GlobeStar Reports Strong Third Quarter 2009 Results With Record Quarterly Revenues and Operating Cash Flow
Date : 11/12/2009 @ 5:32PM
Source : MarketWire Canada
TORONTO, ONTARIO--(Marketwire - Nov. 12, 2009) -
(All dollar amounts are expressed in United States currency unless otherwise stated.)
GlobeStar Mining Corporation ("GlobeStar") (TSX:GMI) today announced key highlights of its financial and operational results for the three months and nine months ended September 30, 2009. Copies of GlobeStar's third quarter 2009 financial statements and management's discussion and analysis are available on GlobeStar's website at www.globestarmining.com and at www.sedar.com.
GlobeStar will hold a conference call at 9:00 a.m. (EST) on Friday, November 13, 2009 to discuss the third quarter 2009 results. Call-in details are included at the end of this release. A short presentation will be made during the conference call, for which presentation slides will be available on the investor relations tab of GlobeStar's website in advance of the call.
Highlights
- Gross revenues for the third quarter of 2009 were approximately $20.7 million, operating earnings were $8.9 million and cash flows from operating activities were $8.0 million.
- Gross revenues for the nine months ended September 30, 2009 were approximately $52.1 million, operating earnings were $18.5 million and cash flows from operating activities were $16.8 million.
- Cash, restricted cash and accounts receivable totalled approximately $18.3 million as at September 30, 2009, as compared to $13.4 million as at June 30, 2009.
- GlobeStar made its quarterly scheduled repayment of long-term debt on September 30, 2009 in the amount of approximately $2.7 million, and was in compliance with all covenants under the debt facility as of that date.
- Cash costs during the third quarter of 2009 were approximately $1.78 per payable pound of copper sold before byproduct credits and approximately $0.73 per payable pound of copper sold after byproduct credits.
- Third quarter production totalled approximately 6.2 million pounds of copper, 3,100 ounces of gold and 148,500 ounces of silver.
- The 2009 exploration program is progressing according to plan, with the continuation of the drilling program in the Bayaguana District and the commencement of drilling at the Maimon Cluster scheduled in the fourth quarter.
- Exploration at the Moblan lithium deposit in Quebec continued with trench sampling, excavation and mapping by GlobeStar's partner in the property.
- GlobeStar was selected to receive an Outstanding Business Achievement Award for Corporate Governance by the Ontario Chamber of Commerce.
Third Quarter 2009 Financial Statements
GlobeStar commenced commercial production at its wholly-owned Cerro de Maimon copper-gold-silver mine and related facilities (the "Cerro de Maimon Mine") on January 1, 2009. Consequently, there are no comparable operating results for 2008.
Results of Operations: During the third quarter of 2009, GlobeStar sold approximately 10,800 tonnes of copper concentrate, plus dore and related products containing gold and silver. Gross revenues from the sale of concentrate during the third quarter of 2009 totalled approximately $17.9 million, while the sale of gold-silver dore and related products resulted in gross revenues of approximately $2.8 million.
Refining, treatment, freight and other marketing-related charges totalled approximately $2.6 million and operating expenses were approximately $6.8 million during the third quarter of 2009.
Cash costs per payable pound of copper sold were approximately $1.78 before byproduct credits and $0.73 after byproduct credits. These cash costs include mine site operating costs as well as smelting, refining, freight and royalty charges related to marketing the copper concentrate.
Operating earnings were approximately $8.9 million, after deducting amortization and depletion of $2.5 million. GlobeStar recorded an unrealized loss of $3.2 million during the third quarter of 2009 on the change in fair value of the outstanding copper, gold and silver hedges entered into under the terms of its debt facility. The fair value of the hedges declined primarily due to the increase in the price of copper during the quarter. During 2010, the amount of copper and gold covered by hedging contracts will decrease from 2009 levels by approximately 67% and 37%, respectively.
Net income for the third quarter of 2009 totalled $1.4 million.
The following condensed Statements of Income outline the financial results of operations during the three and nine months ended September 30, 2009:
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Three Months Nine Months
Statements of Income (Loss) (in U.S. Ended Ended
$millions) September 30, September 30
(unaudited) 2009 2009,
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Gross revenues 20.7 52.1
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Refining, treatment and other charges (2.6) (7.7)
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Net revenues 18.1 44.4
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Operating expenses (6.8) (19.1)
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Amortization & depletion of mineral properties (2.4) (6.8)
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Operating earnings 8.9 18.5
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General & administrative expenses (1.7) (4.4)
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Amortization and exploration property write
downs (0.0) (0.3)
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Interest (0.4) (1.6)
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Foreign exchange losses & realized derivative
losses (1.7) (2.0)
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Unrealized derivative losses (3.2) (16.5)
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Income tax (expense) recovery (0.5) 0.3
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Net income (loss) 1.4 (6.0)
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The realized prices for copper, gold and silver sales during the third quarter of 2009 were $2.89 per pound, $942 per ounce and $17.52 per ounce, respectively. The realized prices incorporate the expected forward prices for the month of settlement. These realized prices compare with the average London Metal Exchange cash settlement price of $2.65 per pound for copper, the average of the London morning and afternoon daily spot prices of $960 per ounce for gold and the London brokers official daily spot price of $14.69 per ounce for silver.
Statements of Cash Flows: Cash flows from operating activities were approximately $8.0 million during the third quarter of 2009, with a total increase in cash for the period of approximately $3.6 million.
GlobeStar made its scheduled long-term debt repayment of approximately $2.7 million, including accrued interest, on September 30, 2009. Pursuant to the requirements of GlobeStar's senior debt facility with Nedbank, the debt reserve account remained fully funded during the third quarter of 2009 in the amount of $5.3 million and GlobeStar was in compliance with all covenants under such facility at the end of the third quarter of 2009.
Exploration expenditures were approximately $1.0 million during the third quarter of 2009, with activities focused on diamond drilling in the Bayaguana gold-copper district and geophysical mapping and analysis in the vicinity of the Cerro de Maimon Mine.
In addition, exploration at the Cerro de Maimon Mine continued during the third quarter, with a four-hole drilling program completed in September and the interpretation of earlier drilling results, at a cost of approximately $0.3 million.
Expenditures on sustaining capital projects and construction related to completing the water ponds at the Cerro de Maimon Mine totalled approximately $1.0 million during the third quarter of 2009.
The following condensed Statements of Cash Flows outline GlobeStar's cash flows during the three and nine months ended September 30, 2009:
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Three Months Nine Months
Statements of Cash Flows (in U.S. Ended Ended
$millions) September 30, September 30,
(unaudited) 2009 2009
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Cash flows from operating activities 8.0 16.8
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Repayment of long-term debt (principal) (2.2) (4.4)
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Funding of debt reserve account 0.2 (5.3)
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Exploration expenditures (1.0) (2.0)
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Drilling at Cerro de Maimón Mine (0.3) (0.5)
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Sustaining capital expenditures (1.0) (3.3)
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Other cash flow items, including net proceeds
from pre-commercial production sales (0.1) 3.0
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Increase in cash 3.6 4.3
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Balance Sheet Data: Cash, restricted cash and accounts receivable were approximately $18.3 million at September 30, 2009, an increase of $4.9 million during the third quarter of 2009. Saleable metal inventories were approximately $2.1 million at September 30, 2009 versus $1.5 million at the June 30, 2009. The amount outstanding on GlobeStar's senior debt facility with Nedbank totalled $39.9 million at the end of the third quarter of 2009, after making the scheduled quarterly repayment of $2.7 million, including accrued interest, on September 30, 2009.
The following condensed Balance Sheets outline GlobeStar's financial position at September 30, 2009 and June 30, 2009:
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As at As at
Balance Sheets (in U.S. $millions) September 30, June 30,
(unaudited) 2009 2009
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Assets
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Cash, including restricted cash 12.8 9.4
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Accounts receivable 5.5 4.1
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Product inventory (at cost) 2.1 1.5
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All other assets 103.4 104.2
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Total Assets 123.8 119.2
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Liabilities & Equity
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Accounts payable and accrued liabilities 8.9 8.2
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Long-term debt 39.9 42.2
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All other liabilities 11.4 6.8
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Equity 63.6 62.0
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Total Liabilities & Equity 123.8 119.2
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Operating Results
A summary of the operating results for the first three quarters of 2009 is outlined in the following tables.
During the third quarter of 2009, the mine and sulphide plant continued to operate efficiently, with no significant issues affecting production. Mining activity was ahead of schedule during the third quarter of 2009 and, as a result, mine production will be scaled back during the fourth quarter in order to return to the annual mine plan. Concentrate production in the third quarter of 2009 increased by approximately 11% compared to the second quarter, due primarily to higher throughput in the sulphide plant, which averaged approximately 1,150 tonnes per day during the third quarter. The plant is on schedule to process an estimated 400,000 tonnes of sulphide ore and produce an estimated 25 million pounds of copper for 2009.
The following table outlines the sulphide plant's operating statistics during the first three quarters of 2009:
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Three Months Three Months Three Months
Ended Ended Ended
Sulphide Plant - Operating September 30, June 30, March 31,
Statistics 2009 2009 2009
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Sulphide ore processed
(tonnes) 106,000 98,000 103,000
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Copper grade 3.1% 3.2% 3.9%
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Gold grade g/t, Silver
grade g/t 1.3, 74 1.0, 59 1.0, 87
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Copper, gold & silver 84%, 33%, 84%, 31%, 86%, 45%,
recoveries 51% 50% 67%
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Copper concentrate produced
(tonnes) 11,700 10,500 12,500
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Copper in concentrate (pounds) 6.2 million 5.9 million 7.6 million
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Gold & silver in concentrate
(ounces) 1,400, 128,000 1,000, 93,000 1,600, 192,000
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The oxide plant achieved its highest quarterly production to date in the third quarter, as a result of adjustments to the reagent quantities in the circuit and the introduction of a new flocculant system. During the fourth quarter of 2009 and beyond, GlobeStar intends to ship oxide production in the form of precipitates rather than as dore, in order to minimize any recovery losses in the final processing stage and maximize revenues.
The following table outlines the oxide plant's operating statistics during the first three quarters of 2009:
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Three Months Three Months Three Months
Ended Ended Ended
Oxide Plant - Operating September 30, June 30, March 31,
Statistics 2009 2009 2009
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Oxide ore processed (tonnes) 61,000 50,000 34,000
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Gold grade g/t, Silver
grade g/t 1.1, 26 1.1, 17 1.3, 65
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Gold & silver recoveries 79%, 41% 80%, 54% 84%, 35%
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Gold produced (ounces) 1,700 1,460 1,200
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Silver produced (ounces) 20,500 14,400 25,000
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Cerro de Maimon Exploration
During the third quarter, assays results received for the drill program performed earlier in 2009 indicated a 200-metre extension of the Cerro de Maimon sulphide ore zone to the northwest. Additional drilling and engineering is required to determine if this mineralization can be added to the estimated mineral reserves at the Cerro de Maimon Mine.
Third quarter exploration activities in the Maimon Cluster, an area defined by a five-kilometre radius around the Cerro de Maimon Mine, included geological mapping, soil sampling and the completion of the interpretation of an IP survey carried out earlier in the year. A number of prospective zones in which IP and geochemical anomalies coincide will be tested by drilling in the fourth quarter of 2009.
Bayaguana District Exploration
GlobeStar's Bayaguana district consists of 72 square kilometres of mineral concessions, located approximately 60 kilometres east of the Cerro de Maimon Mine, and hosts three geologically important copper and gold deposits. The largest mineral deposit is Dona Amanda which has a Canadian National Instrument ("NI") 43-101 compliant inferred mineral resource estimated at 128 million tonnes grading 0.31% copper, 0.19 grams of gold per tonne and 1.43 grams of silver per tonne at a cut-off grade of 0.15% copper.
GlobeStar's 2009 exploration program has completed geological, geophysical and geochemical surveys in the eastern portion of the Bayaguana district and has drilled approximately 2,170 metres in nine holes in La Palma East area. Assay results received in the third quarter of 2009 show that sulphide mineralization has been encountered in narrow (less than 2 metres wide) horizons, which have assayed up to 4% copper and minor amounts of gold and silver.
A nine-hole drill program was completed during the third quarter at the Cerro Mariposa target, with assays received to the end of the quarter indicating the existence of a structurally-controlled massive sulphide mineralization previously unknown. Any decision to reinitiate drilling at Cerro Mariposa will be made after all assays have been received and a complete evaluation has been completed.
These geologically encouraging results have resulted in a continuation of the drill program in the Mariposa area located northwest of La Palma East near the Dona Loretta mineral deposit which has a NI-43-101 compliant estimated inferred mineral resource of 8.2 million tonnes grading 0.5% copper at a cut-off grade of 0.25% copper. The main objective of the current drilling program at Dona Loretta, which will be completed during the fourth quarter, is to extend the known resources in the property.
The Cerro Kiosko deposit has a NI-43-101 compliant estimated indicated and inferred mineral resource of 4.9 million tonnes grading 0.98% copper, 2.0 grams of gold per tonne and 5.1 grams of silver per tonne at a cut-off grade of 0.35 grams of gold per tonne. The Kiosko mineral system remains open to the south and drilling in early 2010 will be directed towards increasing this resource.
Cumpie Hill Nickel Laterite Deposit
Coincident with the recent resurgence in the price of nickel, GlobeStar is evaluating the options available to reinitiate the development of the Cumpie Hill nickel laterite deposit located four kilometres from the Cerro de Maimon Mine. Cumpie Hill has a NI 43-101-compliant estimated indicated and inferred mineral resource of 6.2 million tonnes grading 1.5% nickel at a cut-off grade of 1% nickel containing an estimated 200 million pounds of nickel.
Moblan Lithium Project
The Moblan West lithium deposit, located in northern Quebec, is 60% owned by GlobeStar and hosts a NI 43-101-compliant estimated inferred mineral resource of 5.3 million tonnes grading 1.5% Li2O at a cut-off grade of 0.43% Li2O.
During the third quarter of 2009, exploration activities carried out by GlobeStar's partner, SOQUEM Inc., included excavation, mapping and sampling of 11 trenches.
The deposit is suitable to open pit mining at an estimated stripping ratio of less than 1 to 1. Preliminary metallurgical testing indicates that a high-quality lithium concentrate, containing approximately 91% spodumene and 7.2% Li2O, may be produced from the Moblan West lithium deposit and sold to end users in the glass and ceramic sectors or further upgraded to battery-quality lithium carbonate.
GlobeStar is currently determining the most advantageous strategy for continuing the development of this important lithium resource, which, based on current estimated grades, could be one of the highest-grade undeveloped lithium deposits in the world.
Conference Call Details
GlobeStar will host a conference call on Friday, November 13, 2009 at 9:00 a.m. (EST) to discuss the third quarter 2009 results. The conference call may be accessed by dialing 1-888-789-9572 in North America or 1-416-695-7806 internationally. Please dial in the participant pass code 3573015. The archived conference call can be accessed by following the instructions in the investor relations tab on GlobeStar's website.
A short presentation will be made during the conference call and the presentation slides will be available in the investor relations tab of GlobeStar's website at www.globestarmining.com.
About GlobeStar
GlobeStar Mining Corporation is a Canadian-based mining and exploration company producing copper, gold and silver at its Cerro de Maimon Mine in the Dominican Republic. GlobeStar is exploring for copper and gold on its extensive mineral concessions in the Dominican Republic, and also holds significant interests in the Moblan Lithium Project in Quebec, Canada, and the Cumpie Hill lateritic nickel deposit in the Dominican Republic. GlobeStar maintains a listing on the Toronto Stock Exchange (symbol: GMI).
A.E. Olson, M AusIMM, GlobeStar's Senior Vice President and COO and a Qualified Person as defined under NI 43-101, supervised the preparation of and verified the technical information contained in this release, other than that related to the Moblan Lithium Project, which was verified by Gary H. K. Pearse, P.Eng., of Equapolar Resource Consultants, who is also a Qualified Person under NI 43-101.
Cautionary Statements Concerning Forward-Looking Statements
This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to as ''forward-looking statements''). Forward-looking statements include, but are not limited to, possible events and statements with respect to possible events. The words "plans," "expects," "is expected," "scheduled," "estimates," "forecasts," "projects," "intends," "anticipates," or "believes," or variations of such words and phrases or statements that certain actions, events or results "may," "could," "would," "might," or "will be taken," "occur," and similar expressions identify forward-looking statements.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable to GlobeStar as of the date of such statements, are inherently subject to significant risks and uncertainties and may not be appropriate for use other than as used herein. These estimates and assumptions include, but are not limited to: (a) the accuracy of geologic interpretations and studies of the orebodies at the Cerro de Maimon Mine; (b) the content of the orebody in respect of the Cerro de Maimon Mine; (c) the ability of the sulphide and oxide plants to operate at their design capacities; (d) certain assumptions relating to the market price for copper, gold and silver and the expected levels of supply and demand for copper, gold and silver; (e) there being no significant disruptions affecting operations at the Cerro de Maimon Mine, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment, naturally occurring events or otherwise; (f) production at the Cerro de Maimon Mine being consistent with GlobeStar's current expectations; (g) the continued operation of the Cerro de Maimon Mine; (h) the ability of GlobeStar to successfully continue its exploration activities in respect of the Maimon Cluster, Bayaguana District properties, Moblan deposit and other prospects; and (i) the accuracy of geologic interpretations and drill results in respect of the Maimon Cluster, Bayaguana District properties, Moblan deposit and other prospects. Because of these risks and uncertainties and, as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated, implied or indicated by these forward-looking statements. Although GlobeStar believes that the expectations reflected in its forward-looking statements are reasonable, we can give no assurances that the expectations of any forward-looking statements will prove to be correct. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in the "Risk Factors" section of GlobeStar's most recently filed Annual Information Form and GlobeStar's other filings with the securities regulators of Canada. These factors are not intended to represent a complete list of the factors that could affect GlobeStar. GlobeStar disclaims any intention, and assumes no obligation, to update or revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise, or to explain any material difference between actual events and such forward-looking statements, except as required pursuant to applicable securities laws.
