Liberty Mines Financials posted below, any thoughts?
Liberty Reports Second Quarter 2008 Financial Results
Liberty Mines Inc LBE
8/13/2008 4:39:40 PM
EDMONTON, ALBERTA, Aug 13, 2008 (Marketwire via COMTEX News Network) --
Liberty Mines Inc. ("Liberty or the Company") (TSX:LBE) reports continued strength in the production rate at the Redstone mine for the three months ended June 30, 2008. The Company produced 200,800 (229 per day) mined tonnes of ore in the second quarter of 2008, up 12 % over the previous quarter and continued to exceed the Company's 2008 production targets at the Redstone mine of 200 tonnes per day. The increase in production resulted in a 7.4% increase in the accountable pounds of nickel sold during the three months ended June 30, 2008 to 613,562 accountable pounds.
The increased production and continued diligence in monitoring costs allowed the Company to decrease the cost of producing a pound of nickel for the three and six month periods ended June 30, 2008 to US$5.91 and US$6.42 per pound which includes mining, milling, smelting, refining, price participation and marketing costs but excludes mine depletion and operating asset amortization charges. The Company anticipates the cost to produce a pound of nickel to remain in the US$6.00 to US$7.25 range for the remainder of fiscal 2008 as the McWatters mine will not be declared to be in commercial production until late 2008. With the combined commercial production of the Redstone and McWatters mines at 1,400 to 1,500 tonnes per day at a much lower cost per tonne, the Company will be able to produce a pound of nickel at a target cost of US$3.50 per pound.
The Company continued to focus on development activity at the WcWatters mine in the second quarter of 2008. It is anticipated preproduction at McWatters will commence from the upper level sills in September 2008 with full production from the mine at 1,200 to 1,300 tonnes per day from the lower high grade zone currently scheduled for early 2009.
The following table summarizes the Company's consolidated financial results
for the three and six month periods ended June 30, 2008.
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Three months ended June 30 Six months ended June 30
2008 2007 2008 2007
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Revenue $ 4,390,763 $ - $ 12,314,916 $ -
Mining and
processing costs $ 3,660,101 $ - $ 7,665,444 $ -
Amortization
depletion of
operating assets $ 3,033,042 $ - $ 5,795,826 $ -
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Operating loss $ (2,302,380) $ - $ (1,146,354) $ -
General and
administrative
expenses $ 1,792,555 $ 144,837 $ 2,961,794 $ 423,327
Impact benefit
agreement $ 1,033,958 $ - $ 1,033,958 $ -
Stock based
compensation $ 462,245 $ 501,141 $ 1,166,953 $ 893,720
Amortization and
accretion other
assets $ 273,186 $ 103,900 $ 483,206 $ 113,840
Interest and
bank charges $ 87,239 $ (35,066) $ 150,660 $ (25,405)
Interest on
long-term debt $ 444,469 $ - $ 444,469 $ -
Accretion interest
expense $ 308,093 $ - $ 308,093 $ -
Foreign exchange
loss (gain) $ 84,267 $ (46,681) $ (78,048) $ (71,642)
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Loss before
income taxes $ (6,788,392) $ (668,131) $ (7,617,439) $ (1,333,840)
Future income taxes $ 1,912,592 $ 663,276 $ 1,876,592 $ 663,276
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Loss for the period $ (4,875,800) $ (4,855) $ (5,740,847) $ (670,564)
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Loss per share -
basic and diluted $ (0.06) $ (0.00) $ (0.07) $ (0.01)
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June 30, 2008 December 31, 2007
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Working capital deficiency $ (13,007,696) $ (2,102,096)
Total assets $ 106,297,564 $ 86,839,787
Shareholders' equity $ 63,948,587 $ 72,458,763
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The Company generated revenue for the three and six month periods ended June 30, 2008 of $4,390,763 and $12,314,916 respectively. The Company's achievement of increased production levels in the second quarter of 2008 was not enough to offset the significant decline in nickel prices realized in the same period. The second quarter revenue was significantly impacted by the decline in nickel prices which averaged 11.3% lower than the previous quarter of 2008. In addition, the three month forward nickel prices were approximately US$9.50 per pound at June 30, 2008. This resulted in an additional $1.7M decrease in revenue for the three months ended June 30, 2008 as the final settlement of the Company's outstanding receivable balance is based on the price of nickel three months after the month of treatment based on the terms of the off-take agreement.
Cash mining and processing costs for the three and six month periods ended June 30, 2008 totaled $3,660,101 and $7,665,444, providing a cash operating margin of $730,662 and $4,649,472 respectively.
The mining cost per tonne of ore for the three and six month periods ended June 30, 2008 was $92.62 and $100.33, as compared to $111.54 for the fourth quarter of 2007. The decrease in the mining cost per tonne was a result of lower propane consumption which is used to heat the mine through the winter months and operating efficiencies realized through the continued increase in tonnes of ore mined into the second quarter of 2008 compared to the previous two quarters.
Processing costs for the Redstone mill averaged $48.61 and $45.61 per tonne for the three and six month periods ended June 30, 2008 compared to $34.27 per tonne for the fourth quarter of 2007. The increase in the mill processing cost per tonne is a result of the timing of additional routine maintenance required on certain pieces of processing equipment and additional operating salaries and wages. The Company anticipates the mill processing costs to remain in the $40.00 to $45.00 range for the third quarter of 2008 and decreasing to a target of $14.50 once the mill is at full production with the increased tonnage from McWatters.
On April 29, 2008, the Company closed a brokered debt financing arrangement totaling CDN$13,045,000 and US$3,355,000 bearing interest at 14% per annum. Interest of CDN$2,749,950 and US$704,550 was prepaid on closing the brokered financing agreement. The Company expensed $345,430 in prepaid interest for the three months ended June 30, 2008 using the effective interest method. In addition, interest was accrued totaling $99,039 on the USD$10,000,000 the Company had drawn at June 30, 2008 on the USD$15,000,000 credit facility in place with JJNICL.
The Company incurred commission and transaction costs with respect to the JJNICL credit facility and brokered debt financing agreement totaling CDN$1,189,969 and US$405,079. These costs have been deferred and recorded against the current and long-term portions of the Company's long-term debt balance. For the three and six month periods ended June 30, 2008, $308,093 of the deferred commissions and transaction costs were expensed using the effective interest method.
The Company's net loss for the three and six months periods ended June 30, 2008 were $4,875,800 ($0.06 per common share - diluted) and $5,740,847 ($0.07 per common share - diluted) respectively compared to $4,855 ($0.00 per common share diluted) and $670,564 ($0.01 per common share - diluted) for the comparable periods of 2007.
Cash flow from operations for the three months ended June 30, 2008 were $483,953 compared to $4,927,357 in the previous quarter of 2008. The Company's cash flow from operations was negatively impacted in the second quarter of 2008 by declining nickel prices which fell 11.3% over the previous quarter.
Subsequent to the end of the quarter, incentive stock options were granted to certain directors and officers of the company to purchase an aggregate of 1,000,000 common shares exercisable at $0.47 per share for a period of five years. The options were granted pursuant to a stock option plan approved by shareholders on June 14, 2007.
"We have overcome significant difficulties, from permitting issues last year and water problems this spring, to bring the McWatters mine into production. Soon we will be able to extract development ore from the mine and will work diligently throughout the fall to prepare for full production in late 2008 or early 2009. Although the current price of nickel is a concern for all producers, our cost to produce a pound of nickel will be approximately US$3.50 less metal credits as we hit our production targets. We anticipate the Hart mine to come on stream in the second half of 2009, and we do have the option to increase the production rate at McWatters. This could significantly increase cash flow in 2009 even if nickel prices remain at current levels." said Liberty's President and CEO, Gary Nash. This press release contains non-GAAP measures like operating cost per tonne of ore, net cash cost per pound of nickel, etc. Please see the Corporation's MD&A on SEDAR for discussion of non-GAAP performance measures.
