All Dollar Amounts are in U.S. Dollars ("US$") Unless Otherwise Indicated
Ivernia Inc. ("Ivernia" or, collectively with its subsidiaries, the "Company")
(TSX:IVW) today reported its second quarter 2013 results. During the second
quarter of 2013, the Company's Paroo Station lead mine (the "Mine") focused on
ramping up mining, processing, and transportation operations, which restarted in
early April 2013. Milling operations recommenced on a single shift basis at the
start of April, and ramped up to twenty four hour operations by the end of
April. The Company recommenced mining operations at the end of April 2013.
Primarily as a result of unrealized foreign exchange movements discussed below,
the Company recorded a net loss after tax of $27.7 million or $0.04 per common
share for the second quarter of 2013; compared to net loss after tax of $9.3
million or $0.01 per common share for the same period last year.
SECOND QUARTER 2013 HIGHLIGHTS
Financial
-- In conjunction with the restart of operations and shipments, the
Company recorded revenue of $22.1 million on the sale of 16,700 tonnes
of concentrate containing 10,700 tonnes of lead.
-- Gross loss of $4.0 million for the second quarter of 2013.
-- Net loss after tax of $27.7 million for the second quarter of 2013. Net
loss after tax for the second quarter of 2013 includes a foreign
exchange loss of $30.1 million mainly related to Rosslyn Hill Mining's
functional currency being the A$ while another subsidiary's functional
currency was the US$. The loss was as a consequence of the A$ weakening
against the US$ in the second quarter of 2013 with the US$/A$ rate
decreasing from 1.0426 on March 31, 2013 to 0.9167 on June 30, 2013.
The foreign currency loss is mainly related to unrealized foreign
exchange movements on US$ and C$ intercompany loans. These intercompany
loans are with wholly owned subsidiaries of the Company and are
eliminated from the Statement of Financial Position on consolidation
but the difference between functional currencies gives rise to the
difference.
-- At June 30, 2013, the Company has 7,300 dry metric tonnes of lead
concentrate inventory with a carrying value of $6.0 million.
Operational
-- Mining, processing and export operations at the Mine were recommenced
in April 2013.
-- The Company produced 14,100 tonnes of concentrate during the second
quarter of 2013 containing 9,000 tonnes of lead metal.
-- The Company remains on track to meet the 2013 guidance released on May
13, 2013 (the "2013 Guidance") for production and sales. For the
remainder of 2013, the Mine expects to produce between 31,000 to 36,000
tonnes of lead contained in concentrate and to sell between 35,000 to
40,000 tonnes of lead contained in concentrate. Full production levels
at the Mine are targeted by the end of 2013.
-- On December 28, 2012, the Company entered into management services
agreements (the "Management Services Agreements") with Enirgi Group and
its wholly owned Australian subsidiary Enirgi Metal Group Pty Ltd.
("EMG"), pursuant to which, among other things Enirgi Group is managing
the day to day operations of Ivernia and EMG is managing the restart
and ongoing operation of the Mine. Enirgi Group and EMG have performed
well to date against the Management Services Agreements and provided
the Mine with increased support and expertise.
FINANCIAL AND OPERATING HIGHLIGHTS
The following table is a summary of Ivernia's financial and operating highlights
for the three and six months ended June 30, 2013 and 2012:
Three months ended Six months ended
June 30 June 30
---------------------------------------------------------------------------
(in thousands of United States dollars,
unless otherwise indicated and per
share amounts) 2013 2012 2013 2012
(unaudited) $ $ $ $
---------------------------------------------------------------------------
Financial Highlights
Revenue(1) 22,053 - 22,053 -
Operating costs (26,094) (3,110) (33,238) (5,062)
---------------------------------------------------------------------------
Gross loss (4,041) (3,110) (11,185) (5,062)
---------------------------------------------------------------------------
General and administrative (2,661) (2,092) (5,199) (5,336)
Write off of exploration expenditure - (3,426) - (3,426)
Share based compensation (383) (208) (582) (412)
Foreign exchange (30,148) (2,627) (29,603) (92)
Gain on sale of available for sale
investments - - 172 -
Other income (expenses) 302 - 298 -
Net interest income (expense) (599) 92 (989) 201
Accretion (340) (125) (567) (255)
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(33,829) (8,386) (36,470) (9,320)
---------------------------------------------------------------------------
Loss before tax (37,870) (11,496) (47,655) (14,382)
Deferred income tax recovery 10,200 2,208 12,700 3,229
---------------------------------------------------------------------------
Net loss (27,670) (9,288) (34,955) (11,153)
Unrealized (loss)/gain on investments - (31) 11 (36)
Foreign currency translation
differences 16,011 1,125 15,668 205
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Comprehensive loss (11,659) (8,194) (19,276) (10,984)
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Basic and fully diluted loss per
share(2) (0.04) (0.01) (0.05) (0.01)
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Weighted average shares outstanding -
thousands 755,510 745,131 753,826 745,131
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Cash used in operations before changes
in non-cash working capital (4,587) (3,648) (14,736) (9,602)
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Cash flow used in operating activities (2,290) (3,446) (8,917) (8,495)
---------------------------------------------------------------------------
Operating Highlights
Ore milled - (000's tonnes) 160 - 160 -
Average head grade - (% lead) 8.1 - 8.1 -
Recovery - (%) 69 - 69 -
Concentrate produced - (000's dry
tonnes) 14.1 - 14.1 -
Concentrate sold - (000's dry tonnes)
(1) 16.7 - 16.7 -
Lead metal in concentrate produced -
(000's tonnes) 9.0 - 9.0 -
Lead metal in concentrate sold - (000's
tonnes) (1) 10.7 - 10.7 -
Concentrate inventory - (000's of dry
tonnes) 7.3 10.1 7.3 10.1
Average lead price - LME cash
settlement- ($ per pound) 0.93 0.89 0.99 0.92
Ivernia's average lead sale price - ($
per pound) 0.98 - 0.98 -
Cash cost per pound sold - ($ per
pound)(3) N/A N/A N/A N/A
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(1) Ivernia restarted operations at the Mine in late February, 2010. A ramp-
up of operations took place throughout 2010. On April 5, 2011, the
Company voluntarily ceased transportation and operations as a result of
the detection of lead bearing mud on one of its shipping containers.
With the uncertainty surrounding these results and what was the third
transportation disruption since December 31, 2010 the decision was made
to undertake a comprehensive review of its business practices before
the recommencement of transportation would resume. As such, the Mine's
workforce commenced an orderly shutdown of operations and the Mine was
placed on full care and maintenance in April 2011. In April 2013, the
Company recommenced mining, processing and transportation operations.
(2) Per share data was calculated on the basis of the weighted average
shares outstanding (basic and diluted) for the relevant period.
(3) Cash cost per pound sold is a non-IFRS measure. Cash cost of lead sold
is not currently meaningful as the Mine worked through the issues
surrounding transportation and then care and maintenance during 2011
through 2013. Once the Mine achieves steady state production run rates
information about the cash cost of lead sold will be reintroduced.
OPERATIONS REVIEW
On July 27, 2012, the Company received Ministerial Statement 905, which contains
the majority of the Company's new transportation and operating conditions for
the Mine (the "Operating Conditions") from the Minister for Environment, Water
for Western Australia (the "Minister") which, in general were consistent with
the draft recommended conditions (the "Draft Recommended Conditions") for the
Mine that were released by the Environmental Protection Authority of Western
Australia ("EPA"). The Operating Conditions replace and supersede the Interim
Implementation Conditions (the "Interim Implementation Conditions"), which were
issued on February 23, 2011 and the previous Ministerial Statements 559 and 783.
Following the receipt of the Operating Conditions in the third quarter of 2012,
the Company completed its internal planning process in preparation for the
restart of operations, which included critical path planning, capital
expenditure requirements and the identification of key recruitment milestones.
The operations remained on care and maintenance for the remainder of 2012 and
the first quarter of 2013. Consequently, there was no production or sales of
lead carbonate concentrate in 2012 or the first quarter of 2013. Mining,
processing and transportation operations were recommenced in the second quarter
of 2013.
Principal activities during the second quarter of 2013 focused on ramping up
operations at the Mine which restarted in early April 2013. During the quarter,
the Company produced 14,100 tonnes of concentrate containing 9,000 tonnes of
lead metal and sold 16,700 tonnes of concentrate containing 10,700 tonnes of
metal. The Company recommenced milling operations in April on a single shift
basis and ramped up to twenty four hour operations by the end of April. The
Company recommenced mining operations at the end of April 2013. Transportation
operations were staged and increased in conjunction with the ramp-up of the
operations. The major challenges encountered during the quarter were associated
with increasing plant stability after restart of processing operations. These
included recommissioning the processing plant after nearly two years out of
operation, increasing workforce capability and processing ore with a higher clay
content.
A full discussion of the events for the three year period to March 28, 2013, is
contained in the Annual Information Form dated March 28, 2013 ("2012 AIF") under
the heading "Three-Year History - Operations", and is incorporated herein by
reference. The 2012 AIF is available on the Ivernia web site at www.ivernia.com
and on SEDAR at www.sedar.com.
The table below summarizes quarterly mine production, process production,
shipments and inventories for the three and six months ended June 30, 2013:
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2013 2012 2013 2012
---------------------------------------------------------------------------
Mining
Ore mined - 000's tonnes(1) 171 - 171 -
Low grade ore mined - 000's tonnes(2) 51 - 51 -
Total ore and waste mined - 000's bcm 187 - 187 -
---------------------------------------------------------------------------
Processing
Ore milled - 000's tonnes 160 - 160 -
Average head grade - % lead 8.1 - 8.1 -
Average recovery - % 69 - 69 -
Concentrate produced - 000's dry tonnes 14.1 - 14.1 -
Concentrate grade - % lead 64 - 64 -
Lead metal in concentrate produced -
000's tonnes 9.0 - 9.0 -
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Sales and inventories
Concentrate sold - 000's dry tonnes 16.7 - 16.7 -
Concentrate grade - % lead 64 - 64 -
Lead metal in concentrate sold - 000's
tonnes 10.7 - 10.7 -
Concentrate inventory - 000's dry
tonnes 7.3 10.1 7.3 10.1
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(1) Ore mined does not include low grade ore.
(2) Low grade ore is 1.5 to 2.5% lead.
The Mine was not operational during 2012 and the first quarter of 2013. In April
2013, the Company recommenced mining, processing and transportation operations
at the Mine.
Mine Production Ramp-up
On April 5, 2013, milling and processing operations recommenced at the Mine and
at the end of April, mining operations recommenced. Performance steadily
improved and ramped up over the quarter as the workforce continues to gain
experience with the ore processing plant. Milling rates, production and plant
performance were all generally in line with expectations for the quarter.
The primary focus of site management in the second quarter was to finalise the
safe recommissioning of the processing plant, increase workforce skills and
stabilize and steadily increase milling rates.
During the second quarter of 2013, the mill treated 160,000 dry metric tonnes of
ore with an average head grade of 8.1% lead. The plant recovered an average of
69% of the lead, to produce approximately 14,100 dry metric tonnes of
concentrate with an average grade of 64% containing 9,000 tonnes of lead metal.
As of June 30, 2013, the Company had 7,300 dry metric tonnes of concentrate
inventory of which 5,400 dry metric tonnes of concentrate was at the Mine and
the remainder was in transit.
In the second quarter of 2013, the Company faced challenges with variable ore
types and ore grades, including high grade clay material. The high variation in
processing volumes, ore grades and types and the relatively new plant operating
staff lead to lower recoveries than at normal steady state which is typical and
to be expected in a ore processing plant ramp-up. Plant recoveries are expected
to increase and stabilize as the plant reduces the variability in ore processed,
operator experience increases and the processing plant moves towards steady
state. Overall for the second quarter of 2013, the average plant recovery was
69%.
The Mine has now recruited its full complement of personnel. There currently
appears to be more availability of skills in Western Australia given that a
number of projects and companies have delayed, reduced or shut down operations
in the State.
In the third quarter of 2013, the Company will continue to focus on ramping up
the mining and processing rates towards full production levels. This will
require continued debottlenecking of the processing plant, increasing surge
capacity throughout the concentrate handling and logistics chain and a focus on
reducing the variability of ore delivered to the processing plant.
Operational Optimization
With the recommencement of operations in the second quarter, work has commenced
on mine scheduling optimization for the life-of-mine planning. The aim of this
work is to improve the mining program to deliver lower mining and processing
costs through: blend optimization; reduced double handling; reduced
non-productive equipment moves; and identifying locations for in-pit waste
dumping.
Plans are being reviewed to convert the generator sets in the Mine's onsite
power station from diesel fuel to dual fuel diesel-natural gas or pure natural
gas. The gas pipeline has been installed to the power station and a long term
gas contract is secured until the first quarter of 2017. The reduction of diesel
consumption is expected to significantly reduce the site's power costs and
reduce the Mine's carbon emissions.
The Mine has constructed significant handling infrastructure at the Mine and
along its transport route and implemented a best practice concentrate handling
system utilizing two tonne plastic bulk bags and shipping containers. The
Company is now investigating ways to reduce the cost and improve the efficiency
of the bagging and packing process.
The Mine is also reviewing cost reduction opportunities through improved usage
and a potential reduction in transport costs associated with reagents by
handling and mixing reagents at site. The implementation of such projects is
expected to significantly reduce the reagent costs in the flotation section of
the plant.
Production Outlook
After the second quarter of 2013's production and sales, the Company remains on
track to meet the 2013 Guidance. In the second half of 2013, the Mine expects to
produce between 31,000 to 36,000 tonnes of lead contained in concentrate and to
sell between 35,000 to 40,000 tonnes of lead contained in concentrate. Full
production levels at the Mine are targeted by the end of 2013. For 2014 and
beyond, the Company expects to produce and sell between 80,000 and 85,000 tonnes
of lead contained in concentrate.
The production outlook and 2013 Guidance are forward-looking statements based on
certain material factors and assumptions. See "Forward-Looking Statements".
Capital Resources and Working Capital Requirements
As of June 30, 2013, the Company had approximately $4.3 million in cash. At
current lead prices and foreign exchange rates, the Company expects that it has
sufficient working capital to fund the Mine until operations turn cashflow
positive and to maintain a working capital ratio (excluding current payments to
Sprott Lending Resources Partnership ("Sprott")) above 1.25 to 1.00 in
accordance with the C$20 million secured loan facility with Sprott (the "Sprott
Facility"). Operations are expected to turn cashflow positive in the third
quarter of 2013. While the Company anticipates that cashflow from operating
activities will be sufficient to fund non-operating activities going forward,
including repayment of principal payments under the Sprott Facility starting at
the end of the first quarter of 2014, the Company's financial condition will
remain subject to certain risks and uncertainties as it ramps-up operations over
the course of 2013. For instance, ongoing cash flow from operating activities is
exposed and continues to be exposed to fluctuations in metal prices, production
and shipping rates and the A$/US$ exchange rate. See "Risk Factors - Funding
Requirements" in the 2012 AIF and "Forward-Looking Statements" below. If
management considers cashflow from operating activities to be insufficient to
fund non-operating activities going forward or that working capital will not be
sufficient to meet the covenants under the Sprott Facility, the Company may need
to consider equity or debt financing.
Management's Discussion and Analysis and Consolidated Financial Statements
Ivernia's unaudited financial statements and management's discussion and
analysis for the three months ended June 30, 2013 will be filed today and will
be available on the Ivernia website at www.ivernia.com or SEDAR at
www.sedar.com.
About Ivernia
Ivernia is an international base metal mining company and the owner of the Paroo
Station Mine in Western Australia.
Ivernia trades under the symbol "IVW" on the Toronto Stock Exchange. Additional
information on Ivernia is available on the Company's website at www.ivernia.com
and at SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements contained in this news release are forward-looking
information within the meaning of securities laws. All statements included
herein (other than statements of historical facts) which address activities,
events or developments that management anticipates will or may occur in the
future are forward-looking statements, including statements as to the following:
the 2013 Guidance or other future targets and estimates for production and
sales, the Company's ability meet its working capital needs in the near term,
projections with respect to cash flows and working capital, any additional
financing requirements to restart the Mine, the cost and timing for completion
of capital projects necessary for restart or ongoing operations, the Company's
ability to comply with the new Operating Conditions, capital expenditures,
operating costs, cash costs, mineral resources, mineral reserves, life of mine,
recovery rates, grades and prices, business strategies and measures to implement
such strategies, competitive strengths, estimated goals and plans for Ivernia's
future business operations, lead market outlook and other such matters.
Forward-looking statements are often, but not always, identified by the use of
words such as "seek", "anticipate", "contemplate", "target", "believe", "plan",
"estimate", "expect", and "intend" and statements that an event or result "may",
"will", "can", "should", "could" or "might" occur or be achieved and other
similar expressions. These statements are based upon certain reasonable factors,
assumptions and analyses made by management in light of its experience and
perception of historical trends, current conditions and expected future
developments, as well as other factors management believes are appropriate in
the circumstances.
However, whether actual results and developments will conform with management's
expectations is subject to a number of risks and uncertainties, including
factors underlying management's assumptions, such as, expected concentrate
sales, the costs and other capital expenditures required to recommence
operations and transportation, the timing, need and ability to raise any
additional financing and the risks relating to ramping up mining and milling
throughput and operations, funding requirements, operations being placed on care
and maintenance, matters relating to regulatory compliance and approvals,
shareholder dilution, matters relating to public opinion, presence of a majority
shareholder and Management Services Agreements, matters related to the Esperance
settlement and shipments through the Port of Fremantle, regulatory proceedings
and litigation and general operating risks such as metal price volatility, lead
carbonate concentrate treatment charges, exchange rates, the fact that the
Company has a single mineral property, health and safety, environmental factors,
mining risks, metallurgy, labour and employment regulations, government
regulations, insurance, dependence on key personnel, constraints on cash
distribution from the Mine, the nature of mineral exploration and development
and common share price volatility. Additional factors and considerations are
discussed in the 2012 AIF and elsewhere in other documents filed from time to
time by Ivernia with Canadian securities regulatory authorities. While Ivernia
considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect. These factors may cause the
actual results of the Company to differ materially from those discussed in the
forward-looking statements, and there can be no assurance that the actual
results or developments anticipated by management will be realized or, even if
substantially realized, that they will have the expected results on the Company.
Undue importance should not be placed on forward-looking information nor should
reliance be placed upon this information as of any other date. Except as
required by law, while it may elect to, Ivernia is under no obligation and does
not undertake to update this information at any particular time.
FOR FURTHER INFORMATION PLEASE CONTACT:
Ivernia Inc.
Jessica Helm, Corporate Communications Officer
Enirgi Group Corporation
Suite 3303, 130 Adelaide Street West
Toronto, Ontario M5H 3P5
(416) 365-2783 investor@ivernia.ca
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