2009-11-12 12:41:01 -
TORONTO, ONTARIO -- (Marketwire) -- 11/12/09 -- FNX Mining Company Inc. (TSX: FNX) ("FNX" or the "Company") reports financial and operating results for the quarter ended September 30, 2009 for its Sudbury Mining Operations and its DMC Mining Services business ("DMC"). FNX's third quarter operations were impacted by the extended maintenance shutdown and ongoing labour interruption at the Company's third party processing facilities in Sudbury. This resulted in most ore produced during the third quarter going into inventory and minor revenue recognition and cash flows for the quarter. Third quarter inventory and fourth quarter production will be recognized as revenue in the fourth quarter.
The consolidated net loss for the third quarter was $58.5 million ($0.65 per share) on revenues of $18.8 million, compared to a net loss of $26.5 million ($0.31 per share) on revenues of $76.4 million in the same period of 2008. Year to date consolidated net loss totaled $72.2 million ($0.83 per share) on revenues of $129.6 million, compared to net earnings of $8.9 million ($0.10 per share) on revenues of $329.3 million for the first nine months of 2008.
The Company recorded a $57.9 million impairment to its investment portfolio this quarter. While management believes in the long-term value of its investment in Gold Wheaton Gold Corp., current accounting rules required the Company to write this investment down to its current market value. This resulted in a total impairment loss of $53.0 million being recognized for the Gold Wheaton investment and a significant loss in the Company's earnings for the third quarter.
Terry MacGibbon, Chairman and CEO of FNX noted that, "The third quarter of 2009 was particularly challenging for the Company's Sudbury Operations with nearly all production being stockpiled as inventory. Production during most of June, July and August, totaling approximately 156,000 tons, was shipped to Xstrata Nickel's Sudbury facilities for processing and revenue recognition in the fourth quarter. The Company has been shipping ore to Vale Inco's processing facilities since September and expects to continue to do so, subject to any possible labour interruptions."
Mr. MacGibbon continued, "In spite of these ongoing operating challenges, the Company expects to meet its original 2009 operating guidance. Revenue from production in both the third and fourth quarter will be recognized in the fourth quarter and cash will be received in the first half of 2010. FNX completed a net $137 million financing in the third quarter and has a strong balance sheet with approximately $258 million of cash to continue development of the high-grade LFD and take advantage of any new opportunities."
As at September 30, 2009, the Company's cash and investment portfolio totaled $409.3 million, with $258.2 million in cash and $151.1 million in investments, compared to $129.6 million and $219.6 million respectively as at December 31, 2008. Working capital at the end of the third quarter was $256.3 million, compared to $137.7 million at the end of June 2009 and $130.1 million at the end of December 2008. The Company continues to have zero debt.
Net cash flow from operating activities and adjusted EBITDA for this quarter were an inflow of $8.2 million ($0.09 per share) and a negative $1.0 million respectively, compared to a net outflow of $0.1 million ($0.00 per share) and $1.8 million respectively for the same period in 2008. Year to date cash flow from operating activities and adjusted EBITDA for 2009 were $23.6 million ($0.27 per share) and $29.2 million respectively, compared to $69.2 million ($0.82 per share) and $81.8 million respectively in the first nine months of 2008.
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Table 1 - Financial and
Operating Highlights Q3 2009 Q3 2008 YTD 2009 YTD 2008
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Consolidated
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Revenue 18,782 76,423 129,604 329,339
Net Earnings (Loss) (C$000) (58,501) (26,542) (72,199) 8,862
Basic Earnings (Loss) per
Share (C$) (0.65) (0.31) (0.83) 0.10
Diluted Earnings (Loss) per
Share (C$) (0.65) (0.31) (0.83) 0.10
Cash and Cash Equivalents
(C$000) 258,202 151,069 258,202 151,069
Cash Flow from Operating
Activities (C$000) 8,240 (127) 23,643 69,200
Cash Flow per Share (C$) 0.09 (0.00) 0.27 0.82
Adjusted EBITDA (C$000) (966) 1,845 29,184 81,771
Mining Operations
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Total Revenue (C$000) 4,601 51,178 90,282 217,693
Cash Operating Costs (C$000) 2,245 48,289 53,684 144,587
Cash Operating Margin (C$000) 2,356 2,889 36,598 73,106
Depreciation and Amortization
(C$000) 583 13,863 5,349 34,976
Operating Margin (C$000) 1,773 (10,974) 31,249 38,130
Net Earnings (Loss) (C$000) (58,220) 16,974 (69,685) 20,934
Cash Flow From Operating
Activities (C$000) 10,713 2,354 22,677 68,421
Total Ore Sold (tons) 9,302 346,987 306,369 984,651
Total Ore in Inventory (tons) 176,858 - 176,858 -
Nickel Ore Sold (tons) - 159,419 34,030 579,052
Grade of Nickel Ore Sold
(%Ni) - 1.3 2.0 1.2
Payable Metal Sold - Nickel
(000 lbs) 38 3,146 2,759 10,129
Copper Ore Sold (tons) 9,302 187,568 272,339 405,599
Grade of Copper Ore Sold
(%Cu) 2.8 3.0 3.8 3.1
Payable Metal Sold - Copper
(000 lbs) 419 9,558 17,994 23,712
Payable Metal Sold - Total
Precious Metals (oz) 997 16,379 24,944 35,233
Minesite Revenue per Ton Sold
(C$) 575 147 315 221
Cash Operating Costs per Ton
Sold (C$) 241 139 175 147
Minesite Cash Operating
Margin per Ton Sold (C$) 334 8 140 74
Realized Nickel Price
(US$/lb) 26.68 6.61 6.72 10.20
Realized Copper Price
(US$/lb) 4.99 2.93 2.17 3.43
Exchange Rate (C$ /US$) 1.10 1.04 1.17 1.02
DMC Mining Services
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Total Revenue (C$000) 14,181 25,245 39,322 111,646
Cash Operating Costs (C$000) 12,536 25,063 37,078 107,262
Cash Operating Margin (C$000) 1,645 182 2,244 4,384
Net Earnings (Loss) (C$000) (281) (9,568) (2,514) (12,072)
Cash Flow from Operating
Activities (C$000) (2,473) (2,481) 966 779
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Certain of the above items are considered to be non-GAAP performance
measures
Mining Operations
FNX's Sudbury Operations faced several major challenges in the third quarter, including Vale Inco's extended maintenance shutdown, which subsequently became a labour disruption on July 13, 2009. These events interrupted access to Vale Inco's processing facilities and resulted in the Company stockpiling ore to maintain its planned 2009 production levels. A temporary offtake agreement was signed with Xstrata Nickel, which allowed FNX to stockpile approximately 156,000 tons of ore near Xstrata's Strathcona Mill to be processed in the fourth quarter. Vale Inco subsequently requested that the Company recommence ore shipment to the Clarabelle Mill late in September. While the Company maintains its 2009 guidance, these challenges have increased ore inventories and delayed revenue recognition and cash flows creating skewed financial and operating results for the third quarter.
During the third quarter, Sudbury Operations shipped and sold only 9,302 tons of copper-precious metal ore and placed another 176,000 tons of copper-precious metal ore into inventory, compared to 347,000 tons of ore shipped in the same period of 2008. Year to date 2009, the Company shipped 306,000 tons and held 176,000 tons in inventory, compared to 985,000 tons of ore shipped and sold in the first nine months of 2008.
Total payable metals during the third quarter were 38,000 pounds of nickel, 419,000 pounds of copper and 997 ounces of platinum, palladium and gold, compared to 3.15 million pounds of nickel, 9.56 million pounds of copper and 16,379 ounces of platinum, palladium and gold in the third quarter of 2008. Year to date 2009, payable metals totaled 2.76 million pounds of nickel, 17.99 million pounds of copper and 24,944 ounces of platinum, palladium and gold, compared to 10.13 million pounds, 23.71 million pounds and 35,233 ounces respectively in the first nine months of 2008. The steep decline in payable nickel is due to the suspension of primary nickel production at the end of 2008 and the decline in payable copper is due to significant payable copper currently held in inventory.
In the third quarter, the average minesite revenue per ton of ore sold was $575, while the average cash operating cost per ton of ore sold was $241 leaving an average minesite cash operating margin per ton of ore sold of $334, compared to $147, $139 and $8 respectively in the third quarter of 2008. For the first nine months of 2009, average minesite revenue per ton of ore sold was $315, while the average cash operating cost per ton of ore sold was $175 leaving an average minesite cash operating margin per ton of ore sold of $140, compared to $221, $147 and $74 respectively in the first nine months of 2008.
The average metal prices received in the third quarter were adjusted upward as a result of provisional pricing adjustments from rising metal prices. Due to the unusually low quantities of metal sold in the third quarter, the prices that FNX received from its metal sales were unusually high on a per unit basis. The average realized metal prices were US$26.68 per pound for nickel, US$4.99 per pound for copper, US$3,314 per ounce for platinum, US$1,422 per ounce for palladium and US$1,029 per ounce for gold, compared to US$6.61, US$2.93, US$201, (US$6) and US$827 respectively in the third quarter of 2008.
The Sudbury Mining Operations and contractors during third quarter experienced zero lost time injuries and six medical aids. The Lost Time Injury Frequency Rate ("LTIFR") for this quarter was zero and the Total Medical Injury Frequency Rate ("TMIFR") was 4.9, compared to 0.8 and 9.8 respectively in the comparable period of 2008. For the first nine months of 2009, the LTIFR was 0.3 and TMIFR was 5.5, compared to 0.6 and 8.3 respectively for the same period of 2008. There were no reportable environmental incidents during the third quarter, compared to two incidents during 2008 third quarter.
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Table 2 - Production and Sales Three months ended Nine months ended
Summary Sept. 30 Sept. 30
Podolsky Mine 2009 2008 2009 2008
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Copper Ore Inventory (tons) 78,827 - 78,827 -
Copper Ore Sold (tons) 6,814 82,215 163,192 161,222
Grade of Copper Ore Sold (%Cu) 3.5 5.6 5.5 6.3
Payable Metal Sold
Nickel (000s lbs) 28 486 1,132 1,204
Copper (000s lbs) 394 6,948 15,174 16,428
TPM (ozs) 924 7,795 12,598 15,870
Metal Sales and Costs
Minesite Revenue ($/ton of
ore sold) 449 294 375 486
Cash Operating Cost ($/ton
of ore sold) 213 194 198 225
Minesite Cash Operating
Margin ($/ton of ore sold) 236 100 177 261
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Table 3 - Production and Sales Three months ended Nine months ended
Summary Sept. 30 Sept. 30
Levack Complex Q3-2009 Q3-2008 2009 2008
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Copper Ore Inventory (tons) 94,031 - 94,031 -
Nickel Ore Sold (tons) - 159,419 34,030 579,052
Copper Ore Sold (tons) 2,488 105,353 109,147 244,377
Total Ore Sold 2,488 264,772 143,177 823,429
Grade of Nickel Ore (%Ni) - 1.3 2.0 1.2
Grade of Copper Ore (%Cu) 0.8 0.5 1.3 0.4
Payable Metal Sold
Nickel (000s lbs) 10 2,660 1,627 8,925
Copper (000s lbs) 25 2,611 2,820 7,284
TPM (ozs) 73 8,584 12,346 19,363
Metal Sales and Costs
Minesite Revenue ($/ton of
ore sold) 921 102 245 169
Cash Operating Cost ($/ton
of ore sold) 319 122 148 132
Minesite Cash Operating
Margin ($/ton of ore sold) 602 (20) 97 37
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Development
Driving the access ramp at the LFD continued to be the priority development activity for the Company in the third quarter. The access ramp progressed from the 3500 Level to just above the 3700 Level, representing approximately 1,000 ft of new development. This advance leaves roughly 1,700 ft of additional advancement required in order to break into the existing 4000 Level crosscut from Xstrata's Craig Mine. Significant pre-production development also occurred on the 3180 and 3450 levels. Current development of the access ramp has provided drill platforms for close-spaced definition drilling to support mine planning and resource estimates. An access drift at the 3450 Level was driven to the bottom of a planned fresh ore raise and the raise development will be started in October. Work is currently underway to increase the trucking capacity on the access ramp.
Other significant development work at the Levack Complex consisted of 2,236 ft of drifting at McCreedy West to support current and future production.
Development at the Podolsky Mine during the quarter focused on advancing the main access ramp and further lateral development. Total advancement during the third quarter was 1,482 ft, which included main access ramp development above the 2225 Level and lateral work at the 2000 and 2225 levels. The main access ramp remains on schedule for internal connection late in 2009, which will support access on all levels for future production. Capital work on the backfill plant and system was completed during the third quarter.
Capital expenditures during the third quarter totaled $16.2 million, including LFD development at $8.8 million, Podolsky at $2.9 million, Levack Complex at $1.2 million, $3.1 million on other exploration properties and $0.2 million on corporate and DMC. Year to date capital expenditures totaled $43.9 million, including $26.6 million on LFD development, $9.5 million at Podolsky, $3.7 million at the Levack Complex, $4.0 million on other exploration properties and $0.1 million for corporate and DMC.
Exploration
Mine geology in the third quarter focused on the LFD and Podolsky Mine development. At the former, four drills were engaged in detailed definition of the LFD between the 3050 and the 3650 levels. A total of 27,029 ft was drilled in 138 holes on the LFD during the third quarter, bringing year to date footage on the LFD to 66,576 ft. Additional drilling during this quarter tested for footwall mineralization up-dip from the LFD and below the historic Main Nickel Orebody. Narrow, footwall mineralization was encountered.
At McCreedy West, two drills supported production planning in the PM and 700 deposits. In total during the quarter, 14,350 ft were completed in 79 holes bringing the year to date total to 52,516 ft in 288 holes.
Two underground drills were active during the third quarter at Podolsky. Third quarter drilling totaled 16,864 ft in 65 holes, bringing year to date drilling to 42,891 ft in 169 holes. The focus shifted during the third quarter from defining 2009 mining blocks to 2010 mining plans and beyond. A compilation and re- interpretation of the 2000 Deposit is underway targeted for completion at the end of 2009 in time to be used in the year end reserve and resource estimates. Also at Podolsky, surface drilling was initiated in early July and was focused on four different targets, including deepening a hole below the 2000 Deposit, two footwall targets located to the west of the Whistle Pit to test a Sudbury Breccia unit and a geophysical target located east of the Whistle Offset Dyke. Total surface drill footage completed or in progress at Podolsky during the quarter was 12,260 ft in five holes.
The flow-through budget for 2009 is approximately $6.2 million with the balance of the original $15.0 million in flow-through funds budgeted for 2010. The initial focus of flow-through activity was at the Victoria Property, where three surface drill-rigs were testing the Worthington Offset Dyke structure. The Victoria property contains numerous favourable Quartz Diorite related exploration environments, including the southern extent of the Worthington Offset Dyke. During the third quarter, two additional surface drill rigs were mobilized onto the Victoria Property to accelerate testing of the multiple targets. Total drilling at Victoria in the third quarter was 29,239 ft, including five holes currently in progress.
DMC Mining Services
Revenues from DMC totaled $14.2 million for the three months ended September 30, 2009, compared to $25.2 million for the third quarter of 2008. Year to date revenues were $39.3 million, compared to $111.6 million in the first nine months of 2008. Contract operating costs for the third quarter and year to date were $12.5 million and $37.1 million respectively.
The cash operating margin in this reporting quarter, calculated as the operating revenues of DMC less operating costs and excluding depreciation and amortization, was $1.7 million, compared to $0.2 million in the same period of 2008. For the nine months ended September 30, 2009, operating margin was $2.2 million, compared to $4.4 million for the first nine months of 2008.
The loss for DMC in the third quarter was $0.3 million, compared to a loss of $9.6 million for the comparable period in 2008, while the loss for the nine months ended September 30, 2009 was $2.5 million, compared to $12.1 million for the first nine months of 2008.
The operating cash flow for this quarter was $1.0 million, while the net cash flow from operating activities for this reporting period was an outflow of $2.5 million.
Employees at DMC experienced zero Lost Time Injuries and four Medical Aid Injuries during this quarter for a LTIFR and TMIFR of zero and 6.6 respectively, compared to zero and 0.5 for the same period in 2008.
As at September 30, 2009, DMC had a work backlog of approximately $26.9 million, the majority located in the United States. Approximately $14.4 million of the work backlog is scheduled to be earned in 2009. As part of the normal course of business, DMC regularly sources new clients and contracts to replace expiring contracts. DMC Management continues to actively pursue new opportunities on an ongoing basis.
Investments
Investment impairments totaled $57.9 million in the third quarter of 2009, compared to $nil in the second quarter of 2009 and $10.0 million the third quarter of 2008. The impairments were recorded due to the other-than-temporary decline in the market value experienced by the Company's investment portfolio over the last twelve month period.
FNX evaluates its available-for-sale investments for evidence of impairment under CICA 3855, Financial Instruments - Recognition and Measurement. Under the impairment tests, it was determined that an other-than-temporary impairment exists with respect to FNX's investments in certain junior exploration companies as at September 30, 2009. As a result, these investments were written down to their market values at the balance sheet date, with the impairment loss of $4.9 million being recognized on the Statement of Operations.
FNX accounts for its investment in Gold Wheaton using the equity method and is, therefore, required to include in earnings FNX's share of Gold Wheaton's income or loss for the period, and the Company's investment therein is adjusted by an equivalent amount. For the quarter ended September 30, 2009, FNX's 25.6% share of Gold Wheaton's loss, was $0.5 million, compared to a loss of $1.0 million in the third quarter of 2008.
FNX evaluates its equity accounted investment in Gold Wheaton for evidence of impairment under CICA 3051, Investments. Under the required impairment tests, it was determined that an other-than-temporary impairment exists with respect to FNX's investment in Gold Wheaton as at September 30, 2009. While management believes in the long-term investment value of Gold Wheaton, accounting rules require that the investment be written down to its fair value, which was considered to be the market value at the Balance Sheet date with total impairment losses of $53.1 million being recognized in the Statement of Operations. At September 30, 2009, the market value of FNX's 360 million Gold Wheaton shares was approximately $95.4 million.
Share Capital and Warrants
During the third quarter of 2009, share capital and warrants increased by $138.7 million as a result of the issuance of 14,950,000 common shares in the bought deal which closed on September 9, 2009, net of transaction costs and taxes and the issuance of 7,475,000 warrants to purchase one common share at a price of $13.00 per share at any time prior to September 9, 2012. Year to date share capital has increased by $153.2 million as a result of the aforementioned bought deal, the exercise of 12,500 stock options and the issuance of 2,173,914 flow-through shares in April. As at September 30, 2009, outstanding shares were 102,013,190 and stock options to purchase 3,589,167 common shares at a weighted average of $13.42 per share were outstanding. Including 327,432 outstanding deferred share units, the fully diluted share total was 113,404,789 as at September 30, 2009.
Forward-Looking Statement
Certain information included in this press release, including information relating to future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements." Such forward-looking statements include, without limitation, (i) estimates of future capital expenditures; (ii) estimates regarding timing of future development and production; and (iii) estimates of future costs towards profitable commercial operations. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, interpretation and implications of drilling and geophysical results; estimates regarding timing of future capital expenditures and costs towards profitable commercial operations. Other factors that could cause actual results, developments or events to differ materially from those anticipated include, among others, increases/decreases in production; volatility in metals prices and demand; currency fluctuations; cash operating margins; cash operating cost per pound sold; costs per ton of ore; variances in ore grade or recovery rates from those assumed in mining plans; reserves and/or resources; the ability to successfully integrate acquired assets; operational risks inherent in mining or development activities, and legislative factors relating to prices, taxes, royalties, land use, title and permits, importing and exporting of minerals and environmental protection. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as may be required under applicable securities law. For a more detailed discussion of such risks and other factors, see the Company's latest filings with Canadian securities regulators.
Conference Call
FNX will be hosting a third quarter conference call on November 12, 2009 at 10:00 am Eastern Time.
###PRECONTENT2### Note: The unaudited balance sheet, statement of operations and statement of cash flow are appended to this news release.
###PRECONTENT3###
Contacts:
FNX Mining Company Inc.
Terry MacGibbon
Chairman and Chief Executive Officer
416-628-5929
FNX Mining Company Inc.
Ronald P. Gagel
Senior Vice President and Chief Financial Officer
416-628-5929
FNX Mining Company Inc.
David Constable
Vice President Investors Relations
416-628-5929
info@fnxmining.com :
www.fnxmining.com :
