LeadFX cash at $379,000 (U.S.) on March 31
2018-05-15 20:30 ET - News Release
Mr. Andrew Worland reports
LEADFX REPORTS FIRST QUARTER 2018 FINANCIAL RESULTS
LeadFX Inc. has released its first-quarter 2018 financial results (all dollar amounts are in thousands and U.S. dollars unless otherwise indicated).
The Company's principal asset and sole production stage mineral property is the Paroo Station Lead Mine ("Paroo Station" or the "Mine") located 30km west of Wiluna in the mid-west of Western Australia. The Mine was placed in care and maintenance in the first quarter of 2015. The Company also owns an 83.5% interest in Chief Consolidated Mining Company ("Chief"), an Arizona company with interests in mineral properties in Utah ("Chief Properties").
The primary focus of the Company has been examining initiatives to re-start the Mine, most specifically focusing on supporting InCoR's commitment to complete a definitive feasibility study ("DFS") to assess the viability of constructing and operating a Hydrometallurgical Facility on site to produce 70,000 tpa of lead metal in ingot form.
InCoR contracted SNC-Lavalin Australia Pty Ltd ("SNC-Lavalin") to prepare the DFS and it was successfully completed on February 28, 2018. The results of the DFS were outlined in the press release dated February 28, 2018, the Company's Annual Information Form, Annual Financial Statements and Management Discussion and Analysis each dated March 28, 2018 and the Independent National Instrument 43-101 Technical Report, titled, "NI 43-101 Technical Report on the Paroo Station Lead Carbonate Mine, Wiluna, Western Australia" filed on April 12, 2018.
The DFS demonstrated the technical and economic feasibility of constructing and operating a Hydrometallurgical Facility at the Mine. The Hydrometallurgical Facility would involve the leaching and electrowinning of lead concentrates produced by the existing mine and milling operation to produce lead ingots. This would have the effect of eliminating many of the operating and financial risks that have caused the Mine to be placed on care and maintenance in the past, as well as improving the overall project economics.
(in thousands of U.S. dollars, except per share amounts)
3 months ended March 31,
Cashflow used in operations (1,098) (932)
Cashflow from (used in) investing activities - 456
Cash flows from financing activities 465 1,985
Effect of exchange rate changes on cash and cash equivalents(11) 36
Net change in cash (644) 1,545
Cash on hand 379 2,529
Net loss before tax (3,303) (2,871)
The net loss before tax for the Quarter year was $3,303 (2017: $2,871). Operating loss for the Quarter was $2,992 (2017: $1,967) reflecting lower Mine care and maintenance and general administration costs offset by the recording of a $1.5 million expense reflecting the accounting for warrants issued pursuant to the private placement announced on December 14, 2017.
Cash on hand at the end of the Quarter was $379 (2017: $1,023). The Mine remained on care and maintenance during the Quarter. The Company's activities during the Quarter were financed from cash reserves on hand at the start of the Quarter and tranche 2 of the private placement announced on December 14, 2017 ($465). There were no cash flows from investing activities during the Quarter.
Additional financing will be required to meet our strategic growth plans, ongoing costs and loan commitments of the Company. Subject to arranging financing , the Company is seeking to move into a an early works program of engineering and design for the Hydrometallurgical Facility as well as undertaking a further closed cycle pilot plant. Discussions with project financiers have been initiated.
Capital Resources, Liquidity and Working Capital Requirements
As at March 31, 2018 the Company has a working capital deficit of $25.3 million (December 31, 2017 - $24.2 million) which includes $16.3 million (December 31, 2017 - $15.9 million) owing to Sentient under the Second Amended and Restated Credit Agreement. Neither the Mine nor the Chief properties are operational or generating revenue.
On February 26, 2018 LeadFX, Rosslyn Hill Mining Pty Ltd, Ivernia Australia Pty Ltd, Redback Pipeline Pty Ltd and Sentient entered into an amendment ("Amendment") to the Second Amended and Restated Credit Agreement to extend the maturity date for re-payment of the indebtedness outstanding to Sentient. In accordance with the Amendment, the indebtedness becomes due and payable on the earlier of March 31, 2019 or financial close being achieved for the financing of the planned Hydrometallurgical Facility at the Mine. Financial close is defined as being the date on which the Company has demonstrated it has fully funded the Hydrometallurgical Facility and conditions to first drawdown on debt facilities, if any, for the construction of the Hydrometallurgical Facility have been met. The indebtedness will continue to incur interest at 10% per annum until its maturity.
Notwithstanding the gross proceeds of the placements described herein received by the Company during 2017 and 2018 or the sale of Mining Data in December 2017, the Company has limited cash available, other than to meet near term obligations, and will require additional funding in the near term.
The Company's ability to continue as a going concern is dependent on a number of factors. The Company will need to raise funds in order to pay for its ongoing costs of operations as well as service its working capital deficiency, meet its commitments to lenders, and meet the costs of care and maintenance. In addition, the Company will require funding for any potential future restart of the Mine, construction of a Hydrometallurgical Facility and development of the Company's mineral project. The amount of funding required is dependent on several factors including, but not limited to, the nature of any refinancing of the Second Amended and Restated Credit Agreement, the nature of any additional transactions undertaken by the Company to realize the value of the Company's assets, the outcome of further negotiations with the Company's lenders, the costs and duration of care and maintenance, any decision to pursue a Hydrometallurgical Facility at the Mine, and the cost of bringing the Company's mineral projects into production.
There is no guarantee or assurance that the Company will be able to (i) refinance the Second Amended and Restated Credit Agreement, (ii) secure sufficient financing to fund its commitments to its lenders, general and administrative costs and the costs of ongoing care and maintenance, the costs of any potential future restart of operations or the costs of bringing its mineral projects into production or (iii) complete any further transactions.
If the Company is unable to obtain sufficient funds and repay debts from either one or more of these actions, it would affect its ability to continue as a going concern. A decision to restart the Mine and construct a Hydrometallurgical Facility will be contingent on several factors including, but not limited to, a review of the outcomes of the DFS, forecast capital and operating costs, the LME lead price, and the USD:AUD foreign exchange rate. A decision to commence development of the Company's mineral projects will be contingent on several factors including, but not limited to, overall project economics, commodity prices, the estimated recoverable minerals from the mineral projects, the projected cost to develop these projects and obtaining funding to finance these costs.
These material uncertainties cast significant doubt as to the Company's ability to continue as a going concern. As at March 31, 2018, the consolidated financial statements do not reflect any adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary should the going concern assumption be inappropriate. Such adjustments could be material.
Shares issued and outstanding
As at March 31, 2018, there are 66,753,204 Common Shares, no preferred shares, 8,124,301 Warrants and 106,666 options outstanding.
InCoR exercised the first tranche of Warrants totaling 23,000,000 on February 28, 2018 pursuant to the Umbrella Agreement dated June 20, 2017.