TVI Pacific Provides Third Quarter 2013 Financial and Operational Results
TSX: TVI OTCQX: TVIPF
CALGARY, Nov. 12, 2013 /CNW/ - TVI Pacific Inc. (TSX: TVI) (OTCQX: TVIPF) ("TVI" or the "Company") today announced its unaudited, consolidated financial and operational results for the quarter ended September 30, 2013.
For a thorough explanation of the points discussed in this news release, shareholders are encouraged to read the unaudited interim consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), and the management's discussion and analysis for the periods ended September 30, 2013 and 2012 and the audited consolidated financial statements for the years ended December 31, 2012 and 2011. These documents were filed with certain securities regulators in Canada, and are available on our website (www.tvipacific.com) or under our profile on SEDAR (www.sedar.com).
September 30, 2013 Year-to-date Highlights
- Total net revenue of $39.3 million.
- Earnings before interest, tax, depreciation and share of loss of associates of $4.1 million.
- Net loss of $4.6 million.
- Cash balance of $4.9 million at September 30th, 2013.
- Short-term debt facilities of $3.9 million (average interest rate of 2.0%).
- A working capital surplus of $6.4 million.
|●||Gross revenue ($ million)||$14.6||$22.4||$20.1|
|●||Net revenue ($ million)||$12.1||$19.8||$17.0|
|●||Total cost per Copper Pound Equivalent (1) (US$)||$2.71||$2.41||$3.27|
Production cash cost per Copper Pound
Equivalent (2) (US$)
Total cash cost per Copper Pound Equivalent net
of by-products (3) (US$)
|●||Net income ($ million)||$0.34||$0.53||($4.32)|
|●||Basic net income per share||$0.000||$0.000||($0.007)|
|●||Average copper price received (US$/lb)||$3.23||$3.48||$3.25|
|●||Cash balance at quarter end ($ million)||$4.9||$9.5||$9.1|
|●||Letters of credit and loan facilities ($ million) (4)||$3.9||$7.6||$9.2|
|●||Working capital surplus ($ million)||$6.4||$12.2||$6.3|
|(1)||Includes selling expenses and amortization expenses|
|(2)||Excludes selling expenses and amortization expenses|
|(3)||Includes selling expenses and excludes amortization expenses|
|(4)||Average interest rate of: 2.00% for Q3 2013 and Q2 2013 and 2.01% for Q3 2012|
The mining segment generated net revenues of $11.7 million in Q3 2013 from the sale of concentrates, net of treatment, refining and penalties, and a further $0.3 million from drilling and other services to third party customers. During Q3 2013, there was one shipment of copper concentrate and one shipment of zinc concentrate for a total of 5,498 dry metric tonnes and 5,169 dry metric tonnes, respectively, wherein the Company realized average prices of US$3.23 for copper and US$0.84 for zinc.
The Company realized a consolidated net income of $0.3 million during Q3 2013, which included a decrease in total mining, milling and other expenses through the quarter on a Cu lb equivalent unit basis as metal production increased through a combination of higher throughput and improved metal recoveries. Net income also includes a further $0.6 million in Net Smelter Returns (NSR) earned through Rapu Rapu Processing, Inc. ("Rapu Rapu") during the quarter. Total NSR now received from Rapu Rapu equates to US $2.3 million cash in the current year and US $5.4 million total to date, all net of withholding tax, since the signing of a Memorandum of Agreement with Rapu Rapu on December 12th, 2012.
A 7% decline in copper price, 16% decline in gold price and 24% decline in silver price realized by the Company as compared to the same nine month period ended September 30, 2012 has contributed to lower revenues year-over-year, as has a continuing decline in copper feed grade, as may be expected over the life of the Canatuan mine. This is the result of the declining natural grade distribution of the mineral deposit as the Company mines deeper into the pit and follows its mining plan. As such, production cash cost has increased year-over-year as a result of processing lower feed grades (0.72% average year-to-date) through the blending of ore to reduce penalty elements in the concentrate, though the increase has been offset in part by reduced mining cost and the continuing non-use of cyanide.
Net income breakdown
3 months ended
September 30, 2013
Nine months ended
September 30, 2013
|Reported net income (loss)||0.34||(4.55)|
|Interest expense and income taxes||0.29||0.36|
|Depreciation, depletion and accretion||2.03||6.72|
|Share of loss of associates||0.25||1.56|
Net income before interest, taxes, depreciation and accretion,
and extraordinary items
Adjusting for extraordinary and non-cash items, net income before interest, taxes, depreciation and extraordinary items is $2.81 million for Q3 and $4.09 million for the nine months ended September 30th, 2013. The share of loss of associates represents the Company's proportionate share of losses recognized through the year by Foyson Resources Limited and Mindoro Resources Ltd ("Mindoro"), in which the Company currently holds a 10.61% and 14.4% interest, respectively. The share of loss relates primarily to the impairment of investments held directly by Mindoro.
|Average tonnes processed per day||2,617||2,580||2,593|
|Ore copper grade (%)||0.61||0.92||0.73|
|Copper concentrate copper grade (%)||17.00||18.33||18.23|
|Copper concentrate gold grade (g/t)||12.31||9.41||10.41|
|Copper concentrate silver grade (g/t)||376.92||333.39||349.26|
|Zinc concentrate zinc grade (%)||42.56||48.40||44.60|
|Copper pound equivalent produced||5,309,633||7,034,311||4,938,238|
|Copper produced (lbs)||2,645,950||3,924,034||2,761,964|
|Gold produced (oz)||2,872||3,085||2,541|
|Silver produced (oz)||88,045||109,055||92,579|
|Zinc produced (lbs)||3,319,771||1,789,459||2,312,284|
During Q3 2013, mill throughput averaged 2,617 dry metric tonnes per day, for a total of 240,799 tonnes through the quarter. This mill feed consisted of ore mined from within the ore reserve block model as well as additional materials found and mined during the period. This material, consisting of banded sulphides with low-grade chlorite schists, was used as a blending material to optimize mill recoveries and was located both inside and outside the pit shell and not included in the original ore reserves. Further detailed near-pit exploration will be continued to test the extent of the mineralized sulphide horizon. Additional metallurgical studies are underway to address the increase in penalty elements expected to be encountered in the lower horizon of the ore body.
The average copper feed grade during Q3 2013 was 0.61% copper, lower than 0.73% copper for the previous quarter. In addition to the predicted decline in metal grades deeper in the deposit, ore blending to reduce penalty element levels in the concentrate also contributed to a lower feed grades. The average copper recovery was 81%, higher than the 72% of the previous quarter.
Based on average daily mill throughput going forward of 3,000 tonnes per day, open pit mining is estimated to be completed by the fourth quarter of this year while mill processing and concentrate shipments are expected to continue into the first quarter of 2014 (subject to change in throughput to meet shipping commitments). The Company expects to complete one further copper concentrate shipment and one zinc concentrate shipment through 2013. With mining expected to be completed by year end, preparations for closure of the operations have begun.
To date, 37 copper concentrate shipments of approximately 5,000 dry metric tonnes each, and six zinc concentrate shipments totaling 25,456 dry metric tonnes, have been completed. The 37th copper concentrate shipment completed loading on September 16, 2013 and the sixth shipment of zinc concentrate was completed July 27, 2013.
As of September 30, 2013, the Company had short term debt facilities of $3.9 million at an interest rate averaging 2.0%, while cash on hand was $4.9 million.
Cash balances fluctuate between reporting periods as cash is used for operating and capital requirements. In recent months also commodity markets have experienced substantial volatility and have affected cash balances of the Company as prices for copper, gold and silver have fallen. And while the Company remains confident that required permits for projects will be issued, the Company cannot estimate with any certainty the date of their issue and such delays have further affected cash balances. The Company had scheduled for the introduction of new projects as the Canatuan mine approached its end of mine life to replace cash flow and ensure cash is available to address potential technical issues that may be expected to be experienced at Canatuan, given the age of the mine.
On November 8, 2013, the Company repaid in full all short-term loans currently outstanding with a major Philippine bank that had been secured by the metal off-take agreement related to the sale of copper concentrates. As at the current date, the Company has no further short-term loans outstanding.
Financing Opportunity and Proposed Investment by Prime Asset Ventures, Inc.
On October 18, 2013, the Company entered into a nonbinding letter of interest (the "Proposal") which sets out certain terms of proposed transactions involving Prime Asset Ventures, Inc., an arm's-length Philippines corporation ("PAVI"). The current transaction proposes that PAVI will acquire 68.42% interest in all Philippine assets currently held by the Company, which includes TVIRD, EDCO and various other smaller Philippine subsidiaries. TVIRD is the Company's affiliate who owns and operates the Canatuan mine, the Balabag silver-gold development project, and various exploration projects. The Company would continue to hold 100% of its investments in Mindoro Resources Ltd. and Foyson Resources Limited, as well as 100% of TG World Energy Corp. All of the Company's Philippine assets are currently held through TVI International Marketing ("TVI Marketing"), through which PAVI would acquire its 68.42% interest. TVI Marketing is a wholly-owned subsidiary of TVI Limited, which in turn is a wholly-owned subsidiary of the Company.
It is also proposed that PAVI would acquire through a private placement approximately 5% of the current issued and outstanding common shares of the Company (based upon 622,137,038 common shares currently outstanding and assuming there are no further issuances of shares from the treasury of the Company prior to closing of the private placement).
The Proposal contemplates a number of transactions that are expected to provide USD $11 million cash to the Company, including USD $1 million through the proposed private placement and USD $10 million through a secondary sale by TVI Limited of outstanding TVI Marketing shares to PAVI. The Proposal further contemplates that USD $11.5 million is to be invested directly into TVI Marketing through the issuance of TVI Marketing Shares to PAVI resulting in PAVI acquiring a 68.42% interest in all of the Company's Philippine assets.
A Special Committee has been established by the Company board of directors to consider the Proposal and negotiate the terms of the related definitive agreements and work is proceeding in this regard. Completion of the proposed transactions are further subject to satisfaction or waiver of various conditions, including committee or board approval, as applicable, of both the Company and PAVI, receipt of all necessary regulatory and third party approvals, the negotiation, execution and delivery of definitive transaction documentation by the Company and PAVI, the completion of due diligence investigations and there being no material adverse changes affecting the Company or TVI Marketing. The Proposal provides for a 30 day exclusivity period (through to November 17, 2013), during which the Company has agreed to deal exclusively, with limited exception, with PAVI with a view to negotiating the related definitive agreements. Subject to the terms of the Proposal, the Company may still consider alternative investment offers.
With the exception of certain provisions (exclusivity, confidentiality and costs), the Proposal is nonbinding and there can be no assurance that the Transactions will be completed on the terms set out in the Proposal or at all.
Typhoon Haiyan and Company Operations
The Company is saddened by the loss of life and damage to infrastructure as a result of typhoon Haiyan. Company operations and projects continue to be ongoing and relatively unaffected other than damage to some roads. The Company wishes for the Philippines and its people to soon recover.
About TVI Pacific Inc.
TVI Pacific Inc. is a Canadian resource company focused on the production, development, exploration and acquisition of resource projects in the Philippines and Southeast Asia. The Company produces copper and zinc concentrates from its Canatuan mine and is advancing its Balabag Gold-Silver project. TVI is a participant/operator in several joint venture projects in the Philippines and Papua New Guinea and also has an interest in an offshore Philippine oil property.
The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this news release constitute forward-looking information. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "should", "believe", "schedule" and similar expressions. Forward-looking statements are based upon the opinions and expectations of TVI as at the effective date of such statements and, in certain cases, information received from or disseminated by third parties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from or disseminated by third parties is reliable, it can give no assurance that those expectations will prove to have been correct. Forward-looking statements are subject to certain risks and uncertainties (known and unknown) that could cause actual outcomes to differ materially from those anticipated or implied. These factors include, but are not limited to, such things as general economic conditions in Canada, the United States, the Philippines and elsewhere; volatility of prices for precious metals, base metals, oil and gas; commodity supply and demand; fluctuations in currency and interest rates; inherent risks associated with the exploration and development of mining properties; inherent risks associated with the exploration of oil and gas properties; ultimate recoverability of reserves; production, timing, results and costs of exploration and development activities; political or civil unrest; availability of financial resources or third-party financing; new laws (domestic or foreign); changes in administrative practices; changes in exploration plans or budgets; and availability of personnel and equipment (including mechanical problems). Accordingly, readers should not place undue reliance upon the forward-looking statements contained in this news release and such forward-looking statements should not be interpreted or regarded as guarantees of future outcomes.
Forward-looking statements regarding forward production costs and shipping and refining costs are based on current and previous mineral reserve and resource estimates, current mining and processing activities, prior experiences of management with mining and processing activities, the current development and operating plan, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change). Forward-looking statements regarding the remaining mine life of the Canatuan deposit are based on current and previous mineral reserve and resource estimates, current mining and processing activities, prior experiences of management with mining and processing activities, the current development and operating plan, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change). Forward-looking statements respecting the copper and zinc concentrate shipping schedules are based on the Company's previous experience with concentrate shipments, current mining and processing activities, current and previous mineral reserve and resource estimates, discussions to date with the off-take partner, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change).
The forward-looking statements of the Company contained in this news release are expressly qualified, in their entirety, by this cautionary statement. Various risks to which TVI and its affiliates are exposed in the conduct of their business are described in detail in the Company's Annual Information Form for the year ended December 31, 2012, which was filed on SEDAR on March 19, 2013, and is available at www.SEDAR.com. Subject to applicable securities laws, the Company does not undertake any obligation to publicly revise the forward-looking statements included in this news release to reflect subsequent events or circumstances, except as required by law.
SOURCE TVI Pacific Inc.