2014

MFC Industrial Ltd. Reports First Quarter Results For 2012 - Revenues up 10 percent and earnings per share up 20 percent -

NEW YORK, May 15, 2012 /PRNewswire/ -- MFC Industrial Ltd. ("MFC" or the "Company") (NYSE: MIL) announces its results for the three months ended March 31, 2012 and provides an update on its recent corporate developments.  The Company's financial statements are prepared in accordance with International Financial Reporting Standards. Unless otherwise noted, all dollar amounts are in United States dollars.

We are a global commodities supply chain company. Our primary business focus is our integrated commodities operations and our mineral interests and we supply various commodities, including minerals and metals, chemicals, plastics and wood products to our customers. Such commodities originate either from our directly or indirectly held interests in resource projects or are secured by us from third parties. Through our global commodity supply chain business, we also provide logistics, supply chain management and other services to producers and consumers of commodities. These activities are supported by strategic direct or indirect investments in natural resource assets operating in our core commodities.

HIGHLIGHTS AND CHALLENGES  


 

Our net earnings for the three months ended March 31, 2012, increased 20 percent to $14.6 million, or $0.23 per share, compared to the comparative quarter in 2011, when a one-time expense of $0.14 per share incurred in the comparative quarter is excluded.



In February and April 2012, we completed the first two quarterly payments to our shareholders of our 2012 annual cash dividend, which represented a 10 percent increase over the 2011 cash dividend.



 

We have entered into an agreement for a new source of ferrous metals in India, which is now in the process of obtaining operating permits.

Our potential captive source of ferrous metals, the Pea Ridge Mine project, is on its development schedule.

Under Canadian National Instrument 43-101 ("NI 43-101"), we are limited in our disclosure of our mineral assets. Accordingly, we must complete additional steps to disclose the economic value and additional information on the Pea Ridge Mine project. The transparency of this asset is important to our shareholders. We will strive to update you on our progress on a quarterly basis.



RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Total revenues for the three month period ended March 31, 2012 increased to $147.6 million, compared to $133.8 million in the first quarter of 2011.  Net income for the first quarter of 2012 increased to $14.6 million, or $0.23 per share on a diluted basis, from $2.9 million, or $0.05 per share on a diluted basis in the same quarter last year. Earnings per share in the current quarter were up 20 percent, compared to the comparative quarter in 2011, when a one-time expense of $0.14 per share incurred in the comparative quarter is excluded.

Revenues for our commodities and resources business were $138.5 million for the three months ended March 31, 2012, compared to $118.7 million for the same period in 2011. Included in our commodities and resources business are the gross revenues generated by our royalty interest, which decreased to approximately $4.4 million for the three months ended March 31, 2012 versus $5.5 million in the same period last year.

The decrease in royalty revenue was another disappointment, and was due to lower than expected tonnage of pellets shipped by the mine operator. The operator only shipped a total of 482 thousand tons of iron ore pellets during the quarter versus 719 thousand tons of iron ore pellets during the first quarter of last year. The reduction in pellet shipments experienced during the first quarter was directly attributable to ice problems experienced by the operator, resulting in its access to the St. Lawrence Seaway being closed for a period of time and a customer postponing delivery of its order from March to May.

However, on the positive side, we are happy to state that we received a higher royalty rate than we did last year for the same period and that we are now anticipating that the mine will ship 3.7 million tons of pellets in 2012.

Revenues for our merchant banking business were $4.6 million for the three months ended March 31, 2012, compared to $11.4 million for the same period in 2011.

Other revenues, which encompass our corporate and other investments, were $4.6 million for the three months ended March 31, 2012, compared to $3.7 million for the same period in 2011.

Costs of sales increased to $121.6 million during the three months ended March 31, 2012 from $106.4 million for the same period in 2011. Selling, general and administrative expenses decreased to $9.4 million for the three months ended March 31, 2012 from $11.4 million for the same period in 2011. 

OVERVIEW OF OUR RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Our total revenues by operating segment for each of the three months ended March 31, 2012 and March 31, 2011 are broken out in the table below:

REVENUES  (All amounts in thousands)                                                   


March 31, 2012

three months

March 31, 2011

three months

Commodities and resources 

$     138,485

$     118,745

Merchant banking

4,558

11,401

Other

4,590

3,691

    Total revenues

$     147,633

$     133,837

Our income from continuing operations for each of the three months ended March 31, 2012 and March 31, 2011 is broken out in the table below:

   INCOME FROM CONTINUING OPERATIONS  

   All amounts in thousands, except per share amounts


March 31, 2012

three months

March 31, 2011

three months

Commodities and resources

$    10,620

$       4,861

Merchant banking

5,485

11,980

Other

(586)

(12,262)

Income before income taxes

15,519

4,579

Income tax recovery (expenses)

280

(1,777)

Resource property revenue tax expenses

(901)

(1,181)

Net (income) loss attributable to non-controlling interests   

(313)

1,299

Net income from continuing operations to shareholders

$    14,585

$      2,920

Earning per share

$        0.23

$        0.05

Note: It should be noted that the first quarter of 2011 included a one-time expense of $0.14 per share.              

LIQUIDITY

As at March 31, 2012, we had cash, short-term deposits and securities of $342.7 million. We monitor our capital on the basis of our debt-to-adjusted capital ratio and long-term debt-to-equity ratio. The debt-to-adjusted capital ratio is calculated as net debt divided by adjusted capital, while net debt is calculated as total debt less cash and cash equivalents.

LIQUIDITY                                                                           

All amounts in thousands


   March 31, 2012

December 31, 2011

Total debt

$             22,507

$               47,127

Less: cash and cash equivalents  

(329,379)

(387,052)

Net debt (net cash & cash equivalents)

(306,872)

(339,925)

Shareholders' equity

558,003

546,623

 

LONG-TERM DEBT                                                    

All amounts in thousands, except ratio


March 31, 2012

December 31, 2011

Long-term debt, less current portion

$                  19,200

$                     20,150

Shareholders' equity

558,003

546,623

Long-term debt-to-equity ratio

0.03

0.04

Note: Long-term debt-to-equity ratio is calculated as long-term debt, less current portion divided by shareholders' equity.

CREDIT FACILITIES

We maintain various types of credit lines and facilities with various banks, and most of these are short-term.  These facilities are used for day-to-day business, structured solutions and various other activities in both the commodities and finance areas.

As at March 31, 2012, we had credit facilities aggregating $376.5 million as follows: (i) we had unsecured revolving credit facilities aggregating $167.1 million from banks; (ii) we had revolving credit facilities aggregating $53.3 million from banks for structured solutions, a special financing. The margin is negotiable when the facility is used; (iii) we had a structured factoring arrangement with a bank for up to a credit limit of $113.3 million for our commodities activities. Generally, we may factor our commodity receivable accounts upon invoicing at the inter-bank rate plus a margin; and (iv) we had a foreign exchange credit facility of $42.7 million with a bank. All of these facilities are renewable on a yearly basis.

RECENT ACQUISITION OF FERROUS METALS (PEA RIDGE) SOURCE UPDATE

During the first quarter of 2012, we and our partner Alberici Group, Inc. engaged the consulting firm Behre Dolbear and Company (USA), Inc. ("Behre Dolbear") to assist and advise in our plans to re-open the Pea Ridge underground iron ore mine (the "Mine") located near Sullivan, Missouri, USA.  Behre Dolbear prepared and completed an independent NI 43-101 compliant technical report on the Mine (the "Technical Report").  The Technical report was completed on March 9, 2012 and was filed with Canadian securities regulators on March 30, 2012. The Technical Report cites non-NI 43-101 compliant historical resource estimates, prepared by DataGeo Geological Consultants in May 2008 and commissioned by the prior owners of the project, which estimated the following in situ (originally present) iron resources in all categories of mineralized material:  

HISTORICAL MINERAL RESOURCE ESTIMATES CLASSIFIED EXPANDED IN SITU MINERAL RESOURCE

All amounts in thousands, except percentages 

Class

Short Tons

% Magnetic iron

Total iron % (1)

Measured 

94,124

50.8

58.0

Indicated

94,116

51.9

58.9

Inferred

54,953

40.6

55.9

Previous production (2)

58,542

-

-





Notes:

(1) The Company anticipates that future mining operations at the Mine would include beneficiating

 the resource in a processing plant or mill, similar to past production practices at the Mine.

 This would involve the removal of the non-iron bearing portion of the resource and generally

 results in iron-rich concentrates. Historic data for the Mine indicates that beneficiation resulted

 in iron-rich concentrates that were typically in the range of 66% to 69% iron.





(2) Approximation based on historical production data for the period between 1963 and 2001.

The above historical resource estimates of measured, indicated and inferred resources did

 not account for past production.

The Company has not yet completed the work necessary to verify the classification of the above mineral resource estimates as current mineral resources under NI 43-101.  Accordingly, it is not treating these historical resource estimates as current defined resources and, therefore, they should not be relied upon. However, the Company is providing these historical results and estimates of remaining iron resources to provide an indication of the potential of the Mine project and believes such information is relevant to its future development plans. The Mine will require further evaluation, which MFC and its partner intend to carry out in due course. Further a NI 43-101 compliant feasibility study has not been completed and there is no certainty that the project will be economically viable. For further information regarding the Mine, please refer to the Technical Report.

Behre Dolbear is proceeding with the preparation of a NI 43-101 compliant current resource estimate for the Mine.  This work involves, among other things, re-analysis of existing drill core from underground mineralized material and careful examination of the records of previous exploration and mining, in order to determine the tonnages and grades of mineralized material remaining in the Mine within and below the levels previously mined underground.  Behre Dolbear expects to complete this work and submit its report by the end of the third quarter.

As part of the work necessary to evaluate the Mine for re-opening, Geotechnology, Inc., a consulting firm, has been engaged to conduct a 3D detailed seismic survey over the Mine site to determine, in conjunction with direct measurements within existing vertical drill holes above the Mine deposit, the depth and shape of the top of the subsidence cave zone which is present above the deposit.  They expect to complete this work and provide a report in the third quarter of 2012.  The results of this work will be useful in determining the best way to develop and mine the iron deposit within the Mine.

A necessary step in the completion of feasibility and other studies and the re-opening of the Mine is dewatering the existing underground mine workings.  Three large submersible pumps have been ordered and arrangements have been made for power to the Mine site adequate for the pumps.  We expect to begin pumping the underground water in the early parts of the fourth quarter of this year.

We have begun testing and evaluation of the large tonnage of tailings material at the Mine site, which was produced as a waste product during historic iron mining operations.  This material contains small but potentially valuable recoverable quantities of the iron minerals magnetite and hematite.  We have begun the initial phase of drilling and sampling of this tailings accumulation. Samples are being sent to laboratories for analysis. 

CAPTIVE SOURCE OF COBALT

Pursuant to an asset purchase agreement, in March 2012, MFC acquired a 75% equity interest and a shareholder loan in Kasese Cobalt Company Limited ("KCCL") for consideration of $28 million from Blue Earth Refineries Inc. ("Blue Earth"). As a result of the acquisition, we acquired KCCL which has a mineral refinery plant and power plant in Uganda. KCCL's operations are comprised of the recovery of cobalt metal from pyrite tailings located near its refinery.

Currently, KCCL has approximately a 17-month supply of tailings left to process. With completion of the processing of the remaining tailings, the refinery will have no alternative use and we will shut down the site and start the procedures for environmental cleaning that will return the site to its original state. 

Blue Earth announced a final cash distribution to it shareholders in the amount of US$0.44 per share.  The distribution is a return of capital and therefore no withholding tax will be payable.  This will be the final cash distribution for Blue Earth.

Blue Earth determined that it is in the best interest of its shareholders to sell its interest to MFC because MFC has substantial experience to complete this closure in a secure manner and rationalize the power plant and all of the fixed assets.

INCREASING OUR CAPTIVE SOURCES OF FERROUS METALS IN INDIA

We have entered into an agreement respecting the processing, purchase and sale of iron ore from a new mine property located in Goa, India. The new property is in very close proximity to our existing iron ore operations. This proximity will enables us to use many common facilities, laboratory, engineering staff and other equipment when the mine becomes operational. We are now in the process of obtaining the necessary permits to commence operations.

ODD-LOT SHARE REPURCHASE PROGRAM

As previously announced MFC has commenced an odd-lot share repurchase program, pursuant to which we are offering to buy back common shares from registered and beneficial shareholders who own 99 or fewer common shares. The repurchase program affords eligible shareholders the opportunity to sell all, but not less than all, of their common shares or to continue to maintain their current holdings. The repurchase program began on April 9, 2012 and will expire at the close of business on May 21, 2012, and may be extended by us, in our discretion, for up to an additional six weeks. Shareholders encouraged call Georgeson Inc. toll free at: 1 (888) 274 5157 with questions regarding the repurchase program.  

ANNUAL CASH DIVIDEND

On February 10, 2012, we paid the first quarterly payment of $0.05 per share to our shareholders and the second payment of $0.05 per share was paid in April 2012. The 2012 annual cash dividend is 10% higher than the dividend paid in 2011.

COMMENTS

Chairman Michael Smith commented: "We continue to seek to increase our captive commodities sources to provide us a continuous supply, which will allow us better margins and greater returns. The recently announced acquisition of the Pea Ridge Mine project and the potential new ferrous metals source in India are very good examples of our strategy to increase our captive sources of supply. We now have several of these types of projects underway, including outside the ferrous metals sector."

Mr. Smith concluded: "When we review the first quarter of 2012, we see that more banks and lenders are looking at their loan portfolios with more realistic views and we are encouraged that the credit markets seem to be normalizing. All of this should provide more opportunities for us in the future." 

Shareholders are encouraged to read the entire Form 6-K, which includes our unaudited financial statements and management's discussion and analysis for the three months ended March 31, 2012 and was filed with the Securities and Exchange Commission ("SEC") and Canadian securities regulators on May 15, 2012, for a greater understanding of the Company.

Today at 10:00 a.m. EDT (7:00 a.m. PDT), a conference call will be held to review MFC's announcement and results. This call will be broadcast live over the Internet at www.mfcindustrial.com.  An online archive will be available immediately following the call and will continue for seven days. You may also to listen to the audio replay by phone by dialing: 1 (877) 344 7529, using conference number 10013875. International callers dial: 1 (412) 317 0088.

About MFC Industrial Ltd.

MFC is a global commodity supply chain company and is active in a broad spectrum of activities related to the integrated combination of commodities and resources, including commodity and resource interests, and structured finance, and proprietary investing. To obtain further information on the Company, please visit our website at: http://www.mfcindustrial.com.

Cautionary Note on Historical Resource Estimates

As a reporting issuer in Canada, the Company is required by Canadian law to provide disclosure in accordance with NI 43-101.  Accordingly, you are cautioned that the information contained in this press release may not be comparable to similar information made public by U.S. companies under the United States federal securities laws and the rules and regulations thereunder. In particular, the terms "measured resource", "indicated resource" and "inferred resource" as used in this press release are not defined in the SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into mineral reserves with demonstrated economic viability. In addition, the estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.

Disclaimer for Forward-Looking Information

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature, including, without limitation, statements regarding our future plans, implementation of current strategies and our plans and expectation in respect of the Mine. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "scheduled", "estimates", "forecasts", "projects",  "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, revenues, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause our actual results, revenues, performance or achievements to differ materially from our expectations include, among other things: (i) periodic fluctuations in financial results as a result of the nature of our business; (ii) commodities price volatility; (iii) economic and market conditions; (iv) competition in our business segments; (v) decisions and activities of operators of our resource interests; (vi) the availability of commodities for our commodities and resources operations; (vii) the availability of suitable acquisition or merger or other proprietary investment candidates and the availability of financing necessary to complete such acquisitions or development plans; (viii) our ability to realize the anticipated benefits of our acquisitions; (ix) additional risks and uncertainties resulting from strategic investments, acquisitions or joint ventures; (x) counterparty risks related to our trading activities; (xi) unanticipated grade, geological, metallurgical, processing or other problems experienced by the operators of our resource interests (xii) delays in obtaining requisite environmental, mining and other permits or project approvals; (xiii) potential title and litigation risks inherent with the acquisition of distressed assets; (xiv) risks related to exploration, development and construction of a previously shut-down mine project, including the suitability and integrity of historic mine structures; and (xv) other factors beyond our control. Such forward-looking statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Additional information about these and other assumptions, risks and uncertainties are set out in our Annual Report on Form 20-F and our Management's Discussion and Analysis for the three months ended March 31, 2012, filed with the Canadian securities regulators and on the Form 6-K with the SEC.

UNAUDITED FINANCIAL TABLES FOLLOW –

 

MFC INDUSTRIAL LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

March 31, 2012 and December 31, 2011

(Unaudited)

(United States Dollars in Thousands)


 ASSETS

      

March 31,

 

December 31,


 

 Current Assets

2012

2011



Cash and cash equivalents

$   329,379

$   387,052

Short-term deposits

168

163

Securities

13,164

13,062

Restricted cash

651

623

Loan receivable

81

19,869

Bills of exchange

10,545

Trade receivables

53,704

21,154

Other receivables

11,682

9,144

Inventories

91,752

81,223

Real estate held for sale

12,346

12,012

Deposits, prepaid and other

11,500

9,344

                Total current assets

524,427

564,191







 Non-current Assets

 



Securities

13,276

11,606

Equity method investments

21,070

18,726

Investment property

34,519

33,585

Property, plant and equipment

32,052

3,743

Interests in resource properties

216,854

219,582

Deferred income tax assets

7,651

7,524

                Total non-current assets

325,422

294,766

                                Total assets

$   849,849

$   858,957




 

MFC INDUSTRIAL LTD.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (cont'd)

March 31, 2012 and December 31, 2011

(Unaudited)

(United States Dollars in Thousands)


 LIABILITIES AND EQUITY

    

March 31,

2012

December 31,

2011


 Current Liabilities

 



Short-term bank borrowings

$  110,756

$  114,239

Debt, current portion

3,307

26,977

Dividends payable

3,128

Account payables and accrued expenses

54,123

42,226

Provisions

118

115

Income tax liabilities

3,838

4,453

Deferred sale liabilities

5,404

14,958

                Total current liabilities

180,674

202,968




 Long-term Liabilities

 



Debt, less current portion

19,200

20,150

Deferred income tax liabilities

60,396

61,045

Provisions

2,881

Deferred sale liabilities  

25,824

25,647

                Total long-term liabilities

108,301

106,842

                         Total liabilities

288,975

309,810







EQUITY

 



Capital stock

382,443

382,289

Treasury stock

(68,271)

(68,117)

Contributed surplus

13,037

13,028

Retained earnings

221,529

213,200

Accumulated other comprehensive income

9,265

6,223

Shareholders' equity

558,003

546,623

Non-controlling interests

2,871

2,524

Total equity

560,874

549,147


$ 849,849

$ 858,957

 

MFC INDUSTRIAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2012 and 2011

(Unaudited)

(United States Dollars in Thousands, Except Per Share Amounts)






2012

2011




Net Sales

$  146,049

$  132,582

Equity income

1,584

1,255

      Gross revenues

147,633

133,837




Costs and Expenses:



      Costs of sales

121,625

106,446

      Selling, general and administrative

9,426

11,410

      Share-based compensation - selling, general and administrative

9

7,219

      Finance costs

1,826

1,968


132,886

127,043




 Income from operations

14,747

6,794




 Other item:



      Exchange differences on foreign currency transactions

772

(2,215)




 Income before income taxes

15,519

4,579

 Income tax (expense) recovery:



       Income taxes

280

(1,777)

       Resource property revenue taxes

(901)

(1,181)


(621)

(2,958)




 Net income for the period

14,898

1,621

 Net (income) loss attributable to non-controlling interests

(313)

1,299

 Net income attributable to owners of the parent company

$   14,585

$     2,920




 Basic earnings per share:

$       0.23

$       0.05

 Diluted earnings per share:

$       0.23

$       0.05







 Weighted average number of common shares outstanding   

                           - basic

                    - diluted

 

 

62,560,990

62,560,990

 

62,561,421

62,626,861




 

MFC INDUSTRIAL LTD.

FINANCIAL HIGHLIGHTS

As of March 31, 2012

(Unaudited)

(United States Dollars in Thousands, Except Per Share Amount and Ratios)


Cash and cash equivalents

$ 329,379

Short-term securities

13,164

Trade receivables

53,704

Current assets

524,427

Total assets

849,849

Current liabilities

180,674

Working capital

343,753

Current ratio

2.90

Acid test ratio

2.26

Long term debt, less current portion

19,200

Long-term debt-to-shareholders' equity

0.03

Total Liabilities

288,975

Shareholders' equity

558,003

Equity per common share

8.92

 

Corporate

Investors

MFC Industrial Ltd.

Allen & Caron Inc.

Rene Randall

Joseph Allen

1 (604) 683-8286 ex 224

1 (212) 691-8087

rrandall@bmgmt.com

joe@allencaron.com

SOURCE MFC Industrial Ltd.



RELATED LINKS
http://www.mfcindustrial.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.