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Thanks for thwe update Bobwins.
Sounds like a delay in the 43-101 to include more drilling at the Hinge zone. I guess that means they keep sending out drill results. AGM is next wek so we may find out more then if they have made an official decision.
Thanks again for taking the time for those of us who could not be there.
JFF7
BOBwins - Vancouver show
Questions for Dale Ginn of SGR: do they plan to develop the Hinge zone before Cartwright? Can they start processing high grade ore from the Rice Lake mine this next qtr? Do they want to include results from the Hinge Zone in the 43-101 before relasing the update?
Great grades being found but show me some production.
JFF7
MSGI, maybe I noticed subconsciously. Maybe I should have gone with 7's.
oh well, if I win, I'll give him half the credit.
JFF7
I took his numbers? Didn't see any guess from him but I did see the notes about "where is Hank".
I was thinking it is all about China these days and how 8 is a lucky number according to them so why not go with the 8s. But I was thinking about the conversations over dinner we had with Hank and his wife in Vegas when I made those picks. Interesting.
JFF
"Markets can remain irrational longer than you can remain solvent". - John Maynard Keynes
oil 88 gold 888 12888
JFF8
Copper Down for the Count or Getting It's Second Wind?
A couple of interesting articles on copper. I'm not ready to give up on it quite yet. Usuing this pullback to accumulate again. Lowball bids only. Expect copper to prices to firm up in the third qtr.
http://www.proactiveinvestors.co.uk/articles/art.php?DME3
http://uk.reuters.com/article/idUKL0538386820080605
JFF7
QUA.TO warrants
Can't believe people were selling their warrants in the low 6 dollar range today. Managed to snag a few. Just sold my trading warrants a couple of weeks ago at 9.90 which I thought was pretty cheap.
JFF7
SGR.V : Bobwins / Kipp
If I could add my two cents in on San Gold.
I am in complete agreement with BW's assessment of management to date. Focus has been on proving up reserves (8 drills a' drillin'). Poured their first gold in Aug 06 if I remember correctly but production has been very weak despite having a 1200 tonne / day mill on site available.
A couple of things may have changed recently though.
- they recently hired the general manager from Sherwood as COO to start focusing on improving production. Sherwood has a reputation of getting their mine up and operating profitably quickly. One man will not turn things around by himself but he can certainly get things started.
- the last set of drill results (some of which showed 2.5 ounces per tonne) are from the "Hinge zone" which is not part of their very deep regular mine. These results are from about 100 feet down. It will mean a new mine but it is on the same property very close to the other mines (total of 7 in the area that they own).
As well, a new 43-101 is long overdue but should be coming out soon. It should prove reserves at 2 million or more (in a few years they should be able to prove up 6-10 million ounces). The new 43-101 could possibly be out in time for the annual meeting June 23 (again from memory which isn't that sharp anymore). That supposedly was their target before they start focusing on production.
I already own shares but may add on any pullback below 1.50. The intention would be to hold for a while though. I don't think there is any quick flips to be made here. In the right hands maybe but this management team operates as though it is only a matter of time before someone buys them out. And they seem pretty patient.
I believe this is a world class property that will be proven out overtime but management is in no hurry.
They hit a new 52 week high today (1.73) on some good drill results from the Hinge zone. I believe they have results from a couple more holes to announce that were taken from the same zone at the same time. These should come out in the next week or two.
The other factor to be aware of is that Ned Goodman owns a good chunk of this company through his various companies. He has a good reputuation of zeroing in on great properties. But he also uses his companies to make money on the way up while he is waiting so the share price can be subject to some wild swings.
JFF7
I will be attending the one in Vegas again in November. hope to see some of you there like last time.
JFF7
GORO - Listing
Does Goro still plan on listing on the TSX or AMEX? If so, did they provide an expected timeframe?
JFF7
how do you get to a value of 100 per share. I'm a big QUA holder and even I don't see that sort of value right now. Maybe in 5 years when Sierra and Malmberg could be producing.
The market does not reward junior mining companies for potential that is years and hundreds of millions of dollars in the future. For example Sierra Gorder. what if they don't get the water right they need to make it happen. What if they get the water rights and the water sources dry up. Isn't water a resource that is quickly drying up around the world. What about power problems? What about the long term price of copper. Will it hold for that far out?
Mining is a boom or bust business and these projects are too far out to give them any value. Heck , look how much time it has taken the market to gove some value to Carlotta and how little value it is given at that.
Just my two cents.
JFF7
Board composition
I agree with those keeping separate boards and with Hank saying we should but the symbol name at the begining of the first line.
I don't always have time to read all three boards so i go to the one that is a priority at that time. This ia a big bonus to me of having them separate.
On the other hand if the board administrators have a harder time dealing with three boards instead of one board, I would say they should be allowed to save themselves the work and consolidate.
JFF7
It's good for AZC to be on AMEX if you are going to trade it but I wouldn't own something at this point that is so far away from production. I prefer producers expanding production or near term producers. Possible taken over candidate for QUA?
JFF7
WEX
The problem with this one isn't that it is a bad story as it is a very long story. I continue to hold and fully expect I will see the return I expected but it is taking a lot longer than I originally signed on for.
Development work of the mine is much bigger job than originally thought. Devloping the mine at the same time as they work it prevents them from declaring earnings and from gearing up to full production but it also prevents a lot of dilution for WEX and GPXM who are both cash strapped.
The GPXM management running Ashdown is excellent and the price of Moly is steady for the foreseebale future, and they are demonstrating progress on getting production levels up.
JFF7
Interesting about Brant purchasing.
Also interesting that Anonymous is selling. I always thought Anonymous was reserved for institutions that wanted to buy or sell without others knowing who they were. Are individuals able to use this Anonymous cover? Does WEX even have any institutional holders?
JFF7
Doesn't Liberty Mines (LBE) sell their nickel output to Jinchuan as well?
JFF7
Doesn't Liberty Mines (LBE) sell their nickel output to Jinchuan as well?
JFF7
Got this from a recent Creston Moly PR
"The objective of the ongoing infill drill program is to upgrade the existing inferred resources to the indicated category and to delineate the boundaries of the Main Molybdenum Zone deposit."
Is this the same objective that GPXM is after?
JFF7
Seems like people are starting to figure out exactly how much WEX is worth. Glad I started switching over to GPXM. Down 18% today. Maybe word of the arbitration going GPXM's way is leaking out?
Sounds like from the latest press releases that Ashdown is a few months away from getting the mill up to full 100 tpd. Does anyone have any ideas of what it will take equipment wise and cost wise to move the mill up to 200 TPD?
What will the infill drlling that starts up soon at Ashdown do for us?
I think it is important that Ashdown pay for as much of the cost of Mineral Ridge development as popssible so that the debt or additional shares needed is kept to a minimum.
JFF7
Bobwins - PBG
What's your take on why the share price on PBG has been so sluggish lately? Is this just normal consolidation or it market sentiment taking a "show me" approach on THAI / Capri?
TIA
JFF7
I stand by what I said.
JFF7
"Why would an insider buy shares when they can just grant more options "?
An insider buying shares on the open market is considered a positive signal by investors and may encourage more to buy and maybe the share price rises. If an insider has some stock options expiring, he can buy some shares on the open market in the hope of driving the share price up and then selling his shares at a higher price after from exercising his options.
JFF7
"Something BIG is brewing. "
as long as it is not the share count.
JFF7
Good day to have San Gold (SGR), Up 9% today.
No news but there was a 2.25 million cross in the middle of the day and rumors that somone is kicking the tires. I am becoming more convinced that they have every intention of selling out to someone. Their focus is largely on drilling and proving up resources. No much focus on producing. No other possible excuses for not delivering.
JFF7
"How can analysts be saying this is a bubble when there is verifiable supply issues. Until Supply = Demand the commodities are going higher."
I tend to agree with you on the long haul but the most recent run up in BM prices was as much driven by speculative institutional money as supply / demand issues. That money spigot is slowing so down now so we should expect some pullback even if short term only.
JFF7
Strictly speaking you would reduce it by 23.75%, not 9.5%
(40% interest - 9.5% interest is a reduction of 23.75%)
JFF7
ramp up to 200 tonnes per day? this is the forst I have heard of any mention of 200 tonnes per day. Am I the last to hear?
JFF7
Agreed.
I will happily put up with a little censorship in return for a non-clutered board. I think it is pretty easy to establish the intent of some of these posters after only a few posts.
The moderators are not saying dissenting opinions will be deleted. Valid criticism should be welcome.
JFF7
Your right, that will cost WEX about 1.3 million dollars (for their 40% (or 2/3 of the 1.9 million GPXM is putting up)) to come up with their share.
Maybe they will finally have to sell some more shares (something they hate to do).
JFF7
cl001
Holding Wex must be driving you crazy. It is going to be a good one but it is definitely a hold and mold. There is still a lot of development work to do before they get to the kind of profitability that they can.
Need a lot of patience with this one. Almost as much as I need with SGR.
JFF7
QUA Q4 earnings results - .15 per basic share
no doubt there will be some pain tomorrow. But basically they delivered on their annual guidance and more. Was disappointed that a decision on Malmberg has moved to the 2nd qtr now. Still going to hold long term but there will be opportunities to pick up cheap. Q1 should be very nice with the carry over.
Posted by Tobinator on IV RNO board.
QUA earnings on SEDAR. $0.15 in Q4. $2.80 for the year....
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR AND FOURTH QUARTER ENDED DECEMBER 31, 2007
The following Management Discussion and Analysis (“MD&A”) of Quadra Mining Ltd. and its subsidiaries
(“Quadra” or the “Company”) has been prepared as at February 19, 2008 and is intended to be read in conjunction
with the accompanying audited consolidated financial statements for the year ended December 31, 2007. This
MD&A contains ‘forward looking information’ and reference to the cautionary statement at the end of this MD&A
is advised. Additional information relating to the Company, including its Annual Information Form, is available on
the SEDAR website at www.sedar.com. The Company is a reporting issuer in all provinces and territories of
Canada and its common shares are traded on the Toronto Stock Exchange under the symbol: QUA.
All financial information in this MD&A is prepared in accordance with the Canadian Generally Accepted
Accounting Principles and all dollar amounts are expressed in thousands of United States dollars unless otherwise
indicated.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Quadra is a mining company that owns and operates the Robinson copper mine (“Robinson Mine”) near Ely,
Nevada. In addition, Quadra holds a 100% interest in the Carlota Copper Project (“Carlota”), a heap leach - SX/EW
copper project under construction in Arizona. The Company has an option to purchase the Sierra Gorda project
(“Sierra Gorda”), a late stage exploration property near Antofagasta, Chile. The Company also owns an 82%
interest in International Molybdenum Plc. (“InterMoly”) which holds the rights to the Malmbjerg molybdenum
project (“Malmbjerg”) in Greenland. The strategic plan of the Company includes growth by optimising operations,
developing projects, and pursuing merger and acquisition opportunities.
2007 AND FOURTH QUARTER HIGHLIGHTS:
• Earnings for the year ended December 31, 2007 were $136,412 or $2.80 per share (basic) compared to earnings
of $14,433 or $0.40 per share (basic) in 2006.
• The Company exceeded its 2007 production guidance of 125 million pounds of copper and 90,000 ounces of
gold by producing 131.9 million pounds of copper and 108 thousand ounces of gold.
• The Robinson Mine generated net revenue of $494 million in 2007 from the sale of 134.2 million pounds of
copper and 108 thousand ounces of gold in concentrates compared to net revenue of $393 million generated
from the sale of 117.8 million pounds of copper and 70,000 ounces of gold in 2006.
• Fourth quarter 2007 revenues were $82 million and were lower than previous quarters in 2007 as a result of
adjustments to provisional prices recorded in the third quarter, the lower realized price of copper in the fourth
quarter, and timing of shipments through the year.
• The Company generated cashflow from operating activities (before working capital changes)* of $163 million
in 2007 compared to $18.1 million in 2006.
• Cash and cash equivalents at December 31, 2007 was $263.6 million compared to $47.8 million at December
31, 2006.
• The cash cost per pound of copper produced* was $1.49 per pound in 2007 compared to $1.74 in 2006.
• Construction at Carlota continued on schedule and on budget with commencement of copper production
anticipated in the second half of 2008.
• The Company continued its strategic growth plan in 2007 with the acquisition of an 82% interest in
International Molybdenum Plc (“InterMoly”), holder of the rights to the Malmbjerg molybdenum project.
• The Company continued to advance the Sierra Gorda Project in Chile, announcing successful drill results and
the acquisition of water rights.
• Due to a strong focus on safety and training at Robinson the Total Recordable Injury Rate has been reduced
from 2.6 in 2006, to 1.0 for 2007 (2007 U.S. National Average is 3.3).
• In 2007 the Company was added to the S&P/TSX Composite Index.
2
* The cash cost per pound of copper produced, and offsite costs and onsite costs are non-GAAP financial measures that do not
have a standardized meaning under Canadian Generally Accepted Accounting Principles (“GAAP”), and as a result may not be
comparable to similar measures presented by other companies. The cash cost per of copper produced consists of onsite and
offsite costs, less by-product revenue, divided by the pounds of copper produced in the period. Onsite costs consist of mining
costs, equipment operating lease costs, mill costs, mine site generaland administration costs, royalties and environmental costs.
For financial statement reporting purposes, royalties are reported separately from cost of goods sold. Offsite costs consist of
transportation, smelting and refining of concentrate. For financialstatement reporting purposes, smelting and refining costs are
netted against revenues. Cashflow from operating activities (before working capital changes) is also not a defined term under
GAAP, and consists of cash provided from operating activities less net changes in non-cash working capital.
FINANCIAL PERFORMANCE
Earnings
Earnings for the year ended December 31, 2007 were $136,412 or $2.80 per share (basic) compared to earnings of
$14,433 or $0.40 per share (basic) in 2006. The increased earnings in 2007 result from higher sales volumes from
the Robinson mine, increased metal prices, and lower derivative losses in 2007 as the Company settled its remaining
forward sale contracts in the first half of the year.
For the fourth quarter of 2007, earnings were $7,990 or $0.15 per share (basic) compared to earnings of $50,960 or
$1.34 per share (basic) in the fourth quarter of 2006. Earnings in the fourth quarter of 2007 were impacted by the
declining copper price across the quarter and by the lower sales volumes due to the timing of shipments (see section
below “Fourth Quarter Revenues”). The copper price fell from $3.66/lb. on September 30, 2007 to $3.04/lb. at
year-end resulting in adjustments to provisional sales prices recorded in the third quarter and lower provisional
prices for fourth quarter shipments.
The reduction in earnings in the fourth quarter of 2007 as compared to 2006, is also related to a gain on derivatives
recognized in the fourth quarter of 2006 on the Company’s forward sale contracts, due to the falling copper price in
that period.
Operating income for 2007 increased to $216,766 from $154,208 in 2006, due to increased production and higher
sales volumes from the Robinson mine, and higher average metal prices.
Revenues
All of the Company’s revenues are generated by the Robinson Mine. Revenues from sales of concentrate are
generally recognized at the time of shipment based on metal prices at that time; however, final pricing is not
determined until a future date.
In 2007, revenues from concentrate sales were $493,848 compared to $393,257 in 2006. The increase is primarily
due to increased production of copper and gold and higher average metal prices in the current year. In 2007, the
Company sold 134.2 million pounds of copper and 108 thousand ounces of gold, compared to 117.8 million pounds
of copper and 70 thousand ounces of gold in 2006. Revenues in 2007 were also positively impacted by a $18
million reduction in refining and treatment charges (which are netted against revenues on the statement of
operations).
Fourth Quarter Revenues
Quarterly revenues are driven by sales volumes and copper prices. Fourth quarter revenues in 2007 were $81,667
and were impacted by a lower copper price in the quarter, associated negative pricing adjustments to third quarter
shipment receivables, and by lower sales volumes than in the previous quarters of 2007.
3
Copper Production
(million lbs.)
Copper Sales
(million lbs.)
Copper Price at
Quarter-end (per lb.)
First quarter 2007 36.6 40.5 $3.12
Second quarter 2007 32.4 32.3 $3.47
Third quarter 2007 30.7 32.5 $3.66
Fourth quarter 2007 32.4 28.9 $3.04
Total 132.1 134.2
Under the Company’s current sales contracts, final pricing for copper sales is generally set at least four months after
the time of shipment. Quarterly revenues include estimated prices for sales in the quarter, based on copper prices at
quarter-end, as well as pricing adjustments for sales that occurred in previous quarters, based on the actual price
received. There was a significant reduction in the price of copper at the end of the fourth quarter as compared to the
third quarter, reducing the value of the copper sold, but only provisionally priced.
At September 30, 2007, the end of the previous quarter, receivables included approximately 42.5 million pounds of
copper provisionally valued at $3.66 per pound. During the fourth quarter, 31.8 million pounds of copper that was
provisionally valued at September 30, 2007 was settled at an average final price of $3.24 per pound. Fourth quarter
revenues in 2007 include negative pricing adjustments of $19,821 related to third quarter sales. In the fourth
quarter, the Company shipped approximately 28.9 million pounds of copper at an average provisional price of $3.21
per pound. At December 31, 2007, receivables include 38.2 million pounds of copper which has been provisionally
valued at $3.04 per pound, based on copper prices at year-end. As at February 19, 2008 the copper price was $3.66
per pound.
Copper production and copper sales were substantially in line for the year. However in the fourth quarter, sales
volumes were lower than production due to the timing of shipments.
Cost of Sales and Expenses
Cost of sales increased to $232,951 in 2007 from $206,910 in 2006, primarily due to the increase in sales volumes in
the current year. Amortization, depletion and depreciation increased to $13,832 in 2007 from $11,260 in 2006,
which is also primarily due to the increase in sales volumes in the current year.
Royalties and mineral taxes increased to $27,780 in 2007 from $18,720 in 2006. This increase in royalties and
mineral taxes is primarily due to higher metal prices and increased production in the current year. In addition, in the
first half of 2006, royalty costs of $3,677 were paid into a trust for qualified rehabilitation expenditures, and
therefore did not impact the statement of operations.
General and administrative expenses increased to $10,274 in 2007 from $7,516 in 2006, due to increased activities
at the corporate office.
The Company settled all of its remaining copper and gold forward contracts in the first six months of 2007. There
were no forward sale contracts in place during the third and fourth quarter of 2007. The loss on derivatives for 2007
was $15,293 compared to $151,383 in 2006, and primarily relates to these forward sale contracts. The 2007 loss on
derivatives also includes much smaller amounts related to copper put options, a take or pay fuel contract, and an
interest rate cap contract (see Financial Instruments and Other Instruments).
Stock-based compensation expense increased to $5,386 in 2007 from $2,399 in 2006, due to an increase in the
number of options granted and the increase in the fair value of each option. The loss on settlement of debt of
$11,039 relates to the second lien secured credit facility which was retired in June, 2007 (see Liquidity and Capital
Resources). The Company realized a foreign exchange gain of $6,475 in 2007 compared to a loss of $106 in 2006.
The proceeds of the May 2007 equity financing were denominated in Canadian dollars and the Company has
benefited from a strengthening Canadian dollar since then. Net interest and other income totalled $3,948 in 2007
compared to a loss of $616 in 2006, primarily related to the increased interest income from higher cash balances in
2007.
In 2006, the Company earned a termination fee of $24,194 related to an option agreement with AMP Life Limited,
the major shareholder of Equatorial Mining Limited, as a result of the Company’s unsuccessful attempt to acquire
4
all of the issued and outstanding common shares of Equatorial. The Company incurred total fees and costs of
$9,820 related to this transaction, resulting in a net gain of $14,374 in 2006.
The Company recorded an income tax expense of $48,785 for 2007 compared with a recovery of $7,871 in 2006.
The 2007 tax expense has been recorded based on an annual effective tax rate of 26%.
Fourth Quarter Cost of Sales and Expenses
In the fourth quarter of 2007, cost of sales was $55,358 compared to $58,673 in the fourth quarter of 2006, a
decrease that is consistent with the lower revenue recognized in the current quarter due to the timing of shipments.
The loss on derivatives in the fourth quarter of 2007 was $772 and related to copper put options, a take or pay fuel
contract, and an interest rate cap contract (see Financial Instruments and Other Instruments). In the fourth
quarter of 2006, the Company recorded a gain on derivatives of $28,362 which related to forward sale contracts and
the result of a falling copper price in that period.
SELECTED ANNUAL INFORMATION
2007 2006 2005
Statement of operations ($000's)
Revenues 493,848 393,257 228,235
Earnings (loss) 136,412 14,433 (13,423)
Basic earnings (loss) per share $ 2.80 $ 0.40 $ (0.49)
Diluted earnings (loss) per share $ 2.72 $ 0.39 $ (0.49)
Financial positions ($000's)
Total assets 789,219 335,966 250,642
Total long-term financial liabilities 213,724 37,061 50,478
Dividends n/a n/a n/a
5
SUMMARY OF QUARTERLY RESULTS
The following table summarizes the operating results of the most recent eight quarters (unaudited):
$000's Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Statement of Operations
Revenues - initial provisional price 1 10,012 127,985 129,832 1 27,533 1 17,300 8 3,253 115,353 8 1,497
Revenues - price adjustments ( 22,215) 12,847 17,766 1 9,330 ( 9,912) ( 5,474) 42,629 1 5,412
Refining and treatment charges ( 6,130) ( 6,245) ( 6,459) (10,408) ( 8,215) ( 9,856) ( 15,757) (12,973)
Revenues - total* 8 1,667 134,587 141,139 1 36,455 9 9,173 6 7,923 142,225 8 3,936
Operating income 1 4,649 64,527 72,618 6 4,972 3 0,713 2 4,005 72,431 3 3,181
Earnings (loss) before income taxes 1 0,810 63,739 50,772 5 9,876 5 6,375 2 6,960 ( 31,696) (45,076)
Earnings (loss) 7 ,990 48,755 36,556 4 3,111 5 0,960 2 0,634 ( 21,997) (35,163)
Basic earnings (loss) per share $ 0 .15 $ 0.90 $ 0.78 $ 1 .13 $ 1 .34 $ 0 .55 $ ( 0.59) $ (1.15)
Diluted earnings (loss) per share $ 0 .14 $ 0.86 $ 0.76 $ 1 .12 $ 1 .32 $ 0 .54 $ ( 0.59) $ (1.15)
Financial Position
Cash 2 63,586 285,210 278,462 2 24,252 4 7,774 3 7,864 50,211 2 4,421
Total Assets 789,219 758,900 687,457 5 31,266 3 35,966 328,426 347,894 3 08,182
Total Liablities and non-controlling interest 290,840 270,671 263,687 3 18,461 1 70,850 214,592 259,062 2 03,468
Shareholders' equity 498,379 488,229 423,770 2 12,805 1 65,116 113,834 88,832 1 04,714
Production Statistics - Robinson mine
Copper production (million lbs) 32.4 30.7 32.2 3 6.6 35.3 33.3 27.8 2 5.0
Copper sales (million lbs)* 28.9 32.5 32.3 4 0.5 34.1 19.6 33.1 3 1.0
Average provisional price per pound $ 3.21 $ 3.46 $ 3.43 $ 2 .66 $ 3.25 $ 3.39 $ 3.14 $ 2 .21
Gold production (ozs) 27,048 24,138 25,893 3 1,040 27,646 20,425 12,532 1 4,471
Copper grade (%) 0.59 0.66 0.59 0 .67 0.67 0.69 0.52 0 .53
Gold grade (g/t) 0.38 0.39 0.36 0 .46 0.41 0.32 0.24 0 .27
Copper recovery 66.1% 58.1% 74.1% 75.0% 61.0% 63.4% 70.3% 69.5%
Gold recovery 59.2% 52.5% 64.0% 63.1% 53.7% 57.9% 47.5% 54.5%
Total onsite and offsite costs 73,164 68,940 69,397 6 6,090 64,166 67,219 67,979 6 2,622
2006
SUMMARY OF QUARTERLY RESULTS
2007
* Revenues from sales of concentrate are recognized at the time of delivery which is generally upon loading of a
ship at the port of Vancouver, Washington. Due to the timing of shipments, the amount of product sold in a
quarter may differ from quarterly production volumes at the Robinson Mine in Ely, Nevada. Revenues are
initially recognized based on metal prices at the time of shipment; however, final pricing is not determined until a
future period. Price adjustments are recorded at each quarter-end prior to final settlement.
The quarterly performance of the Robinson Mine varies as a result of changes in head grade, metal recovery and
waste stripping requirements. Due to the complex nature of the Robinson ore body, volatility in metal prices, and
industry cost pressures the results have varied from quarter to quarter, and are expected to vary from quarter to
quarter in the future.
Quarterly earnings during 2006 and the first two quarters of 2007 were impacted by derivative losses and gains
related to outstanding forward sale contracts for copper and gold. There were no forward sale contracts in place
during the third and fourth quarter of 2007.
In the third quarter of 2006, the Company recorded a net gain of $14 million from a termination fee related to the
Company’s unsuccessful attempt to acquire Equatorial Mining Limited.
The increased cash balance in the first and second quarters of 2007 is related to debt and equity financings that were
completed in these periods (see Liquidity and Capital Resources).
6
REVIEW OF OPERATIONS AND PROJECTS
ROBINSON MINE (NEVADA)
Fourth Quarter Year
2007 2006 2007 2006
Copper production (Million lbs) 32.4 35.3 131.9 121.4
Gold production (ozs) 27,048 27,646 108,119 75,074
Waste mined (Tonnes 000’s) 13,600 13,964 59,296 59,212
Ore mined (Tonnes 000's) 3,451 4,121 14,380 15,281
Ore milled (Tonnes 000’s) 3,753 3,919 14,171 13,860
Onsite costs $ 57,273 $ 46,250 $ 209,071 $ 181,962
Offsite costs $ 15,891 $ 17,916 $ 68,523 $ 80,024
Total costs $ 73,164 $ 64,166 $ 277,594 $ 261,986
Capital expenditure $ 6,127 $ 4,100 $ 24,150 $ 11,555
By product credits
- Gold and silver $ 20,925 $ 16,441 $ 78,454 $ 44,100
- Molybdenum $ 1,132 $ 334 $ 2,868 $ 6,075
Copper grade (%) 0.59 0.67 0.63 0.61
Gold grade (g/t) 0.38 0.41 0.40 0.31
Copper recovery 66.1% 61.0% 67.4% 65.4%
Gold recovery 59.2% 53.7% 59.7% 53.6%
Mill Operating Time 95% 95% 92% 90%
During 2007 a total of 73.7 million tonnes of ore and waste were mined from the Veteran area of the Tripp–Veteran
pit. Copper production in 2007 was 131.9 million pounds, compared to 121.4 million pounds in 2006. The
increased copper production in 2007 is a result of increases in head grade, recoveries and mill throughput. The
understanding of how to adjust to the variations within the deposit, together with continuous improvement activities,
have resulted in better performance with respect to throughput, recovery and concentrate grade.
Gold production has exceeded expectations in 2007 increasing to 108,119 ounces from 75,074 ounces in 2006. The
increase in gold recoveries and production in 2007 is primarily due to a higher gold head grade than that predicted
by the block model. Technical studies, including re-assays of existing samples, are still underway to evaluate
methods of improving the gold grade estimated in the Veteran pit.
Copper production in the fourth quarter was 32.4 million pounds compared to 35.3 million pounds in the fourth
quarter of 2006. Gold production in the fourth quarter of 2007 was 27,048 ounces compared to 27,646 ounces in
2006. The reduced copper production is a result of lower head grades as mining activities moved as planned into
lower grade material that was predicted to occur in the fourth quarter of 2007.
Robinson Operating Costs
Operating costs are comprised of onsite and offsite costs. Onsite costs are primarily driven by the volume of waste
and ore moved, payroll costs, equipment maintenance costs, and royalties. Onsite costs in 2007 were $209,071
compared to 181,962 in 2006. The increased costs in 2007 primarily relate to a $5.2 million cost increase for tire
replacements on haul trucks, an increase of $7.6 million for scheduled replacements of major components on mining
equipment, and an additional $7.3 million of royalty costs. Royalty costs are higher in 2007 as a result of increased
production, higher metal prices, and the impact of royalty costs now being fully payable (see “Costs of Sales and
Expenses”). Onsite costs in the fourth quarter of 2007 were $57,273 compared to $46,250 in the fourth quarter of
2006. This increase is also related to tire costs and the replacement of major components on mining equipment
scheduled for the fourth quarter 2007.
Offsite costs are primarily driven by smelting and refining charges, the volume of concentrate transported, and rail
and ocean freight rates. Offsite costs in 2007 were $68,523 compared to $80,024 in 2006. This decrease is
7
primarily due to lower rates for smelting and refining, which have fallen as a result of surplus smelting capacity,
partially offset by higher volumes shipped and by increased ocean freight rates. There has been upward pressure on
ocean freight rates through 2007. Offsite costs in the fourth quarter of 2007 were $15,891 compared to $17,916 in
the fourth quarter of 2006, with the decrease also attributable to lower smelting and refining costs and lower
volumes shipped.
The cash cost per pound of copper produced, including stripping costs, was $1.49 in 2007 as compared to $1.74 in
2006. The reductions in the cash costs per pound have primarily been driven by increased copper production and
increased gold by-product revenue, partially offset by higher onsite costs in 2007. The cash cost per pound of
copper produced is a non-GAAP term and consists of onsite and offsite costs, less by-product revenue, divided by
the pounds of copper produced in the period.
Robinson Production Outlook
In 2008, the Company expects annual production of 130 million pounds of copper and 100,000 ounces of gold. Due
to the continued complex nature of the Robinson ore body, metal production is expected to vary from quarter to
quarter. This production guidance includes the impact of the supergene zone, which will again be encountered in
2008. Gold production exceeded expectations in 2007 and technical studies, including re-assays of existing
samples, are underway to evaluate methods of improving the accuracy of the estimate of the gold grade in the
Veteran pit.
The following table shows the proven and probable mineral reserves for the Robinson Mine as of January 1, 2008
(metric units except for gold troy ounces). The reserves were prepared under the supervision of Scott Hardy,
P.Eng., and Juris Ore, both of Quadra Mining Ltd. Mr. Hardy is the designated Qualified Person as defined by
National Instrument 43-101. Changes from the prior year’s proven and probable mineral reserves relate primarily to
the Veteran Pit and include ore and waste mined in 2007, changes to pit designs, adjustments arising from the
complex mineralogy, and re-estimation of the deposit resources incorporating 2006-2007 development drilling.
Tripp-Veteran
Reserve Ore Copper Gold Contained Metal Waste Total Strip
Classification kt Grade% Grade g/tonne Copper kt Gold oz (000's) kt kt Ratio
Proven 26,374 0.57% 0.35 151 299
Probable 2,242 0.76% 0.29 17 21
Proven and Probable 28,616 0.59% 0.35 168 320 74,672 103,288 2.61
Ruth
Reserve Ore Copper Gold Contained Metal Waste Total Strip
Classification kt Grade% Grade g/tonne Copper kt Gold oz (000's) kt kt Ratio
Proven 60,459 0.63% 0.19 383 365
Probable 13,647 1.12% 0.19 153 82
Proven and Probable 74,106 0.72% 0.19 536 447 272,645 346,751 3.68
Stockpiles
Reserve Ore Copper Gold Contained Metal Waste Total Strip
Classification kt Grade% Grade g/tonne Copper kt Gold oz (000's) kt kt Ratio
Proven 1,066 0.47% 0.15 5 5
Probable
Proven and Probable 1,066 0.47% 0.15 5 5 0 1,066 0.00
Total Robinson
Reserve Ore Copper Gold Contained Metal Waste Total Strip
Classification kt Grade% Grade g/tonne Copper kt Gold oz (000's) kt kt Ratio
Proven 87,899 0.61% 0.24 539 669
Probable 15,889 1.07% 0.20 170 103
Proven and Probable 103,788 0.68% 0.23 709 772 347,317 451,105 3.35
Note:
Mineral reserves are based on a variable economic cutoff grade, or netvalue calculation, which includes all operating costs. This
value is converted to recoverable copper pounds per ton cutoff gradeand applied to resource material remaining inside the pit designs
as of January 1, 2008. Resource materials classified as “Measured” and“Indicated” within the pit and above the cutoff are called
“Proven” and “Probable” reserves. Certain materials were reduced from the resource tonnage by 18% due to the possibility of
unfavorable metallurgical performance. The reserves are based on a variable copper prices starting at $2.50 per pound in 2008
decreasing to $1.75 by the end of mine life.
The global shortage of large off-road tires has been addressed by improvements in operating practices which are
extending the useful life of all tires, with tire lives 40-50% greater than historical benchmarks. The Company has
also entered into a tire supply agreement to help meet tire requirements for 2008-2009. While the shortage of tires
continues, the situation seems to be moderating as additional production capacity and new producers come on line.
8
Mill recoveries in 2008 are expected to follow the trends previously observed in the Veteran pit, with higher
recoveries from the hypogene material, and lower recoveries but higher grades from the supergene material. Ore is
expected to be mined from upper benches of ore body, supergene material, early in 2008 and again towards the end
of the year.
Exploration drilling in 2007 focused on the potential for additional reserves in the Veteran pit. The accumulated
data was expected to be converted into a resource estimate by early 2008 but delays in getting assay information
from third party labs have delayed full analysis until mid-year. Some of this drilling has been used to generate
revisions to the resource and reserve estimate given above. Current drilling activity is now focused on collecting
metallurgical samples and development drilling in the Ruth pit, which is expected to be the primary source of ore
from 2010 onwards. Once this is completed, exploration drilling is planned in the Ruth pit area.
Robinson Operating Cost Outlook
Management is not aware of any significant changes in cost inputs for 2008.
CARLOTA COPPER PROJECT (ARIZONA)
The Company holds a 100% interest in the Carlota copper project, a heap leach – SX/EW copper project, currently
under construction in Arizona. The budgeted construction cost is $218 million (including $29 million of working
capital) and copper production is expected to commence in the second half of 2008. Primary access and haul roads
have been completed and work is progressing on SX-EW platform concrete work, pre-production mining activities
and development of the leach pad grading and drainage.
As of December 31, 2007, the Company has incurred capital expenditures of $93.3 million for construction,
purchase of equipment and other project development costs. The Company also incurred capitalized interest and
financing costs of $12.8 million.
On October 4, 2007 the United States Court of Appeals for the 9th Circuit released its decision in an action relating
to one of the water discharge permits issued for the Carlota Copper Project. The Company is continuing
construction of the Carlota project and in the event that the NPDES permit is not reissued, the design of the mine
site with respect to run-off will be modified. Management is studying the cost and operating implications of this
modification. See section below “Contingencies”.
Carlota Outlook
Construction service and supply contracts will continue to be negotiated and awarded during the first quarter of
2008. Leach pad liner placement and development activities, SX-EW plant construction, power line installation,
ancillary facilities construction and pre-production mining activities will continue in the first quarter. The Company
reports the development of the project to be on schedule and on budget and anticipates commencement of copper
production in the second half of 2008.
SIERRA GORDA (CHILE)
During 2007, the Company incurred costs of $11.1 million for exploration of the Sierra Gorda project and spent $0.9
million on claim option payments.
The results from deep sulphide drilling in 2006 moved the focus from an oxide heap-leach project to a potentially
larger project that would encompass both heap leaching and primary sulphide production. The priority throughout
2007 was to evaluate and extend sulphide and oxide mineralization in the “281 Zone” - the area around the
discovery hole from 2006 – in an effort to gather sufficient information to support an inferred category mineral
resource in this zone. Drill results in 2007 continued to outline a significant sulphide system with large volumes of
moderate grade material as well as deep high grade mineralization. In addition, the program evaluated covered
oxide and sulphide targets generated by last year’s shallow grid drilling, and other sulphide targets within the claim
block. Over 48,000 metres of drilling has been completed in 2007, with five or six drill rigs on site for most of the
year since commencement of the exploration program in April.
9
During 2007, the Company acquired water extraction rights from various sellers in Region II in northern Chile and
has also entered into option agreements to acquire additional water rights in 2008. As of December 31, 2007 the
Company had incurred total costs of $10.6 million on the water rights acquisition program, which includes
acquisition costs, legal and other advisory services, payments under option agreements, and the fair value of
common shares issued to acquire a private Chilean company.
Sierra Gorda Outlook
A technical report on mineral resources, reflecting 2007 drill results, is expected to be completed in the second
quarter of 2008. The Company will then consider options for a development program which is expected to include
definition drilling along with metallurgical, geotechnical and other engineering studies.
MALMBJERG MOLYBDENUM PROJECT (GREENLAND)
In 2007, the Company acquired 82.5% of the outstanding shares of International Molybdenum Plc (“InterMoly”)
which holds the rights to the Malmbjerg molybdenum project. On April 27, 2007 the Company mailed an offer
(“the Offer”) to acquire all of InterMoly’s issued share capital (the “InterMoly Shares”) and traded warrants (the
“InterMoly Warrants”). The conditions of the Offer were satisfied or waived and the acquisition closed on June 22,
2007 with Quadra having received 82.5% of InterMoly Shares and 90.8% of InterMoly Warrants. In September
2007, the Company completed the compulsory acquisition of the remaining outstanding InterMoly Warrants. A
total of 3,293,111 common shares of the Company were issued in exchange for the interest in InterMoly. The fair
value of the acquisition was $39.8 million, which includes transaction costs of $2.6 million.
The studies carried out by InterMoly before the acquisition proposed a conventional open pit operation with a
production rate of approximately 23 million pounds per year of molybdenum.
As of December 31, 2007, the Company incurred costs of approximately $13.6 million on the project. In July 2007,
the Company commenced the feasibility level studies required to make a development decision for the project. All
field work planned for 2007 was completed and the site has been demobilized. Pilot plant testing of the bulk sample
taken during the summer is underway.
Malmbjerg Outlook
Engineering and cost studies are proceeding on schedule. A technical report on mineral resources is expected to be
completed in the second quarter. The results of these studies will be used to determine development plans, budgets
and schedules.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s source of cash flow from operations is the Robinson Mine. The Company generated cash flow from
operations (excluding working capital changes) of $162.5 million in 2007 compared to $18.1 million in 2006. This
increased cash flow is driven by the higher revenues and sales volumes in 2007 and the lower derivative loss
realized in 2007.
The Company incurred capital expenditures of $93.3 million at the Carlota project in 2007, for the purchase of
mining equipment and other project construction costs. Capital expenditures at the Robinson Mine were $24.1
million and related to normal replacement and upgrades, tailings dam work, commencement of pre-mining works for
the Ruth pit and the development and exploration drilling program. The Company spent a further $26.1 million on
exploration and development of the Sierra Gorda and Malmbjerg projects.
In March 2007 the Company completed a $200 million syndicated private loan financing, consisting of a $150
million First Lien Secured Credit Facility (“First Facility”) and a $50 million Second Lien Junior Secured Credit
Facility (“Second Facility”). The First Facility has a 5 year term and bears interest at LIBOR + 6.5%. The Second
Facility had a 7 year term and bore interest at LIBOR + 10%. The Second Facility was repaid in full in June 2007.
With respect to the First Facility, the Company has certain prepayment options and the lenders have the ability to
call a portion of the debt on a semi-annual basis (see Commitments and Contractual Obligations). The First
10
Facility is secured by all Company assets except Sierra Gorda and payments and distributions outside of the secured
group of assets are subject to certain restrictions. The Company paid fees and other transactions costs of $7.7
million in connection with arranging the Facilities, and also issued 2,027,776 warrants to the Second Facility
Lenders. Each warrant entitles the holder to purchase a common share of the Company at an exercise price of
$Cdn9.24 per share before March 1, 2012.
The Company repaid the $16.9 million balance that was outstanding under its working capital facility with
Macquarie Bank Ltd. (“Macquarie”). This working capital facility and the hedge line of credit facility with
Macquarie both expired in the first quarter of 2007.
In May 2007, the Company completed an equity financing with a syndicate of underwriters through which the
Company issued 11.96 million units at a price of $Cdn12.60 per unit for gross proceeds of $Cdn150.7 million. Each
unit consisted of one common share of the Company and one-half of a warrant, with each whole warrant entitling
the holder to purchase an additional common share at an exercise price of $Cdn20.00 for a period of three years.
The Company incurred share issue costs of $5.8 million in connection with this offering.
A portion of the proceeds of the equity financing was used to repay the $50 million Second Facility which was
retired in June 2007. Under the terms of the Second Facility, the Company was required to pay a prepayment
premium of $5.0 million to retire this debt.
At December 31, 2007 the Company had working capital of $287.2 million as compared to a working capital
deficiency of $18.7 million at December 31, 2006. The increase in the working capital position is primarily due to
the equity financing completed in May 2007, the long-term debt financing completed in March 2007, the settlement
of the forward sale position, and the operating cash flow generated by the Robinson Mine. At December 31, 2007,
accounts receivable and revenues includes approximately 38.2 million pounds of copper provisionally valued at
$3.04 per pound. The final pricing for these provisionally priced sales is expected to occur between January 2008
and April 2008. Changes in the price of copper from the amounts used to calculate the provisional values will
impact the Company’s revenues and working capital position in the first quarter of 2008. On February 19, 2008 the
copper price was $3.66/lb.
At December 31, 2007 the Company had cash and cash equivalents of approximately $263.6 million. These amounts
are comprised of cash deposits and highly liquid investments that are readily convertible to cash. The counterparties
include banks, governments and government agencies.
Liquidity Outlook
The Company has expansion plans, including but not limited to, construction of the Carlota project where the
Company expects to incur additional capital expenditures of approximately $125 million (including working capital
requirements) to complete construction in the second half of 2008. The Company also expects to spend
approximately $50 million on capital expenditures and environmental bonding at the Robinson Mine, primarily
related to the development of the Ruth pit, which will become the primary source of ore in 2010, the exploration and
development drilling program, and normal replacements and upgrades.
Under the terms of the First Facility debt, the Company’s lenders will have the right to call approximately $42
million of the loan in March 2008, based on the excess cash flow generated in 2007 (see Commitments and
contractual obligations).
Management believes that it will have sufficient cash to complete construction of the Carlota project based on the
expected production results at Robinson and the Company’s price protection program for copper (see Financial
Instruments and Other Instruments), regardless of the cashflow sweep described above. Development of the
Sierra Gorda and Malmbjerg projects in 2008 may require additional sources of financing, depending on the
development plans, metal prices and whether or not the First Facility lenders exercise their call options in 2008.
11
Commitments and contractual obligations
($000's) Less than 1-2 2-3 3-4 4-5 After Total
1 year years years years years 5 years
17,250 17,250 1 7,250 17,250 1 52,875 - 221,875
Deferred consideration (b) 15,104 - - - - - 15,104
Reclamation liabilities (c) - - - - - 8 8,315 8 8,315
Take or pay contract (d) 7,608 6,600 3 ,300 - - - 17,508
12,917 12,812 1 5,692 7,381 1 ,627 - 50,430
Total 52,879 36,662 3 6,242 24,631 1 54,502 8 8,315 393,232
Payment Due By Period
Minimum lease payments (capital
and operating)
Senior secured credit facility and
interest payments (a)
(a) Senior secured credit facility
Interest on the Company’s $150 million First Facility is payable quarterly based on an annual interest rate
of LIBOR + 6.5%. The Company is obligated to make a semi-annual offer to the lenders to repay an
amount equal to 50% of excess cash flow, as computed under the terms of the First Facility. The Company
also has the right to prepay the First Facility at a premium of 103% for the first three years, 102% in the
fourth year and 101% in the fifth year.
(b) Deferred gold consideration
As at December 31, 2007, 18,750 ounces of gold remained to be paid to the vendor as deferred purchase
consideration for the acquisition of the Carlota project in 2005. This gold will be paid in three quarterly
instalments during 2008. The deferred gold liability has an estimated fair value of $15,104 at December
31, 2007, based on the forward prices of gold over the expected payment schedule.
(c) Reclamation liabilities
The Company has estimated total future reclamation costs of $88.3 million (undiscounted), which primarily
relate to the closure of the Robinson Mine. The Company has estimated the fair value of this liability to be
$37.5 million at December 31, 2007 based on the estimated discounted future payments.
(d) Take or pay contracts
In 2007 the Company entered into an agreement to purchase, on a take or pay basis, 504,000 gallons of fuel
per month until February 2008. The Company has also signed a three year tire supply contract for a total
commitment of approximately $6,600 per year.
MARKET TRENDS AND FUNDAMENTALS
Since 2003, the growing demand for copper, particularly in China, coupled with an inability of the copper industry
to increase supply due to a lack of immediate development projects, has resulted in decreased inventories of copper.
These low inventories, together with a weakening U.S. dollar, have led to a substantial increase in the copper price.
The following graph shows the inventory level, as published by the London Metal Exchange (“LME”), of copper
and the spot price of copper from 2004 to December 31, 2007.
12
LME Copper Price & Inventory
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jan 1 2004
Jan 1 2005
Jan 1 2006
Jan 1 2007
Jan 1 2008
Inventory Level (tonnes)
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Copper Price (US$/lb)
Inventory Level Copper Spot
Inventories published on the LME declined to a 30 year low of only 25,525 tonnes on July 22, 2005 but they have
since rebounded to 197,450 tonnes as of December 31, 2007.
The copper price has remained volatile in 2007 with the spot price ranging from a low of $2.37 per pound to a high
of $3.77 per pound during the year. At December 31, 2007 the closing spot price was $3.03 per pound. At February
19, 2008, the closing spot price was $3.66 per pound.
The reference price of copper metal is determined by trading on the LME, where the price is set in U.S. dollars at the
end of each business day.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Company’s revenues and cash flows are subject to fluctuations in the market price of copper and gold. In addition,
there is a time lag between the time of initial payment on shipment and final pricing, and changes in the price of copper
and gold during this period impact the Company’s revenues and working capital position.
As of December 31, 2007 the Company has no outstanding forward sales contracts for copper or gold. As at
December 31, 2006 the Company had forward contracts outstanding to sell 67 million pounds of copper at an
average price of $2.26 per pound and 24,000 ounces of gold at an average price of $429/oz. The outstanding copper
contracts related to metal produced in 2006 but the final pricing of the sales and settlement of the contracts did not
occur until the first half of 2007. At December 31, 2006 the Company recorded a liability of $46.5 million based on
the fair value of the outstanding forward contracts at that time. In the first and second quarters of 2007, the
Company recorded realized derivative losses of $54.4 million on the income statement, based on the difference
between the actual sales prices and the forward contracted prices.
In recognition of the volatility of the commodities market and in order ensure completion of construction at Carlota,
the Company has instituted a floor price protection program. Under this program, the Company has purchased
copper put options at various times during 2007 at a total cost of $11.5 million. At December 31, 2007 the
Company had outstanding put options for approximately 149 million pounds of copper with an average strike price
of $2.43 per pound and with maturity dates spread between January 2008 and September 2008. The fair value of the
outstanding copper put options at December 31, 2007 was $8.8 million. The $2.8 million reduction in the fair value
of the put options has been recognized as a derivative loss on the statement of operations in 2007.
In 2007 the Company entered into an agreement to purchase, on a take or pay basis, 504,000 gallons per month of
diesel fuel for the 12 month period ending on February 1, 2008. As at December 31, 2007, the fair value of the fuel
contract was $0.5 million, resulting in an unrealized derivative gain of $0.5 million in 2007.
The Company’s $150 million senior secured credit facility bears interest at a variable rate of LIBOR + 6.5%. As a
condition of the $150 million credit facility, the Company purchased a contract which provides an interest rate cap.
The contract effectively caps LIBOR at 5.35% for $100 million of debt until June 6, 2010. The cost of the interest
13
rate cap was $0.5 million. The fair value of the interest rate cap was $0.1 million at quarter-end resulting in an
unrealized loss of $0.4 million in 2007.
CONTINGENCIES
On October 4, 2007 the United States Court of Appeals for the 9th Circuit released its decision in an action relating
to one of the water discharge permits issued for the Carlota Copper Project, currently under construction in Arizona.
In the decision, the Court ordered the National Pollution Discharge Elimination System (NPDES) permit be
"vacated" and returned to the United States Environmental Protection Agency (EPA), who have been defending the
permit before the courts, for further processing consistent with the Court's decision. While the lawsuit was not filed
against the Carlota Copper Company (“CCC”) (a 100% owned subsidiary of Quadra Mining Ltd.), CCC intervened
in the case and is a party in the litigation and on January 18, 2008 filed a motion for the 9th Circuit to rehear the
case. The 9th Circuit is currently considering whether to rehear the case.
The permit remains in effect during the appeal process. The decision has no immediate impact, as the primary
purpose of the permit is to deal with the situation where, after operations commence, there is a major storm event
that gives rise to excess water that requires discharge and does not meet Clean Water Act specifications. The
Company is continuing construction of the Carlota project and in the event that the NPDES permit is not reissued,
the design of the mine site with respect to run-off will be modified. Management is studying the cost and operating
implications of this modification. There can be no assurance that permit renewals required for the development and
operation of Carlota will not be challenged in the future.
In July 2007 the Company received a notice that a claim had been filed in Chilean courts against the Company’s
wholly-owned Chilean subsidiary, Minera Quadra Chile Limitada. The claimant is a 5.33% shareholder in a
corporation (the “Optionor”) with which the Company signed an option agreement in 2004. The claimant is seeking
to nullify the option agreement on the basis that the Optionor did not obtain proper shareholder approval of the
agreement. This agreement is one of the six option agreements that the Company holds with respect to its Sierra
Gorda mineral property. Based on advice received from Chilean counsel the Company believes that the option
agreement is valid and that the claim is without merit.
TRANSACTIONS WITH RELATED PARTIES
One of the directors of the Company is a partner of an affiliate of Blake, Cassels & Graydon LLP. During the year
ended December 31, 2007, the Company incurred legal fees of $890 with that entity (year ended December 31, 2006
- $569), which were at normal business terms.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing financial statements management has to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Based on historical experience, current conditions and expert
advice, management makes assumptions that are believed to be reasonable under the circumstances. These
estimates and assumptions form the basis for judgments about the carrying value of assets and liabilities and
reported amounts for revenues and expenses. Different assumptions would result in different estimates and actual
results may differ materially from results based on these estimates. These estimates and assumptions are also
affected by management’s application of accounting policies. Critical accounting policies and estimates are those
that affect the consolidated financial statements materially and involve a significant level of judgment by
management.
Mineral Properties
Mineral property development costs, including exploration, mine construction, and stripping costs, are capitalized
until commercial production is achieved, and are then amortized over the remaining life of the mine based on proven
and probable reserves. The determination of the extent of reserves is a complex task in which a number of estimates
and assumptions are made. These involve the use of geological sampling and models as well as estimates of future
costs. New knowledge derived from further exploration and development of the ore body may also affect reserve
14
estimates. In addition the determination of economic reserves depends on assumptions on long-term commodity
prices and in some cases exchange rates.
An impairment loss is recognized for a mineral property if its carrying value exceeds the total undiscounted cash
flows expected from its use and disposal. Undiscounted cash flows for mineral properties are estimated based on a
number of assumptions including long-term commodity, proven and probable reserves, estimated value beyond
proven and probable reserves, and estimates of future operating, capital, and reclamation costs. Based on
management’s view of future metal prices and cost assumptions, the carrying value of the Company’s mineral
properties was not impaired at December 31, 2007.
Revenue Recognition
Sales are recognized and revenues are recorded at market prices when title transfers and the rights and obligations of
ownership pass to the customer. The majority of the Company's concentrate is sold under pricing arrangements
where final prices are determined by quoted market prices in a period subsequent to the date of sale. The Company
estimates provisional pricing for its concentrate based on forward prices for the expected date of the final settlement.
Subsequent variations in price are recognized as revenue adjustments as they occur until the price is finalized. As a
result, revenues include estimated prices for sales in that period as well as pricing adjustments for sales that occurred
in the previous period. These types of adjustments can have a material impact on the revenues.
Asset Retirement Obligations, Reclamation and Mine Closure
Due to uncertainties concerning environmental remediation, the ultimate cost to the Company of future site
restoration could differ from the amounts provided. In 2006 and 2007 the Company revised its estimate of the
timing and amount of closure costs at the Robinson Mine which resulted in adjustments to the liability recorded in
the Company’s financial statements. The estimate of the total liability for future site restoration costs is subject to
change based on amendments to laws and regulations and as new information concerning the Company’s operations
becomes available. The Company is not able to determine the impact on its financial position, if any, of
environmental laws and regulations that may be enacted in the future.
Future Income Tax Assets
Management believes that uncertainty exists regarding the realization of certain future tax assets and therefore a
valuation allowance of $36.5 million has been recorded. The Company has not recognized the benefit of U.S.
Alternative Minimum Tax credits, the tax basis of Carlota in excess of the acquisition price, and non-capital losses.
The Company has recognized a net current future income tax asset of $12.1 million and a net non-current future
income tax liability of $23.7 million that relates to the temporary difference created between the tax and accounting
basis of assets and liabilities of operations based in the United States. Management estimates that, using long term
copper prices in line with its mine plan estimates, the future taxable income will be sufficient to utilize the net tax
assets which have been recognized.
CHANGE IN ACCOUNTING POLICIES
Effective January 1, 2007, the Company adopted CICA Handbook Section 3855 “Financial Instruments –
Recognition and Measurement”, Section 3865 “Hedges” and Section 1530 “Comprehensive Income”. These new
standards were adopted on a prospective basis in 2007 with no restatement of prior period financial statements.
In accordance with these standards the Company classified all financial instruments as either held-to-maturity,
available-for-sale, held for trading, or loans and receivables. Financial assets held to maturity, loans and receivables
and financial liabilities other than those held for trading, are measured at amortized cost. Available-for-sale
instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income.
Instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized on
the statement of operations. Transaction costs on financial assets and liabilities classified other than as held for
trading are treated as part of the investment cost. The Company currently does not apply hedge accounting to its
derivative instruments.
15
OUTSTANDING SHARE DATA
The Company had 55,115,736 common shares issued and outstanding common shares at December 31, 2007. As of
February 19, 2008 the Company had 55,332,113 common shares issued and outstanding.
CONTROL OVER FINANCIAL REPORTING
Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent
limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
During the process of management’s review and evaluation of the design of the Company’s internal control over
financial reporting in the fourth quarter of 2006, it was determined that the design and evaluation of internal controls
over information technology at the Robinson Mine was not completed. The design and implementation of these
controls has now been substantially completed.
Disclosure Controls and Procedures
The Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures.
Based upon the results of that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures
were effective to provide reasonable assurance that the information required to be disclosed in reports it files is
recorded, processed, summarized and reported within the appropriate time periods and forms.
February 19, 2008
This MD&A contains “forward-looking information” that is based on Quadra’s expectations, estimates and
projections as of the dates as of which those statements were made. This forward-looking information includes,
among other things, statements with respect to Quadra’s business strategy, plans, outlook, long-term growth in cash
flow, earnings per share and shareholder value, projections, targets and expectations as to reserves, resources, results
of exploration (including targets) and related expenses, property acquisitions, mine development, mine operations,
mine production costs, drilling activity, sampling and other data, estimating grade levels, future recovery levels,
future production levels, capital costs, costs savings, cash and total costs of production of copper, gold and other
minerals, expenditures for environmental matters and technology, projected life of Quadra’s mines, reclamation and
other post closure obligations and estimated future expenditures for those matters, completion dates for the various
development stages of mines, availability of water for milling and mining, future copper, gold, molybdenum and
other mineral prices (including the long-term estimated prices used in calculating Quadra’s mineral reserves), the
percentage of production derived from mechanized mining, the percentage of production from milling, currency
exchange rates, debt reductions, timing of expected sales and the percentage of anticipated production covered by
forward sale and other option contracts or agreements, anticipated outcome of litigation and personnel issues.
Generally, this forward-looking information can be identified by the use of forward-looking terminology such as
“outlook”, “anticipate”, “project”, “target”, “believe”, “estimate”, “expect”, “intend”, “should”, “scheduled”, “will”,
“plan” and similar expressions. Forward-looking information is subject to known and unknown risks, uncertainties
and other factors that may cause Quadra’s actual results, level of activity, performance or achievements to be
materially different from those expressed or implied by such forward-looking information, including but not limited
to:
* Uncertainties related to the accuracy of reserve and resource estimates and estimates of future production
and future cash and total costs of production and the geotechnical or hydrogeological nature of ore deposits,
diminishing quantities or grades of reserves and variable metallurgical performance of these reserves.
* Uncertainties related to expected production rates, timing of production and the cash and total costs of
production and milling.
* Uncertainties relating to copper, gold, molybdenum and other mineral prices, which are beyond the
Company’s control.
16
* Provisional payments on concentrate material that the Company sells; uncertainty in the final metal prices
used for the computation of final settlement exists such that final settlement could be less than the cost of
production plus other liquidity requirements.
* Operating and technical difficulties in connection with mining development or production activities.
* Uncertainties with respect to the quantity or quality of molybdenum that may be produced at the
Robinson Mine.
* Uncertainties and costs related to Quadra’s exploration and development activities, such as those
associated with determining whether copper, gold, molybdenum or other mineral reserves exist on a
property.
* Uncertainties related to feasibility studies and other studies that provide estimates of expected or
anticipated costs, expenditures and economic returns from a mining project.
* Uncertainties related to capital cost estimates for mine construction activities.
* Uncertainties relating to the availability of adequate water resources for mining and milling operations
* Uncertainties related to the ability to obtain and retain necessary licences, permits, electricity, surface
rights and title for development projects and project delays due to third party opposition.
* Uncertainties in obtaining additional financing that may result in delay or postponement of development
projects or even a loss of the mineral property interest.
* Uncertainties related to the future development or implementation of new technologies, research and
development and, in each case, related initiatives and the effect of those on our operating performance.
* Uncertainties related to judicial or regulatory proceedings, including whether the permits required for
development and operating activities will be obtained and whether existing permits will be challenged.
* Changes in, and the effects of, the laws, regulations and government policies affecting Quadra’s mining
operations, particularly laws, regulations and policies relating to:
> mine expansions, environmental protection and associated compliance costs arising from exploration,
mine development, mine operations, reclamation and mine closures;
> expected effective future tax rates in jurisdictions in which Quadra’s operations are located;
> the protection of the health and safety of mine workers; and
> mineral rights ownership in countries where Quadra’s mineral deposits are located.
* Changes in general economic conditions, the financial markets and in the demand and market price for
copper, gold, molybdenum and other minerals and commodities, such as diesel fuel, petroleum, steel,
concrete, electricity and other forms of energy, mining equipment, operating supplies including truck tires,
and fluctuations in exchange rates, particularly with respect to the value of the U.S. dollar and Canadian
dollar, concentrate and transportation charges.
* The effects of derivative instruments to protect against fluctuations in copper, gold, molybdenum and
other metal prices and exchange rate movements and the risks of counterparty defaults, and mark to market
risk.
* Unusual or unexpected formations, seismic activity, cave-ins, flooding, pressures, pit wall failures and
other similar incidents (and the risk of inadequate insurance or inability to obtain insurance to cover these
risks).
* Changes in accounting policies and methods used to report Quadra’s financial condition
* Uncertainties associated with critical accounting assumptions and estimates.
* Environmental issues and liabilities associated with mining including processing and stock piling ore.
* Geopolitical uncertainty and political and economic instability in countries in which Quadra operates.
* Labour strikes, work stoppages, or other interruptions to, or difficulties in, the employment of labour in
markets in which Quadra operates mines, or extreme weather conditions, environmental hazards, industrial
accidents or other events or occurrences, including third party interference that interrupt the production of
minerals in Quadra’s mines or interrupt the delivery of Quadra’s product to customers.
* Quadra’s reliance on a single producing property.
* Uncertainties relating to acquisitions, including whether the Carlota copper project and recently acquired
Malmbjerg molybdenum project can be brought into production.
* Breaching covenants and undertakings contained in debt facility agreements could result in a significant
loss to Quadra
A discussion of these and other factors that may affect Quadra’s actual results, performance, achievements or
financial position is contained in the filings by Quadra with the Canadian provincial securities regulatory authorities,
including Quadra’s Annual Information Form. This list is not exhaustive of the factors that may affect our forwardlooking
information. These and other factors should be considered carefully and readers should not place undue
reliance on such forward-looking information. Quadra disclaims any intent or obligations to update or revise
Belgie - TCM news
They maintained their forecast for their other mine which has a much bigger production. Combined their revised guidance is only reduced production by 4-5%. This will also probably be taken as a positive because the market had already baked in a lot of negative with the unknown impact of the pit-wall slide. Now that it is known, this is actually a positive for the stock price.
You have look at things in context to understand what effect they will have. Just my opinion.
JFF7
Quadra Warrants
QUA Warrants way under valued here. Canadian Warrants site has then valued at 8.94 while they closed at 6.60.
http://canadianwarrants.com/WarrantValues-Current.htm
Moly prices now at 34.125 and rising.
http://www.rocamines.com/s/Home.asp
JFF7
there is no chance at all that GPXM will fall to 10 cents a share this year. no matter how you do the valuation. Your just pulling a number out of the air in order to have some shock value.
JFF7
Geez Louise
GPXM may have difficulties meeting short term obligations which may require some share dilution but to say it is going to 10 cents is just plain ignorant, perhaps purposely ignorant.
There has been no recognition or discussion of the increased output from Ashdown mine. The situation there is improving month by month. If they can't make Ashdown profitable and live with those earnings because they want to get Mineral Ridge on stream, then they deserve to go to 10 cents. But if Ashdown mines provides enough to support any development of Mineral Ridge there is no reason for this stock to go to 10 cents.
JFF7
MLY update
CCM Master Qualified Fund LTD reported on SEDI that they have taken a 10.35% (4,502,400 shares) position in the Sprott Moly Fund.
https://www.sedi.ca/sedi/SVTIIBIviewResults?locale=en_CA
JFF7
NGG warrants
The other twist on this but with the same results (selling pressure on the shares) is that people who participated in a private placement and received warrants along with their original shares may currently be hanging on to both their shares and warrants but are now forced to exercise the warrants because of the expiry date.
With the warrants expiring, they may be forced into exercising them but they do not have the investment capital to increase their current holdings by the number of shares the warrants entitle them to purchase. So they sell the original shares in order to exeercise their warrants and get cheaper shares.
JFF7
I hope your right about copper and Moly. I'm there. OK, I've been there too long. Maybe I will be like a the clock on the wall and if I stay in one place long enough, I'll be right. I call it my clock strategy. LOL.
Gook luck to all and have fun!.
JFF7
well if they hate GPXM that much then they are not likely to come to terms on the dispute any time soon and it will be a long drawn out affair. Hopefully that wouldn't stop Ashdown from being a success since it is to the benefit of both parties to do so. However, people who hate will do funny things including doing things that hurt themsleves in order to spite the object of their hatred.
JFF7
I think one major difference in their points of view is that GPMX views Ashdown as a stepping stone to getting on their feet and developing MR and moving on to other things whiie Wex views Ashdown as a a meal ticket with little in the way of plans to find another property to develop themselves.
I have a hard time believing there will become one company if these perspectives are true. Would GPMX ever be in a position to buy out WEX? I think since they place different values on Ashdown in terms of their future, that they will never agree to terms.
So I am hoping for the realisation that both parties are better off coming to terms with the current dispute through arbitration and then having WEX let GPMX run Ashdown as profitable as they can and having GPXM / Wex split the profits. GPXM can move on to making MR portiable and WEX can go find some other property to buy up and then try to find someone to develop it for them.
JFF7