in this press release and
the attached disclosure and in the Miramar's Annual Report on Form
40-F for the year ended December 31, 2006 and Reports on Form 6-K
filed with the Securities and Exchange Commission.
Forward-looking statements are based on the beliefs, estimates
and opinions of Miramar's management on the date the statements are
made. Miramar undertakes no obligation to update these
forward-looking statements if management's beliefs, estimates or
opinions, or other factors, should change.
This news release has been authorized by the undersigned on
behalf of Miramar Mining Corporation
MIRAMAR MINING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") provides
an analysis of the financial results of Miramar Mining Corporation
(the "Company") for the three and nine month periods ended
September 30, 2007 compared with the same periods in the previous
year. In order to better understand the MD&A, it should be read
in conjunction with the annual consolidated financial statements
for the years ended December 31, 2006 and 2005 and related notes.
The Company's consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP") and expressed in thousands of Canadian dollars,
except per share amounts. This MD&A is dated as of November 7,
2007. All amounts are expressed in Canadian dollars, except as
otherwise indicated.
OVERVIEW
The Company's mining and exploration assets are primarily gold
assets in the Canadian Arctic. The Company has focused its
activities in the Canadian Arctic for more than ten years and has
developed considerable experience in operations, exploration and
logistics. In 2004, the Company terminated all mining activities at
its Con and Giant mines in Yellowknife, Northwest Territories.
Since then, the Company's business has been focused on the
exploration and development of the Hope Bay gold mineral project in
Nunavut (the "Hope Bay Project"). The Hope Bay Project is 100%
owned by the Company and extends over 1,000 square kilometers. The
Company believes the Hope Bay Project encompasses one of the most
prospective undeveloped greenstone belts in Canada. The belt
contains a number of significant gold deposits including the Doris
North deposit which the Company has been working towards becoming
the first new gold mine in Nunavut.
The Company's goal has been to become an intermediate gold
producer through the phased development of the Hope Bay
Project.
- Phase 1: Short-term: Develop a small scale, high return gold
mine at Doris North with the objective of generating significant
cash flow, after capital payback, to advance the subsequent phases
while minimizing equity dilution. A feasibility study on the Doris
North deposit prepared in early 2003 concluded a two year mine at
Doris North which could produce approximately 155,000 ounces of
gold per year (the "Doris North Project") was feasible. The Company
is currently working on an update to the study and has expanded the
scope of the updated feasibility study to include a review of the
potential additional production which could be added from other
areas in Doris, such as Doris Central and Doris Connector.
- Phase 2: Medium-term: Extend and expand production levels to a
targeted production level of either approximately 300,000 ounces
per year or 600,000 ounces per year. The potential mining
alternatives which are under consideration in technical and
economic studies are: a) an underground operation with a targeted
production of approximately 6,000 tonnes per day and focused on
developing the higher grade, more accessible upper portions of the
Boston, Doris Central and Madrid deposits, and b) a larger scale
("Large Pit Concept") operation with a targeted production of
approximately 16,000 tonnes per day, based upon open pit mining at
Madrid and underground mining at the Boston and Doris deposits.
- Phase 3: Longer-term: Continue exploration efforts at Hope Bay
with the objective of discovering new deposits and expanding the
current known resources in order to provide additional resources to
extend mine production.
To achieve these objectives, the Company needs to successfully
complete, among other things, the current permitting process for
the Doris North Project, complete financing for mine construction,
successfully construct and place into production the Doris North
Project, complete technical and economic studies on Phase 2
development of the Boston, Doris and Madrid deposits and identify
additional resources, complete feasibility studies on Phase 2 and
complete permitting on Phase 2.
THIRD QUARTER HIGHLIGHTS
- Subsequent to the quarter, on October 8, 2007 the Company
signed a support agreement with Newmont Mining Corporation
("Newmont") for the acquisition by Newmont Mining B.C. Limited, a
wholly owned subsidiary of Newmont with unanimous support of the
Miramar board of directors, of all the outstanding shares of the
Company for $6.25 cash per common share. The acquisition will be
effected by way of a take-over bid. The take-over bid circular and
director's circular relating to the offer was mailed to
shareholders on October 31, 2007. The initial expiry date of the
bid is December 6, 2007.
- A total of approximately 24,600 meters of exploration drilling
was completed in the third quarter of 2007, focused primarily in
the Madrid deposit area. For the nine months to the end of
September, approximately 58,000 meters have been drilled at Hope
Bay.
- Significant exploration results were reported in the quarter
from the Suluk deposit within the Madrid area, including hole #569
which intercepted 5.1 g/t over 58 meters, and hole #557 which
intercepted 8.2 g/t over 18.5 meters.
- Site preparation for the construction of the Doris Mine
continued in the quarter along with acquisition of construction
materials, equipment and plant facilities, including a 118 person
camp for mine operations that was completed and was shipped to site
in August and September 2007.
- On September 20, 2007, the Nunavut Water Board ("NWB") issued
a positive decision on the water license application for the Doris
North mine. The NWB has recommended to the Minister of Indian and
Northern Affairs Canada ("INAC") that a six year Type A water
license be issued to Miramar Hope Bay Ltd. for the construction,
operation and ultimate reclamation of the Doris North Project.
- On August 8, 2007, the Company completed an equity
underwriting agreement for a private placement offering of
3,080,000 flow-through common shares at $6.50 per share along with
a non-brokered private placement of 19,038 flow-through common
shares at $6.50 per share for total gross proceeds of approximately
$20.1 million.
- The Company's financial results for the three and nine month
periods ended September 30, 2007 were losses of $3.0 million or
$0.01 per share and $5.0 million or $0.02 per share, respectively.
In the third quarter of 2007, the Company recorded a write down on
its investment in asset backed commercial paper ("ABCP") of $3.5
million.
OPERATIONS OVERVIEW
Selected Financial Data
The following tables summarize total other income, earnings or
loss and earnings or loss per share for each of the last eight
fiscal quarters (in thousands of dollars except per share
amounts).
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2007 Q3 2007 Q2 2007 Q1 2006 Q4
Other income $ 1,598 $ 5,241 $ 2,423 $ 3,988
Earnings/(loss) $ (2,985) $ (2,774) $ 802 $ (3,151)
Per share $ (0.01) $ (0.01) $ 0.00 $ (0.01)
--------------------------------------------------------------------------
2006 Q3 2006 Q2 2006 Q1 2005 Q4
Other income $ 1,762 $ 1,109 $ 2,228 $ 247
Earnings/(loss) $ 357 $ 1,906 $ (1,083) $ (8,348)
Per share $ 0.00 $ 0.01 $ (0.01) $ (0.05)
--------------------------------------------------------------------------
Earnings
For the three month period ended September 30, 2007, the Company
had losses of $3.0 million or $0.01 per share compared to net
earnings of $0.4 million or $0.00 per share in the same period of
2006. In the third quarter of 2007, the Company recorded a write
down on its investment in ABCP of $3.5 million. Additionally, in
the third quarter of 2007, expenses were lower than the same period
of 2006 by $0.3 million offsetting lower interest income, which was
$0.2 million lower the third quarter of 2007 than the same period
of 2006.
For the nine month period ended September 30, 2007, the Company
had losses of $5.0 million or $0.02 per share compared to net
earnings of $1.2 million or $0.01 per share in the same period of
2006. The difference of $6.2 million is mainly attributable to: (1)
as described above, a write down of $3.5 million on ABCP
investments; (2) stock-based compensation expense which was higher
by $4.3 million in 2007 than 2006, (3) future income tax recovery
was lower by $3.5 million, and (4) partially offsetting, interest
and other income was $4.2 million higher and severance and closure
expenses were lower by $1.1 million in the first nine months of
2007 compared to the same period of 2006. Other income was $2.4
million higher in 2007 than the same period of 2006 due to gains on
the sale of Sherwood. Interest income was $1.8 million higher than
2006 due largely to higher average cash balances.
Operating Costs
During the three month period ended September 30, 2007, general
and administrative expenses, salaries, professional services,
investor relations and travel and interest and penalties totaled
$1.1 million compared to $1.3 million in the same period of 2006
due to lower general and administrative expenses and interest and
penalties in the period.
During the nine month period ended September 30, 2007, general
and administrative expenses, salaries, professional services,
investor relations and travel and interest and penalties totaled
$4.3 million compared to $4.2 million in the same period of 2006
due to higher listing fees in 2007. Stock-based compensation was
$5.8 million in 2007 compared to $1.5 million in the same period of
2006. The significant difference results from increased stock-based
compensation expenses incurred in the second quarter of 2007. A
total of 4.3 million stock options were valued in the second
quarter of 2007 compared to 1.8 million in 2006; the fair value
averaged $2.46 per share in 2007 compared to $1.54 in 2006.
Stock-based compensation in 2007 includes the value of
approximately 1.3 million stock-options which were granted in 2006,
but held subject to shareholder approval which was obtained in the
second quarter of 2007. Of the total stock-based compensation,
approximately 54% in each period has been included in deferred
exploration expenditures. Depreciation, depletion and accretion
expense in 2007 was $0.8 million, unchanged from the same period in
2006. Severance and closure costs were $0.4 million in 2007
compared to $1.5 million for the same period of 2006.
EXPLORATION AND DEVELOPMENT ACTIVITIES
The Company's focus continues to be on the Hope Bay Project. The
Company has been committed to a strategy of advancing the Hope Bay
Project to a production decision while continuing to expand gold
resources. The staged development strategy has been to focus first
on the high grade gold Doris North Project, with the goal of
generating cash flow to pay for mining infrastructure and to
partially fund the subsequent development of a bulk tonnage
operation at Madrid and a satellite mining operation at the Boston
deposit which is approximately 50 kilometers south of the Doris
North deposit area. The Company's exploration strategy has been to
focus on expanding the size and increasing the confidence level of
existing deposits and on continued exploration for new gold
resources in order to support a sustained production profile.
In the first quarter of 2007, the Company approved spending
programs at Hope Bay for exploration and project development for
2007 totaling $39.6 million, which includes $31.4 million for
drilling and exploration activities with the objective of
completing approximately 72,000 meters of drilling targeted to
continue to expand and extend existing deposits and explore for new
deposits. Additionally, $8.2 million has been budgeted to advance
Phase 2 engineering and environmental studies. The Hope Bay mine
construction budget for 2007 was also approved totaling $37.2
million. The budget includes the cost of the acquisition of a 118
person camp for the Doris Mine, a mill building, some initial site
preparation and small equipment purchases along with the expected
costs to complete the permitting and licensing process. Based on
lower than planned drill productivity in the first half of 2007,
the Company now projects the total drilling in 2007 will be
approximately 62,000 meters.
The Hope Bay exploration camp was reopened in late February and
the season's drilling activity commenced on March 17, 2007. In the
first half of 2007, drilling activities were focused at the Suluk
deposit which is in the Madrid deposit area and accounted for a
total of approximately 33,500 meters. In the third quarter of 2007,
a total of approximately 24,500 meters of drilling was completed,
comprised of 13,300 meters in the Madrid area, 5,200 meters in the
Boston deposit and 6,000 meters in various regional targets.
Significant exploration results were reported in the quarter
from the Suluk deposit within the Madrid area, including hole #569
which intercepted 5.1 g/t over 58 meters, hole #557 which
intercepted 8.2 g/t over 18.5 meters. At the Boston deposit,
drilling has been focused on resource targets in the Boston BN and
B2 areas of the deposit as well as exploration in the surrounding
area of the Boston deposit. At the same time, a program of
re-sampling core from historical drill holes at Boston has been
ongoing in 2007. Assays are pending for all Boston activity
to-date.
On April 20, 2007, the Company reported its revised resource
calculation incorporating the results of the successful exploration
activities in 2006 on the Hope Bay Project. The revised resource
calculation increased the indicated resources by 1.8 million
ounces, or 22%. Given the potential for a large open pit operation
at the Madrid deposit area, the Company was able to reduce the
cutoff grade applied to those resources, which in part led to the
reported increase. However, using the same cutoff grades as in
2005, approximately 0.5 million ounces were added to the total
resources.
The tables below summarize the reported resources at the Hope
Bay Project as at December 31, 2006.
HOPE BAY INDICATED MINERAL RESOURCES AT DECEMBER 31, 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Indicated
-------------------- Cutoff Contained
Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(1)
--------------------------------------------------------------------------
Madrid Deposit Area
Naartok East 11,353,900 3.7 1.5 1,350,727
Naartok West 6,794,400 3.7 1.5 797,672
Rand 2,957,000 2.5 1.5 239,910
Suluk 11,427,700 3.6 1.5 1,313,989
South Patch 0 0.0 0.0 0
Subtotal Madrid 32,533,000 3.5 3,702,298
Doris Deposit
Doris Hinge(2) 345,000 34.7 8 385,000
Doris North/Connector N/A
Doris Central 824,000 12.9 5 341,000
Doris Pillars N/A N/A N/A
Subtotal Doris 1,169,000 19.3 726,000
Boston Deposit
Boston B2 1,949,000 11.4 4 713,000
Boston B3/B4 363,000 7.3 4 85,000
Subtotal Boston 2,312,000 10.7 798,000
Total Indicated(3) 36,014,000 4.51 5,226,298
--------------------------------------------------------------------------
(1) Disclosure of contained ounces is permitted under Canadian
regulations; however, the United States Securities and Exchange
Commission generally permits mineralization that does not constitute
"reserves" to be reported only as in place tonnage and grade. See
discussion under the heading "Cautionary Note for U.S. Investors" for
a description of differences between Canadian and U.S. requirements
for estimates of mineralization.
(2) Includes the undiluted, unrecovered Probable Mineral Reserve for Doris
Hinge referred to below.
(3) Numbers may not add up exactly due to rounding.
HOPE BAY INFERRED MINERAL RESOURCES AT DECEMBER 31, 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Inferred
-------------------- Cutoff Contained
Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(1)
--------------------------------------------------------------------------
Madrid Deposit Area
Naartok East 14,368,900 2.8 1.5 1,274,903
Naartok West 5,228,100 3.4 1.5 565,276
Rand 5,373,600 2.3 1.5 403,284
Suluk 17,342,000 2.8 1.5 1,546,437
South Patch 227,000 22.5 7 164,202
Subtotal Madrid 42,539,600 2.9 3,954,102
Doris Deposit
Doris Hinge 28,000 10.0 8 9,000
Doris North/Connector 1,270,000 13.9 5 569,000
Doris Central 73,000 12.8 5 30,000
Doris Pillars 263,000 18.6 5-7 158,000
Subtotal Doris 1,634,000 14.5 766,000
Boston Deposit
Boston B2 995,000 9.1 4 292,000
Boston B3/B4 1,437,000 9.7 4 449,000
Subtotal Boston 2,431,000 9.5 741,000
Total Inferred(2)(3) 46,604,600 3.64 5,461,102
--------------------------------------------------------------------------
(1) Disclosure of contained ounces is permitted under Canadian
regulations; however, the United States Securities and Exchange
Commission generally permits mineralization that does not constitute
"reserves" to be reported only as in place tonnage and grade. See
discussion under the heading "Cautionary Note for U.S. Investors" for
a description of differences between Canadian and U.S. requirements
for estimates of mineralization.
(2) Inferred Mineral Resources are reported in addition to Indicated
Mineral Resources.
(3) Numbers may not add up exactly due to rounding.
The Company reports a Probable Mineral Reserve of 458,200 tonnes
grading 22 grams Au/t for the Doris Hinge zone which is included in
the Indicated Mineral Resource. The Probable Mineral Reserve was
estimated during the course of a Feasibility Study carried out by
Steffen Robertson and Kirsten (Canada) Inc. on the Doris North
Project in 2002. This Probable Mineral Reserve is included within
the Indicated Mineral Resource reported in the table above entitled
"Hope Bay Indicated Mineral Resource", to which dilution of 39% and
a mining recovery factor of 95% has been applied.
During the first quarter of 2007, the Company continued to
advance studies, including alternative mining concepts, which will
assess the optimal mining and milling capacity for the next phase
of development at Hope Bay. The results of the technical and
economic studies were targeted to be completed in the second
quarter of 2007. However, these studies were deferred until later
this year in order to incorporate the significant results from the
2007 drilling program.
The Company continued to work towards obtaining permits and
licenses for the Doris North Project. In early May 2007, the
finalized support documentation requested by the NWB was submitted
and technical sessions were held in mid-June 2007. The final public
hearing for the water license application was held on August 13-15,
2007. On September 20, 2007, the NWB issued a positive decision on
the water license application for the Doris North mine. The NWB has
recommended to the Minister of Indian and Northern Affairs Canada
("INAC") that a six year Type A water license be issued to for the
Doris North Project.
In July 2007, the permit for the Roberts Bay jetty foreshore
lease was received from Indian and Northern Affairs Canada and the
authorizations from the Department of Fisheries ("DFO") and
Transport Canada allowing the construction of the jetty at Roberts
Bay to be completed. The jetty was used to receive the sealift
shipment of construction equipment and materials in September and
October, 2007. In September 2006, the Company filed materials to
support its application for amendment of Schedule II of the Metal
Mining Effluent Regulations ("MMER") to include Tail Lake as a
designated tailings impoundment area. In January 2007, the DFO
accepted the Company's selection of the proposed tailings disposal
plan and requested that Environment Canada take steps to amend the
MMER to include Tail Lake in Schedule II. This amendment is
expected in the first quarter of 2008. The Company continues to
expect that the permitting process will proceed in a manner which
will allow the Company to continue with its activities for initial
site development in 2007, completion in 2008 and commencement of
production in the second half of 2008. In January 2007, the Company
engaged SNC-Lavalin to update the feasibility study which was
completed on Doris North in 2003. The update was expected to be
completed in the second quarter of 2007. However, it is now
expected to be completed in the fourth quarter of 2007. The Company
has expanded the scope of the updated Doris Feasibility Study to
include a review of the potential additional production which could
be added from other areas in Doris, such as Doris Central and Doris
Connector. Any such amendment to the project would likely result in
an increase in both the size and life of the Doris North operation,
which in turn would result in cost increases to the project while
increasing the gold produced.
CAPITAL PROGRAMS
During the third quarter of 2007, the Company incurred capital
expenditures of $14.1 million for exploration and project
activities at Hope Bay and $17.2 million for property, plant and
equipment compared to $12.0 million for exploration and project
activities at Hope Bay and $0.2 million for property, plant and
equipment. The increase in expenditures for property, plant and
equipment is largely comprised of construction-in-progress
expenditures for the Doris North Mine as detailed in note 4 of the
interim consolidated financial statements for the third quarter of
2007.
FINANCING AND LIQUIDITY
At September 30, 2007, the Company had consolidated working
capital of $63.3 million compared to $143.7 million at the end of
2006. At September 30, 2007, the Company had $83.0 million of cash
and cash equivalents and short term investments compared to $149.8
million of cash and cash equivalents and short term investments at
December 31, 2006. At September 30, 2007, the Company also had
$15.7 million in reclamation security trusts and cash collateral
deposits for reclamation bonds which are classified outside of
working capital.
In the third quarter of 2007, the Company re-classified its
investments in Canadian third party asset backed commercial paper
of $37.3 million from cash and cash equivalents to long-term
investments. At the dates the Company acquired these investments
they were rated R1(High) by Dominion Bond Rating Service ("DBRS"),
the highest credit rating issued for commercial paper, and backed
by R1 (High) rated assets and liquidity agreements. The majority of
these investments matured during the third quarter of 2007 but, as
a result of liquidity issues in the Canadian ABCP market, were not
repaid on maturity. As a result, the Company has classified its
ABCP as long-term investments after initially classifying them as
cash and cash equivalents in prior periods.
On August 16, 2007, an announcement was made by a group
representing banks, asset providers and major investors that they
had agreed in principle to a long-term proposal and interim
agreement to convert the ABCP into long-term floating rate notes
maturing no earlier than the scheduled maturity of the underlying
assets. On September 6, 2007, a restructuring committee consisting
of major investors was formed to propose a solution to the
liquidity problem affecting the ABCP and has retained legal and
financial advisors to oversee the proposed restructuring process.
On October 16, 2007, it was announced that the committee expected
that the restructuring would be completed on or before December 14,
2007, by means of extraordinary resolutions of the various trusts
that had issued ABCP.
The ABCP in which the Company has invested has not traded in an
active market since mid-August 2007 and there are currently no
market quotations available. The ABCP in which the Company has
invested continues to be rated R1 (High, Under Review with
Developing Implications) by DBRS. During the third quarter of 2007,
the Company assessed the carrying value of its ABCP investments
using its estimate of fair value which was based on a probability
weighted discounted cash flow analysis. This valuation resulted in
a reduction of $3.5 million to the estimated fair value of the
ABCP. Continuing uncertainties regarding the value of the assets
which underlie the ABCP, the amount and timing of cash flows and
the outcome of the restructuring process could give rise to a
further change in the value of the Company's investment in ABCP
which would impact the Company's earnings.
On August 8, 2007, the Company completed an equity underwriting
agreement for a private placement offering of 3,080,000
flow-through common shares at $6.50 per share along with a
non-brokered private placement of 19,038 flow-through common shares
at $6.50 per share for total gross proceeds of approximately $20.1
million. The Company will be required to incur Canadian exploration
expenditures as defined by the Income Tax Act (Canada) for the
total gross proceeds by December 31, 2008.
The Company believes it has sufficient cash resources and
liquidity to sustain its planned activities in 2007 to complete
initial construction planned in 2007 for Phase 1 mine development.
If the proposed transaction with Newmont is not completed as
contemplated, the future exploration and development of the Hope
Bay Project may require the Company to raise additional capital
through a combination of project debt and equity financings. The
Company's strategy has been to use equity financing for exploration
activities and the maximum amount of project debt to build mining
infrastructure until sufficient cash flow is generated from mining
operations.
LIABILITIES AND CONTINGENCIES
The Company has the legal obligation to reclaim properties for
which it holds water licenses and exploration and mining
agreements. The Company has estimated these asset retirement
obligations at December 31, 2006, to be an aggregate of $23.4
million on an undiscounted basis. The properties for which these
obligations have been estimated are the Con Mine in Yellowknife and
the Hope Bay Project in Nunavut. The Company has established cash
deposits as collateral for letters of credit pledged in favour of
various governmental agencies and others under several water
licenses and mineral exploration and mining agreements. The Company
has reclamation security trusts totaling $11.2 million for the Con
Mine and cash collateral deposits totaling $4.5 million for Hope
Bay and other properties.
The reclamation security trusts for the Con Mine were
established on December 31, 2004. The Company deposited $9 million
of the $10 million proceeds from the sale of its Bluefish
hydroelectric facility into a reclamation security trust, in
accordance with an agreement with the Department of Indian and
Northern Development. The remaining $1 million of the proceeds was
deposited into a second reclamation security trust. The proceeds
from any subsequent sale of Con Mine assets will also be deposited
into this second reclamation security trust.
The cost of reclamation was estimated by Golder and Associates
and the Company on the basis of a final closure and reclamation
plan which was submitted to the McKenzie Valley Land and Water
Board ("MVLWB") in January 2007. In late April 2007, the Company
received final approval from the MVLWB for the Con Mine Closure and
Reclamation Plan following an extensive technical and public
review. The approval has conditions that apply to submission of
detailed designs related to construction of specified reclamation
works such as the cap on the tailings containment areas and for
completion of ongoing studies such as the hydrogeology of the
flooding of the underground mine workings. On October 15, 2007, the
Company received comments from INAC in relation to the Con Mine's
water license application. The Con Mine's current water license is
set to expire in January 2008. INAC's submission included an
estimate for the total cost of reclamation for land and water for
the Con Mine of approximately $27 million. This amount, if
accepted, is higher than the estimate prepared by the Company by
more than $10 million on an undiscounted basis. The Company will
present its arguments in support of its estimated cost at a public
hearing for the water license which was initially scheduled to
commence on November 5, 2007. The MVLWB has agreed to delay the
public hearing as requested by the Company; accordingly, the public
hearing has been re-scheduled to January 16-17, 2008.
In 1995, the Corporation entered into a joint exploration
transaction with an investor that resulted in a renunciation of
certain resource expenses being made to the investor. The amount of
the renunciation was based upon an independent valuation prepared
for the Corporation relating to the Con Mine assets. In 2000, the
Canada Revenue Agency (the "CRA") issued a reassessment notice
challenging the valuation that formed the basis for this
transaction. The reassessment does not give rise to any taxes
payable by the Corporation. However, as part of the original
transaction, the Corporation agreed to compensate the investor for
any shortfall in the renunciation made by the Corporation to a
maximum of $2.7 million plus accrued interest. On March 29, 2007,
the Company and the CRA reached a settlement regarding the
reassessment which adjusts certain tax pools of the Company and
preserves the amount of the renunciation originally made to the
investor. Accordingly, the Company no longer has a contingent
liability with respect to possible payments to the investor. The
settlement does not result in any income tax payable by the
Company.
In September 2006, the Company signed an Inuit impact and
benefits agreement with the KIA which establishes the terms which
will apply to Doris North mine operations with respect to benefits
to the Inuit people of the Kitikmeot region. Included in the
agreement are specific payments totaling $1.4 million which would
be made to the KIA subject to the successful completion of certain
project milestones such as a positive production decision made by
the Company and receipt of its water license. Also in September
2006, the Company completed a water compensation agreement with the
KIA for the proposed use of the lake for tailings disposal. The
agreement establishes total compensation of $0.9 million to be paid
by the Company over a three year period following a positive
production decision made by the Company.
Contractual Obligations
The following table summarizes the contractual obligations as at
December 31, 2006 of the Company for each of the five years
commencing with 2007 and thereafter, in thousands of dollars.
2007 2008 2009 2010 2011 Thereafter
-----------------------------------------------------
Oxygen plant $ 600 $ - $ - $ - $ - $ -
Office lease costs $ 336 $ 336 $ 344 $ 260 $ 260 $ 245
Exploration equipment $ 611 $ 95 - - - -
Site reclamation(1) $ 8,473 $ 4,098 $ 2,715 $ 1,328 $ 369 $ 5,096
(1) The Company is obligated to fund closure and reclamation costs for its
mining and exploration operations as a condition of associated water
licenses. However, the timing of the payments has not been determined
with certainty and may change depending upon future events.
Reclamation of exploration sites will be deferred to the extent that
the Company continues to be engaged in actively exploring them.
In June 2007, the Company entered into a purchase commitment for
$10.4 million for a diesel generating system expected to be
delivered in June 2008. In July 2007, the Company entered into a
purchase commitment of approximately $6.0 million for the purchase,
delivery and storage of approximately 4 million liters of P-50
diesel fuel. The fuel was in the process of being delivered the
Hope Bay site in the third quarter and is expected to be at site by
the end of October or early November 2007.
For additional information related to the Company's obligations
and commitments see note 15 to the annual consolidated financial
statements.
Off Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements
other than the pension obligations which are described in note 13
of the annual consolidated financial statements.
OUTLOOK
For the past several years, the outlook for the Company has been
dependent on the exploration results from, and proposed development
of, the Hope Bay Project. The Company controls 100% of the Hope Bay
Project, which has indicated resources totaling 5.2 million ounces
of gold at a grade of 4.5 grams per tonne and an additional 5.5
million ounces of gold at a grade of 3.6 grams per tonne in the
inferred category.
Subsequent to the quarter, on October 8, 2007 the Company signed
a support agreement with Newmont Mining Corporation ("Newmont") for
the acquisition by Newmont Mining B.C. Limited, a wholly owned
subsidiary of Newmont with unanimous support of the Miramar board
of directors, of all the outstanding shares of the Company for
$6.25 cash per common share. The acquisition will be effected by
way of a take-over bid. The take-over bid circular and director's
circular relating to the offer was mailed to shareholders on
October 31, 2007. The initial expiry date of the bid is December 6,
2007.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Changes in Internal Control over Financial Reporting
("ICFR")
No changes occurred in the third quarter Company's ICFR that has
materially affected, or is reasonably likely to materially affect,
the Company's ICFR.
CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2007, the Company adopted five new Canadian
Institute of Chartered Accountants ("CICA") accounting standards:
(a) Handbook Section 1530, Comprehensive Income; (b) Handbook
Section 3855, Financial Instruments - Recognition and Measurement;
(c) Handbook Section 3861 Financial Instruments - Disclosure and
Presentation; (d) Handbook Section 3865, Hedges; and (e) Handbook
Section 1506, Accounting Changes. Consistent with the requirements
of the new accounting standards, the Company has not restated any
prior period amounts as a result of adopting the accounting
changes.
(a) Section 1530 introduces new standards for the presentation
and disclosure of the components of comprehensive income.
Comprehensive income is defined as the change in net assets of an
enterprise during a reporting period from transactions and other
events and circumstances from non-owner sources.
(b) Section 3855 requires all financial assets, financial
liabilities and non-financial derivatives to be recognized on the
balance sheet and measured based on specified categories.
(c) Section 3861 sets out standards which address the
presentation of financial instruments and non-financial derivates,
and identifies the related information that should be disclosed.
These standards also revise the requirements for entities to
provide accounting policy disclosures, including disclosure of the
criteria for designating as held-for-trading those financial assets
or liabilities that are not required to be classified as
held-for-trading; whether categories of normal purchases and sales
of financial assets are accounted for at trade date or settlement
date; the accounting policy for transaction costs on financial
assets and financial liabilities classified as other than
held-for-trading; and provide several new requirements for
disclosure about fair value.
Upon adoption of these new standards, the following adjustment
was recorded with respect to the classification of the Company's
financial instruments. The Company has designated its investments
as available for sale assets in accordance with Section 3855 and as
a result now records the investments on the balance sheet at their
fair market value based on quoted market prices. This change in
accounting standard resulted in an increase in the carrying value
of the investments and accumulated other comprehensive income of
$8,952,000 on the balance sheet upon adoption at January 1, 2007.
Unrealized gains and losses on these investments since January 1,
2007 have been included in the statement of comprehensive income.
There is no net impact to future income taxes resulting from this
adjustment as the future income tax liability is fully offset by a
reduction in the Company's future income tax valuation allowance.
The Company's investment in the Northern Orion Explorations Ltd.
net proceeds interest royalty is not impacted by the adoption of
Section 3855 as the instrument is not traded on an exchange and
payments are based on the volume of metal sold and the price
realized thereon.
(d) Section 3865 sets out when hedge accounting can be applied
and builds on existing Canadian GAAP guidance by specifying how
hedge accounting is applied and disclosed. The Company currently
does not have any hedging contracts.
(e) Section 1506 revises the current standards on changes in
accounting policy, estimates or errors as follows: voluntary
changes in accounting policy are allowed only when they result in
financial statements that provide reliable and more relevant
information; changes in accounting policy are to be applied
retrospectively unless doing so is impracticable; changes in
estimates are to be recorded prospectively; and prior period
adjustments are to be corrected retrospectively. In addition, this
standard calls for enhanced disclosure about the effects of changes
in accounting policies, estimates and errors on the financial
statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Company's consolidated financial
statements requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities as well as the reported expenses during the reporting
period. Such estimates and assumptions affect the determination of
the potential impairment of long-lived assets, estimated costs
associated with reclamation and closure of mining properties, and
the determination of stock-based compensation and future income
taxes. Management re-evaluates its estimates and assumptions on an
ongoing basis; however, due to the nature of estimates, actual
amounts could differ from its estimates. The most critical
accounting policies upon which the Company depends are those
requiring estimates of gold reserves and resources, future
recoverable gold ounces and assumptions of future gold prices.
Accounting for Exploration and Development Costs
Exploration expenditures related to mineral properties are
deferred only if it is probable that these costs will be recovered
from future operations. The carrying values of mineral properties
are assessed at the balance sheet date to determine whether any
persuasive evidence exists that the properties may be permanently
impaired. The Company's progress in its development activities
towards its planned operations is a key factor to be considered as
part of the ongoing assessment of the recoverability of the
carrying amount of capital assets and deferred exploration and
development costs. If there is persuasive evidence of impairment,
the asset is written down to its estimated net recoverable value.
Deferred acquisition, exploration and development expenditures
totaled $245.7 million for Hope Bay at September 30, 2007.
Asset Retirement Obligations
Asset retirement obligations are the estimated costs associated
with mine closure and reclamation and are recorded as a liability
at fair value. The liability is accreted over time through periodic
charges to operations. In addition, asset retirement costs are
capitalized as part of each asset's carrying value at its initial
discounted value and are amortized over the asset's useful life. In
the event the actual costs of reclamation exceed the Company's
estimates, the additional liability for retirement and remediation
costs may have an adverse effect on the Company's future results of
operations and financial condition.
The asset retirement obligation for the Con Mine is comprised of
two components (1) processing of historic mill roaster tailings
(arsenic contained within this material is rendered inert by a
process which utilizes the pressure oxidation circuit); and, (2)
site closure and monitoring activities, including building removal,
capping of mine openings, restoration of tailings areas, water
treatment and post-closure monitoring.
Although the ultimate amount to be incurred is uncertain, at
December 31, 2006 the liability for site closure and reclamation at
Con Mine has been estimated on an undiscounted basis before
inflation to be $22.1 million, to be expended from 2007 to 2050.
For purposes of determining the fair value of the obligation, a
discount rate of 9.8%, an inflation factor of 2.0% and a market
risk premium have been applied. As required by regulatory policies
and Canadian GAAP, cost estimates include contractor markups,
provision for administration and engineering, provision for a
market risk premium, and a provision for contingencies. However,
the Company expects to use its employees wherever possible to
complete the reclamation activities, which could reduce actual
costs below the accrued liability. The Company has $11.2 million on
deposit in Con Mine reclamation security trusts. The Company has
committed the proceeds from any asset sales at the Con Mine to the
reclamation security trusts and the funds in the trusts will be
applied to offset in part the reclamation costs as they are
incurred.
Key assumptions in estimating the asset retirement obligation
for the Con Mine include the assumptions that: a) the processing of
residual historic mill roaster tailings (calcines and arsenic
bearing sludges) through the autoclave will be completed in 2007;
b) final wash down of the blend plant storage pits will be
completed in 2007; c) the final mine closure and reclamation would
receive regulatory approval in 2007 allowing other site closure
reclamation activities to commence in 2007 and essentially be
completed over a three year period, including the removal of
remaining buildings, capping of remaining mine openings, capping of
the tailings containment areas and remediation of the site to the
standard acceptable for industrial-use property; and, d) an
allowance for ongoing water treatment for a period of approximately
25 years and an allowance for post closure environmental
performance monitoring for a period of approximately 50 years.
Key assumptions in estimating the asset retirement obligation
for the Hope Bay exploration camps include removal of exploration
camps, reclamation of site pads and infrastructure, placement of
surface stored waste rock underground at Boston and re-vegetation
as needed. The estimate of the cost, based on contractor rates, of
such reclamation activities is $1.3 million.
Stock-based Compensation
Stock-based compensation is accounted for using the fair value
based method. Under the fair value based method, compensation cost
is measured at fair value of the options at the date of grant and
is expensed over the vesting period of the award. The Company
estimates the fair value using the Black-Scholes option pricing
model.
RISKS AND UNCERTAINTIES
The following risks and uncertainties, as well as risks not
currently known to the Company, could materially affect the
Company's future performance:
- The Company would require external financing and production
revenue to conduct further exploration on and development of its
mineral resource properties and to develop the Doris North
deposit.
- The Company has had no revenue from operations and no ongoing
mining operations of any kind.
- Changes in the market price of gold and other metals, which in
the past have fluctuated widely, will significantly affect the
potential of the Company's properties.
- The Company has no history of producing gold from the Hope Bay
Project and there can be no assurance that it would successfully
establish mining operations or profitably produce gold.
- There can be no assurance that the Company's exploration
programs would result in the establishment of mineral reserves or
the expansion of such reserves with new mineral reserves.
- The Company has a history of losses and would expect to incur
losses for the foreseeable future.
- The figures for the Company's mineral reserves and mineral
resources are estimates based on interpretation and assumptions and
the Company's mineral deposits may yield less mineral production
under actual conditions than the Company's estimates indicate.
- The Company requires various permits in order to conduct its
current and anticipated future operations and delays or a failure
to obtain such permits, or a failure to comply with the terms of
any such permits that the Company has obtained, could have a
material adverse impact on the Company.
- The Hope Bay properties are subject to the Nunavut Land Claims
Agreement and ongoing operations are affected by working
relationships with Inuit organizations.
- The Company is subject to significant governmental
regulations.
- The Company's activities are subject to environmental laws and
regulations that may increase its costs of doing business and
restrict its operations.
- Changes in the factors underlying the Doris North feasibility
study since its preparation may make the financial calculations no
longer applicable; actual capital costs, operating costs,
production and economic returns from the Doris North deposit may
differ significantly from those the Company has anticipated; and
there are no assurances that any future development activities
would result in profitable mining operations.
- Title to the Company's mineral properties cannot be guaranteed
and may be subject to prior unregistered agreements, transfers or
claims and other defects.
- The Company may experience difficulty attracting and retaining
qualified management and operations personnel to meet the needs of
its anticipated growth, and the failure to manage the Company's
growth effectively could have a material adverse effect on its
business and financial condition.
- The Company has ongoing reclamation on the Con Mine and the
Company may be required to contribute more funds towards the
abandonment and reclamation of the Con Mine site which could have a
material adverse effect on its financial position.
OUTSTANDING SHARE DATA
As at November 7, 2007, there were 221,966,846 common shares
outstanding. As at November 7, 2007, there were options and
warrants outstanding to purchase an aggregate of 25,152,235 common
shares. The options were granted to certain of the Company's
executive officers, directors and employees (6,652,235 stock
options) and the warrants were granted to Newmont as part of a
private equity placement completed in 2005 (18,500,000
warrants).
RELATED PARTIES
The Company owns 8.1% of Maximus Ventures Ltd. ("Maximus"), a
company related by virtue of a common director. The Company
supplied services on a cost recovery basis to Maximus totaling $1.3
million during the nine month period ended September 30, 2007 (2006
- $0.6 million). Transactions with related parties are recorded at
their exchange amount which is the amount of consideration received
as established and agreed to by the Company and Maximus.
FORWARD LOOKING STATEMENTS
Statements relating to exploration work at the Hope Bay Project
and the expected results of this work and strategies, plans,
studies and permitting for the development of the Hope Bay Project,
statements related to analyses of financial condition, future
results of operations and other information that are based on
forecasts of future results, estimates of amounts not yet
determinable and assumptions of management are forward-looking
statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and the securities
legislation of certain provinces of Canada. Forward looking
statements are statements that are not historical facts and are
generally, but not always, identified by the words "expects",
"plans", "anticipates", "believes", "intends", "estimates",
"projects", "satisfies", "potential", "goal", "objective",
"prospective", "strategy", "target", and similar expressions, or
that events or conditions "will", "would", "may", "can", "could" or
"should" occur. Information inferred from the interpretation of
drilling results and information concerning mineral reserve and
resource estimates may also be deemed to be forward looking
statements, as it constitutes a prediction of what might be found
to be present when and if a project is actually developed. These
forward-looking statements are subject to a variety of risks and
uncertainties which could cause actual events or results to differ
materially from those reflected in the forward-looking statements,
including, without limitation: risks related to fluctuations in
gold prices and currency exchange rates; uncertainties related to
raising sufficient financing to fund the planned work in a timely
manner and on acceptable terms; changes in planned work resulting
from weather, logistical, technical or other factors; the
possibility that results of work will not fulfill expectations and
realize the perceived potential of the Company's properties;
uncertainties involved in the interpretation of drilling results
and other tests and the estimation of gold reserves and resources;
the possibility that required permits may not be obtained on a
timely manner or at all; the possibility that capital and operating
costs may be higher than currently estimated and may preclude
commercial development or render operations uneconomic; risk of
accidents, equipment breakdowns and labour disputes or other
unanticipated difficulties or interruptions; the possibility of
cost overruns or unanticipated expenses in the work program; the
risk of environmental contamination or damage resulting from
Miramar's operations, risks and uncertainties described under
"Risks and Uncertainties" and elsewhere in the Management's
Discussion and Analysis, and other risks and uncertainties,
including those described in the Miramar's Annual Report on Form
40-F for the year ended December 31, 2006 and Reports on Form 6-K
filed with the Securities and Exchange Commission.
Forward-looking statements are based on the beliefs, estimates
and opinions of Miramar's management on the date the statements are
made. Miramar undertakes no obligation to update these
forward-looking statements if management's beliefs, estimates or
opinions, or other factors, should change.
CAUTIONARY NOTE TO U.S. INVESTORS
All resource estimates reported in this disclosure are
calculated in accordance with the National Instrument 43-101 of the
Canadian securities administrators and the Canadian Institute of
Mining and Metallurgy Classification system. These standards differ
significantly from the requirements of the United States Securities
and Exchange Commission, which permits U.S. mining companies in
their Securities and Exchange Commission filings to disclose only
those mineral deposits that qualify as proven or probable
"reserves" because a determination has been made based on an
appropriate feasibility study that the deposits could be
economically and legally extracted or produced, and, accordingly,
resource information reported in this disclosure may not be
comparable to similar information reported by United States
companies. The term "resource(s)" does not equate to "reserves" and
normally may not be included in documents filed with the Securities
and Exchange Commission, and investors are cautioned not to assume
that "resources" will be converted into "reserves" in the
future.
This disclosure uses the term "inferred resources". While this
term is recognized by Canadian securities regulations concerning
disclosures by mining companies, the U.S. Securities and Exchange
Commission does not recognize it. "Inferred resources" have a great
amount of uncertainty as to their existence and as to their
economic and legal feasibility. It cannot be assumed that all or
any part of the "inferred resources" will ever be upgraded to a
high category. Under Canadian securities regulations, estimates of
"inferred resources" may not form the basis of feasibility or
pre-feasibility studies except in rare cases. Investors are
cautioned not to assume that part or all of an "inferred resource"
exist or are economically or legally feasible.
Additional Information
Additional information regarding the Company is included in the
Company's Annual Information Form ("AIF") and Annual Report on Form
40F, which are filed with the Canadian securities regulators and
the United States Securities and Exchange Commission, respectively.
A copy of the Company's AIF is posted on the SEDAR website at
www.sedar.com. A copy of the Form 40F can be obtained from the
United States Securities and Exchange Commission website at
www.sec.gov.
Interim Consolidated Financial Statements
(Expressed in Canadian dollars)
MIRAMAR MINING CORPORATION
Three and nine months periods ended September 30, 2007 and 2006
MIRAMAR MINING CORPORATION
Consolidated Balance Sheets
(Expressed in thousands of Canadian dollars)
September 30, 2007 and December 31, 2006
--------------------------------------------------------------------------
September 30, December 31,
2007 2006
(unaudited)
--------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 43,004 $ 145,800
Short term investments 40,000 3,957
Accounts receivable 2,630 1,781
Inventory 3,880 5,243
Power credits 389 389
Prepaid expenses 691 322
-------------------------------------------------------------------------
90,594 157,492
Power credits 490 780
Property, plant and equipment (note 4) 35,839 6,547
Mineral properties (note 5) 245,720 204,892
Cash collateral deposits 15,714 15,263
Asset backed commercial paper (note 6) 33,814 -
Investment in Northern Orion
Explorations Ltd. 6,305 6,305
Investments (note 7) 10,756 969
Other assets 2,339 1,647
--------------------------------------------------------------------------
$ 441,571 $ 393,895
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 20,675 $ 4,976
Current portion of site reclamation and
closure costs (note 8) 6,195 8,473
Current portion of deferred gain 389 389
-------------------------------------------------------------------------
27,259 13,838
Deferred gain 490 780
Provision for site reclamation and closure
costs (note 8) 8,579 11,002
Future income tax liability 36,930 25,981
--------------------------------------------------------------------------
73,258 51,601
Shareholders' equity:
Share capital (note 9) 562,926 551,480
Contributed surplus 15,324 5,213
Deficit (219,355) (214,399)
Accumulated other comprehensive
income (note 3) 9,418 -
-------------------------------------------------------------------------
368,313 342,294
--------------------------------------------------------------------------
$ 441,571 $ 393,895
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Subsequent events (note 12)
See accompanying notes to consolidated financial statements.
MIRAMAR MINING CORPORATION
Consolidated Statements of Operations and Deficit
(Expressed in thousands of Canadian dollars, except per share amounts)
For the three and nine month periods ended September 30, 2007 and 2006
--------------------------------------------------------------------------
3 months ended 9 months ended
September 30 September 30
-------------------------- --------------------------
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
Expenses:
Depreciation,
depletion and
accretion $ 280 $ 347 $ 830 $ 822
General and
administration 323 430 1,380 1,389
Salaries 277 314 954 1,043
Stock-based
compensation - 52 5,771 1,519
Professional
services 263 269 1,131 816
Investor relations
and travel 215 190 464 384
Interest and
penalties 17 100 360 602
Foreign exchange 80 19 204 62
Write down of
asset backed
commercial
paper (note 6) 3,500 - 3,500 -
Severances and
closure 96 179 366 1,507
-------------------------------------------------------------------------
5,051 1,900 14,960 8,144
--------------------------------------------------------------------------
Loss before
undernoted (5,051) (1,900) (14,960) (8,144)
Other income:
Interest income 1,425 1,578 4,828 3,054
Other income 173 184 4,434 2,045
-------------------------------------------------------------------------
1,598 1,762 9,262 5,099
--------------------------------------------------------------------------
Earnings (loss)
before income
taxes (3,453) (138) (5,698) (3,045)
Income tax
recovery:
Current - - - 14
Future 468 495 742 4,211
-------------------------------------------------------------------------
468 495 742 4,225
--------------------------------------------------------------------------
Net earnings
(loss) for the
period (2,985) 357 (4,956) 1,180
Deficit, beginning
of the period (216,370) (211,605) (214,399) (212,428)
--------------------------------------------------------------------------
Deficit, end of
the period $ (219,355) $ (211,248) $ (219,355) $ (211,248)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Basic and diluted
earnings (loss)
per share $ (0.01) $ 0.00 $ (0.02) $ 0.01
Weighted average
number of common
shares outstanding 219,475,761 210,161,304 218,200,818 195,599,232
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
For the three and nine month periods ended September 30, 2007
--------------------------------------------------------------------------
3 months ended 9 months ended
September 30, September 30,
2007 2007
(unaudited) (unaudited)
--------------------------------------------------------------------------
Loss for the period before
comprehensive income (2,985) (4,956)
Unrealized gains on available for
sale investments 50 4,900
Reclassification of net realized gain
on investments (173) (4,434)
--------------------------------------------------------------------------
Comprehensive loss (3,108) (4,490)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
MIRAMAR MINING CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
For the three and nine month periods ended September 30, 2007 and 2006
--------------------------------------------------------------------------
3 months ended 9 months ended
September 30 September 30
-------------------------- --------------------------
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
Cash provided by
(used in):
Operations:
Net earnings
(loss) for the
period $ (2,985) $ 357 $ (4,956) 1,180
Items not
involving cash:
Depreciation,
depletion and
accretion 280 347 830 822
Stock-based
compensation - 52 5,771 1,519
Gain on sale of
investments (173) - (4,434) (1,861)
Future income
taxes (468) (495) (742) (4,211)
Write down of
asset backed
commercial paper 3,500 - 3,500 -
Other - 25 125 382
Changes in
non-cash working
capital:
Accounts
receivable (471) (397) (849) (1,132)
Inventory 635 (232) 1,363 (972)
Prepaid expenses 241 261 (369) (111)
Accounts payable
and accrued
liabilities 3,372 670 15,507 5,938
Payments made on
site reclamation
(note 8) (3,001) (2,108) (5,413) (4,518)
-------------------------------------------------------------------------
930 (1,520) 10,333 (2,964)
Financing:
Issue of common
shares for cash 19,320 96,660 20,307 102,354
-------------------------------------------------------------------------
19,320 96,660 20,307 102,354
Investments:
Expenditures on
plant, equipment
and deferred
exploration (31,342) (11,619) (63,509) (26,484)
Short-term
investments (40,000) (79,843) (36,043) (59,843)
Proceeds on sale
of investments 174 - 3,881 2,034
Asset backed
commercial paper
(note 6) (37,314) - (37,314) -
Purchase of
collateral
deposits, net (165) (43) (451) (178)
-------------------------------------------------------------------------
(108,647) (91,505) (133,436) (84,471)
--------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (88,397) 3,635 (102,796) 14,919
Cash and cash
equivalents,
beginning of
period 131,401 60,007 145,800 48,723
--------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 43,004 $ 63,642 $ 43,004 $ 63,642
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Supplementary
information:
Interest received $ 1,306 $ 963 $ 4,809 $ 2,482
Non-cash investing
and financing
activities:
Fair value of
stock options
allocated to
shares issued
on exercise 69 998 607 3,516
Stock-based
compensation
included in
deferred
exploration 25 368 4,946 1,557
Recognition of
future income tax
liabilities to
mineral
properties 11 165 2,221 2,394
Common shares
received on option
agreement (note 5) 300 - 443 -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
MIRAMAR MINING CORPORATION
Notes to Interim Consolidated Financial Statements -
Unaudited
(Tabular dollar amounts expressed in thousands of Canadian
dollars except per share amounts)
For the three and nine month periods ended September 30, 2007
and 2006
1. Interim Financial Statements:
These unaudited interim consolidated financial statements of
Miramar Mining Corporation (the "Company") have been prepared in
accordance with the accounting principles and methods of
application disclosed in the consolidated financial statements for
the year ended December 31, 2006, except as disclosed in note 2.
These interim consolidated financial statements as at September 30,
2007 and for the three and nine month periods ended September 30,
2007 and 2006 are unaudited; however they reflect all adjustments
necessary for the fair presentation in accordance with Canadian
generally accepted accounting principles ("GAAP") of the results
for the interim periods presented. Certain comparative figures have
been reclassified to conform to the current period
presentation.
These financial statements do not include all disclosures
required by Canadian GAAP for annual financial statements and
accordingly the financial statements should be read in conjunction
with the consolidated financial statements and notes thereto
contained in the Company's annual report for the year ended
December 31, 2006.
2. Changes in accounting policies:
Effective January 1, 2007, the Company adopted five new Canadian
Institute of Chartered Accountants ("CICA") accounting standards:
(a) Handbook Section 1530, Comprehensive Income; (b) Handbook
Section 3855, Financial Instruments - Recognition and Measurement;
(c) Handbook Section 3861 Financial Instruments - Disclosure and
Presentation; (d) Handbook Section 3865, Hedges; and (e) Handbook
Section 1506, Accounting Changes. The main requirements of these
new standards and the resulting financial statement impact are
described below.
Consistent with the requirements of the new accounting
standards, the Company has not restated any prior period amounts as
a result of adopting the accounting changes. The effect of the
adoption of these standards is summarized below.
(a) Comprehensive Income (Section 1530):
CICA Section 1530 introduces the term Comprehensive Income,
which consists of net earnings and other comprehensive income
("OCI"). Comprehensive income represents changes in Shareholder's
equity during the period arising from transactions and other events
with non-owner sources. OCI includes certain gains or losses, such
as unrealized holding gains and losses from available for sale
assets, that are excluded from net earnings in accordance with
GAAP. As a result of adopting this standard, a Statement of
Comprehensive Income now forms part of the Company's consolidated
financial statements. Cumulative changes in OCI are included in
Accumulated Other Comprehensive Income, which is presented as a new
category of Shareholder's Equity in the balance sheet and is
reconciled in note 3.
(b) Financial Instruments - Recognition and Measurement (Section
3855):
CICA Section 3855 sets out criteria for the recognition and
measurement of financial instruments for fiscal years beginning on
or after October 1, 2006. This standard requires all financial
instruments within its scope, including derivatives, to be included
on the balance sheet and measured either at fair value or, in
certain circumstances when fair value may not be considered most
relevant, at cost or amortized cost. Changes in fair value are to
be recognized in either the statement of operations or the
statement of comprehensive income.
All financial assets and liabilities are recognized when the
Company becomes a party to the contract creating the item. As such,
any of the Company's outstanding financial assets and liabilities
at the effective date of adoption are recognized and measured in
accordance with the new requirements as if these requirements had
always been in effect. Any changes to the fair values of assets and
liabilities prior to January 1, 2007 were recognized by adjusting
opening accumulated other comprehensive income.
All financial instruments are classified into one of the
following five categories: held-for-trading, held to maturity,
loans and receivables, available for sale financial assets, or
other financial liabilities. Initial and subsequent measurement and
recognition of changes in the value of financial instruments
depends on their initial classification:
- Held to maturity investments, loans and receivables, and other
financial liabilities are initially measured at fair value and
subsequently measured at amortized cost. Amortization of premiums
or discounts and transaction costs are amortized into net earnings,
using the effective interest method.
- Available for sale financial assets are measured at fair
value, with unrealized gains and losses recorded in other
comprehensive income until the asset is realized, at which time
they will be recorded in net earnings.
- Held for trading financial instruments are measured at fair
value. All gains and losses resulting from changes in their fair
value are included in net earnings in the period in which they
arise.
- All derivative financial instruments are classified as held
for trading financial instruments and are measured at fair value,
even when they are part of a hedging relationship. All gains and
losses resulting from changes in their fair value are included in
net earnings in the period in which they arise.
Upon adoption of these new standards, the following adjustment
was recorded with respect to the classification of the Company's
financial instruments.
The Company has designated its investments as available for sale
assets in accordance with Section 3855 and as a result now records
the investments on the balance sheet at their fair market value
based on quoted market prices. This change in accounting standard
resulted in an increase in the carrying value of the investments
and accumulated other comprehensive income of $8,952,000 as at
January 1, 2007. Unrealized gains and losses on these investments
since January 1, 2007 have been included in the statement of
comprehensive income. There is no net impact to future income taxes
resulting from this adjustment as the future income tax liability
is fully offset by a reduction in the Company's future income tax
valuation allowance.
(c) Financial Instruments - Disclosure and Presentation (Section
3861):
CICA Section 3861 sets out standards which address the
presentation of financial instruments and non-financial derivates,
and identifies the related information that should be disclosed.
These standards also revise the requirements for entities to
provide accounting policy disclosures, including disclosure of the
criteria for designating as held-for-trading those financial assets
or liabilities that are not required to be classified as
held-for-trading; whether categories of normal purchases and sales
of financial assets are accounted for at trade date or settlement
date; the accounting policy for transaction costs on financial
assets and financial liabilities classified as other than
held-for-trading; and provides several new requirements for
disclosure about fair value. Disclosure related to the fair value
of the Company's available for sale investments is included in note
6 to these financial statements.
(d) Hedging (Section 3865):
CICA Section 3865 specifies the circumstances under which hedge
accounting is permissible and how hedge accounting may be
performed. The Company currently does not hold any financial
instruments designated for hedge accounting.
(e) Accounting Changes (Section 1506):
CICA Section 1506 revised the standards on changes in accounting
policy, estimates or errors to require a change in accounting
policy to be applied retrospectively (unless doing so is
impracticable or is specified otherwise by an new accounting
standard), changes in estimates to be recorded prospectively, and
prior period errors to be corrected retrospectively. Voluntary
changes in accounting policy are allowed only when they result in
financial statements that provide reliable and more relevant
information. In addition, these revised standards call for enhanced
disclosures about the effects of changes in accounting policies,
estimates and errors on the financial statements. The impact of
this new standard cannot be determined until such time as the
Company makes a change in accounting policy, other than the changes
resulting from the implementation of the new CICA Handbook
standards discussed in this note.
3. Accumulated other comprehensive income:
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2007
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Balance, beginning of the period -
Adjustment to opening balance - change in
accounting policy (note 2) 8,952
Unrealized gains on available for sale investments 4,900
Reclassification of net realized gain on available
sale investment (4,434)
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Balance, end of the period 9,418
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4. Property, plant and equipment:
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September 30, December 31,
2007 2006
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Accumulated
depreciation Net book Net book
Cost and depletion value value
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Mine plant and
equipment $ 118,017 $ 115,923 $ 2,094 $ 2,094
Exploration equipment 4,964 1,198 3,766 2,720
Construction in
progress 29,454 - 29,454 1,177
Computer equipment 1,941 1,568 373 379
Leasehold and office 587 435 152 177
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Total $ 154,963 $ 119,124 $ 35,839 $ 6,547
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Expenditures capitalized in relation to the planned construction
of the Doris North Mine at Hope Bay, listed in the table above
under the heading Construction in Progress, totaled $29.5 million
and is largely comprised of: $6.7 million for camp and mine dry
facilities, $6.4 million for ongoing construction of site roads and
infrastructure, $5.9 million for construction supplies and
transportation, $4.6 million for process plant buildings and
equipment, $2.9 million for various equipment and $3.0 million for
engineering, management and permitting.
5. Mineral properties:
The following is a summary of exploration and development costs
incurred related to the Company's Hope Bay Project:
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3 months ended 9 months ended
September 30, September 30,
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2007 2006 2007 2006
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Balance, beginning of period $ 231,899 $ 188,483 $ 204,892 $ 170,817
Additions:
Drilling 3,012 2,731 7,552 6,923
Sample analysis 789 254 1,826 587
Personnel and contracts 1,976 1,495 5,120 3,714
Stock-based compensation 25 368 4,946 1,557
Supplies and equipment 1,004 856 2,010 1,888
Other exploration costs 289 263 1,185 800
Title and claim management 36 10 83 99
Transportation and freight 3,639 2,664 7,322 4,932
Camp and infrastructure 1,947 1,552 4,243 2,870
Environmental and permitting 1,338 1,255 2,862 2,865
Feasibility and studies 55 420 1,901 1,070
Future income taxes related to
the above 11 165 2,221 2,394
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14,121 12,033 41,271 29,699
Disposition of mineral property (300) - (443) -
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Balance, end of period $ 245,720 $ 200,516 $ 245,720 $ 200,516
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On September 20, 2004, the Company completed an option agreement
with Maximus Ventures Ltd ("Maximus"), whereby Maximus can earn a
75% interest in the Chicago and Twin Peaks areas of Hope Bay by
spending $7.5 million scheduled over a three-year period. In
consideration for entering the option agreement, Maximus is to pay
the Company five million shares of Maximus as repayment for past
expenditures on the properties, issued over a three-year period.
Additional shares could also be issued to the Company at specific
resource milestones. In March 2007, the Company received 0.5
million additional shares of Maximus which has been recorded as
part of investments, with a corresponding decrease of $143,000
recorded against the Hope Bay mineral property. In total at
September 30, 2007, the Company had 4.0 million shares of
Maximus.
On September 10, 2007, the Company was entitled to receive an
additional 1,000,000 common shares of Maximus under the terms of
the option agreement. Consequently in the third quarter, the
Company recorded a receivable for these shares and corresponding
decrease of $300,000 recorded against the mineral property. The
common shares of Maximus were received on October 10, 2007.
6. Asset backed commercial paper
At September 30, 2007, the Company held Canadian third party
asset-backed commercial paper ("ABCP") with an original cost of
$37.3 million. At the dates the Company acquired these investments
they were rated R1(High) by Dominion Bond Rating Service ("DBRS"),
the highest credit rating issued for commercial paper, and backed
by R1 (High) rated assets and liquidity agreements. The majority of
these investments matured during the third quarter of 2007 but, as
a result of liquidity issues in the Canadian ABCP market, did not
settle on maturity. As a result, the Company has reclassified its
ABCP as long-term investments after initially classifying them as
cash and cash equivalents.
On August 16, 2007, an announcement was made by a group
representing banks, asset providers and major investors that they
had agreed in principle to a long-term proposal and interim
agreement to convert the ABCPs into long-term floating rate notes
maturing no earlier than the scheduled maturity of the underlying
assets. On September 6, 2007, a restructuring committee consisting
of major investors was formed to propose a solution to the
liquidity problem affecting the ABCP and has retained legal and
financial advisors to oversee the proposed restructuring process.
On October 16, 2007, it was announced that the committee expected
that the restructuring would be completed on or before December 14,
2007, by means of Extraordinary Resolutions of the various trusts
that had issued ABCP.
The ABCP in which the Company has invested has not traded in an
active marked since mid-August 2007 and there are currently no
market quotations available. The ABCP in which the Company has
invested continues to be rated R1 (High, Under Review with
Developing Implications) by DBRS.
The valuation technique used by the Company to estimate the fair
value of its investment in ABCP incorporates probability weighted
discounted cash flows considering the best available public
information regarding market conditions and other factors that a
market participant would consider for such investments. During the
third quarter of 2007, this valuation resulted in a reduction of
$3.5 million to the estimated fair value of the ABCP. Continuing
uncertainties regarding the value of the assets which underlie the
ABCP, the amount and timing of cash flows and the outcome of the
restructuring process could give rise to a further change in the
value of the Company's investment in ABCP which would impact the
Company's earnings.
7. Investments:
The fair value of investments at September 30, 2007, based on
quoted market values, are as follows:
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September 30, Accumulated September 30,
2007 unrealized 2007
Cost basis holding gains Carrying value
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Available for sale
Sherwood Copper Corp. $ 114 $ 9,026 $ 9,140
Maximus 887 613 1,200
Other 37 79 116
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Total $ 1,038 $ 9,718 $ 10,756
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On January 29, 2007, the Company sold 150,000 of its shares in
Sherwood Copper Corp. ("Sherwood") to a former officer pursuant to
a termination agreement. In the second quarter the Company sold
668,700 shares in Sherwood at an average net selling price of $5.41
per share. In the third quarter the Company sold 25,000 shares in
Sherwood at an average net selling price of $6.99 per share. At
September 30, 2007, the Company owns approximately 1.3 million
shares of Sherwood.
8. Site reclamation and closure:
The Company has recorded provisions for the estimated cost of
site closure and reclamation relating to past mining activities at
the Con Mine and past exploration activities at the Hope Bay
Project. The following is a reconciliation of the changes in the
provision for site reclamation and closure during the year:
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2007
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Balance, beginning of the period $ 19,475
Site closure and reclamation costs incurred (5,413)
Accretion expense 712
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Balance, end of the period $ 14,774
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Allocated between:
Current portion $ 6,195
Non-current portion 8,579
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$ 14,774
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See discussion in note 12 (b) of these financial statements
regarding subsequent event relating to the reclamation of Con
Mine.
9. Share capital:
(a) Authorized:
500,000,000 common shares without par value
(b) Issued:
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Common shares
----------------------
Number
of shares Amount
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Balance, December 31, 2006: 217,125,038 $ 551,480
Issued:
Future income tax effect of flow-through shares - (9,468)
On exercise of stock options 509,765 1,478
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Balance, March 31, 2007 217,634,803 $ 543,490
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Issued:
On exercise of stock options 18,200 47
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Balance, June 30, 2007 217,653,003 $ 543,537
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Issued:
Common shares for cash, net of issue costs 3,099,038 19,189
On exercise of stock options 55,593 200
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Balance, September 30, 2007 220,807,634 $ 562,926
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(c) Stock options:
At September 30, 2007, the Company had share options outstanding
as follows:
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Share Average
options exercise price
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Beginning of the period 5,058,638 $ 2.67
Granted 3,502,500 4.90
Exercised (583,558) 1.94
Cancelled (168,500) 2.83
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End of the period 7,809,080 $ 3.72
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Exercisable 7,309,080 $ 3.64
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As at September 30, 2007, 7,309,080 options were fully vested
and expire as follows:
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Year Number Exercise price
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2008 679,676 $ 2.94
2009 1,226,060 3.22
2010 564,706 1.30
2011 2,100,138 3.07
2012 2,738,500 4.93
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Exercisable options exclude options which are contingent on
future performance targets (500,000 options).
(d) Warrants and brokers compensation options:
At September 30, 2007, the Company had 18,500,000 warrants
outstanding with an exercise price of $2.75 per share. These
warrants were granted to Newmont as described in note 11(b) of the
annual consolidated financial statements.
10. Related parties:
The Company owns 8.1% of Maximus, a company related by virtue of
a common director. The Company supplied services on a cost recovery
basis to Maximus totaling $1.3 million during the nine month period
ended September 30, 2007 (2006 - $0.6 million). Transactions with
related parties are recorded at their exchange amount which is the
amount of consideration received as established and agreed to by
the Company and Maximus.
11. Commitments and contingencies:
(a) In June 2007, the Company entered into a purchase commitment
for $10.4 million for a diesel generating system expected to be
delivered in June 2008.
(b) In July 2007, the Company entered into a purchase commitment
for approximately $6.0 million for the purchase, delivery and
storage of approximately 4 million liters of P-50 diesel fuel. The
fuel was in the process of being delivered the Hope Bay site in the
third quarter and is expected to be at site by the end of October
or early November 2007.
12. Subsequent events:
(a) On October 9, 2007, the Company signed a definitive support
agreement with Newmont Mining Corporation for the acquisition by
Newmont, with unanimous support of the Miramar board of directors,
of all the outstanding shares of the Company for $6.25 cash per
common share. The acquisition will be effected through a take-over
bid circular that was mailed to shareholders on October 31, 2007.
The earliest possible date that the proposed transaction would
close is December 6, 2007.
(b) On October 15, 2007, Miramar Con Mine, Ltd. received
comments from Indian and Northern Affairs Canada ("INAC") in
relation to the Con Mine's water license application. The Con
Mine's current water license is set to expire in January 2008.
INACs submission included an estimate for the total cost of
reclamation for land and water for the Con Mine of approximately
$27 million. This amount, if accepted, is higher than the estimate
prepared by the Company by more than $10 million on an undiscounted
basis. The Company will present its arguments in support of its
estimated cost at a public hearing for the water license which was
initially schedule to commence on November 5, 2007. The MVLWB has
agreed to delay the public hearing as requested by the Company;
accordingly, the public hearing has been re-scheduled to January
16-17, 2008.
Contacts: Miramar Mining Corporation Anthony P. Walsh President
& CEO (604) 985-2572 or Toll Free: 1-800-663-8780 (604)
980-0731 (FAX) Email: info@miramarmining.com Website:
www.miramarmining.com