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THE UNITED STATES
All Dollar Amounts are in U.S. Dollars ("US$") Unless Otherwise Indicated
Ivernia Inc. ("Ivernia" or, collectively with its subsidiaries, the "Company")
(TSX:IVW) today reported results for the three months ended March 31, 2014.
Principal activities during the first quarter of 2014 focused on maximizing
production and sales, implementing cost reduction projects, and improving the
company's working capital position.
Concentrate revenue for the first quarter of 2014 was $32.6 million from the
sale of 25,900 tonnes of concentrate containing 17,100 tonnes of lead metal
which was impacted by a previously disclosed rail transport disruption in the
quarter. The Company remained cash flow positive for the quarter with a $1.0
million net increase in cash but generated a net loss after tax of $2.9 million.
FIRST QUARTER 2014 HIGHLIGHTS
Financial
-- Revenue of $32.6 million on the sale of 25,900 tonnes of concentrate
containing 17,100 tonnes of lead.
-- Gross profit of $9.9 million.
-- Cash flow positive with a $1.0 million net increase in cash since
December 31, 2013.
-- Net loss after tax of $2.9 million.
-- On March 31, 2014, we entered into an amendment to the credit facility
with Sprott Resource Lending Partnership ("Sprott") to postpone the
commencement of repayment of principal instalments from March 31, 2014
to June 30, 2014 and to allow the C$20 million principal to be repaid in
equal monthly instalments over a 24 month period ending May 31, 2016 (as
amended, the "Sprott Facility") further strengthening our cash flow
position.
-- As part of amending the Sprott Facility, Ivernia closed a private
placement of 41,666,667 common shares at C$0.12 per share for proceeds
of C$5 million on April 11, 2014 with five existing shareholders to
improve the Company's working capital.
Operational
-- Mining, processing and export operations at the Mine recommenced in
April 2013.
-- Operations continued to be focused on maximizing production and sales
levels in the quarter despite the temporary rail transportation
disruption due to a rainfall event in January.
-- During April 2014 we switched the supply of fuel to the power plant at
the Mine from diesel to natural gas which is expected to result in cost
savings going forward.
-- We produced 26,300 tonnes of concentrate containing 17,300 tonnes of
lead metal.
-- For 2014, we expect to produce and sell between 80,000 and 85,000 tonnes
of lead contained in concentrate.
FINANCIAL AND OPERATING HIGHLIGHTS
(For the three months ended March 31) 2014 2013
(in thousands of United States dollars, unless
otherwise indicated and per share amounts) $ $
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Financial Highlights
Revenue(1) 32,605 -
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Gross profit/(loss) 9,892 (7,041)
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Net loss (2,892) (7,285)
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Basic loss per share (0.00) (0.01)
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Total assets 194,979 196,798
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Cash flow provided by (used in) operating activities 1,169 (7,422)
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Operating Highlights
Ore milled - (000's tonnes) 363.6 -
Average head grade - (% lead) 6.2% -
Recovery - (%) 76.8% -
Concentrate produced - (000's dry tonnes) 26.3 -
Concentrate sold - (000's dry tonnes) 25.9 -
Lead metal in concentrate produced - (000's tonnes) 17.3 -
Lead metal in concentrate sold - (000's tonnes) (3) 17.1 -
Concentrate inventory - (000's of dry tonnes) 4.2 10.1
Average lead price - LME cash settlement- ($ per
pound) (2) 0.96 -
Ivernia's realised average lead sale price - ($ per
pound) 0.96 -
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1. The Mine was placed on care and maintenance in April 2011. In April
2013, we recommenced mining, processing and transportation operations.
2. Average lead price - London Metal Exchange ("LME") cash settlement is
calculated from April 4, 2013 onwards, being the date of restart of
milling and processing operations.
3. The figures for lead metal in concentrate sold for the first quarter of
2014 is subject to adjustment for the final settlement of weights and
assays for concentrate shipped during this period.
OPERATIONS REVIEW
During the first quarter of 2014, the mill treated 363,600 dry metric tonnes of
ore with an average head grade of 6.2% lead. The plant recovered an average of
77% of the lead in ore fed to the mill, to produce 26,300 dry metric tonnes of
concentrate with an average grade of 65.6% containing 17,300 tonnes of lead
metal. The Company sold approximately 25,900 tonnes of concentrate containing
17,100 tonnes of lead metal. For the comparative quarter in 2013 the mine was
not operational. When compared to the fourth quarter of 2013, this quarter's
operational results are largely in line. When compared to the fourth quarter of
2013, the amount of ore treated through the mill was approximately 6% greater in
the first quarter of 2014; however, the average head grade was approximately 9%
lower in the first quarter of 2014 which resulted in the amount of lead metal
produced being approximately 4% lower in the first quarter of 2014. Recovery was
largely stable between the fourth quarter of 2013 and the first quarter of 2014.
In the first quarter of 2014, the Company faced a variety of challenges from
extreme weather events to unusual ore characteristics. During January 2014
significant rainfall occurred within the Wiluna and Kalgoorlie regions which cut
access to the Mine site for intermittent periods. Critical supplies of food,
fuel and reagents were slowed impacting operations at the Mine. During this
period the supply chain was shut down by the washout of several sections of the
rail line between Leonora and Kalgoorlie. This meant we were unable to ship
concentrate to our customers. During this time, inventory levels increased as
concentrate was stockpiled in containers for shipment pending re-opening of the
rail line. The rail line was closed for a period of 3 to 4 weeks and is now back
to full operation.
Operating results for the quarter delivered periods of lower than expected head
grades and poor recoveries which was driven by atypical ore characteristics. As
a result of these supply chain interruptions and atypical ore characteristics
sales of lead metal in concentrate were approximately 2,500 tonnes lower than
the sales of 19,600 tonnes achieved during the fourth quarter of 2013.
Contingency plans were activated with the result being that both grade and
recovery improved to above expectations by the end of the quarter. Production
recovery plans have been activated to recover the lost production and sales
within the second and third quarters of 2014.
Despite the interruptions to the sales supply chain, sales of concentrates in
the quarter approximated production levels. The market for the Company's
concentrate remains solid with sales booked for the balance of 2014's forecast
production.
While the Company was cash flow positive in the first quarter with a $1.0
million net increase in cash over the end of the fourth quarter of 2013, the
Company generated a net loss of $2.9 million for the quarter. The net loss for
the quarter was partially impacted by lower LME lead prices as well as lower
than expected concentrate sales and production due to the rail transportation
disruption caused by the rainfall event in January 2014. By the end of the first
quarter, the LME three month forward lead price had reduced from $1.01 per pound
as at December 31, 2013 to $0.94 per pound leading to a $2.2 million write down
of inventory to net realizable value primarily relating to the Mine's medium
grade stockpiles.
We commenced two major projects at the Mine during the first quarter of 2014.
The first is a gas power generation project which resulted in the Mine switching
the supply of fuel to the power plant from diesel to natural gas during April
2014. This will result in cost savings for the Company going forward. The second
is a Tailings Storage Facility ("TSF") lift. This involves the raising of the
dam walls to enable greater storage capacity within the TSF to support
continuous processing operations.
Summary quarterly mine production, process production, shipments and inventories:
(For the three months ended March 31) 2014 2013
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Mining
Ore mined - 000's tonnes(1) 470.2 -
Total ore and waste mined - 000's of BCM 810.6 -
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Processing
Ore milled - 000's tonnes 363.6 -
Average head grade - % lead 6.2% -
Average recovery - % 76.8% -
Concentrate produced - 000's dry tonnes 26.3 -
Concentrate grade - % lead 65.6% -
Lead metal in concentrate produced - 000's tonnes 17.3 -
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Sales and inventories
Concentrate sold - 000's dry tonnes 25.9 -
Concentrate grade - % lead 65.8% -
Lead metal in concentrate sold - 000's tonnes 17.1 -
Concentrate inventory - 000's dry tonnes 4.2 10.1
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(1) Ore mined does not include low grade ore
The Mine was not operational during the first quarter of 2013. In April, 2013,
the Company recommenced mining, processing and transportation operations.
Production Outlook
We will continue to focus on maximizing production and sales levels and
delivering continuous cost improvements. This requires continued improvement of
the operational efficiency of the processing plant, increasing surge capacity
throughout the concentrate handling and logistics chain and a focus on reducing
the variability of ore delivered to the processing plant.
Despite the brief interruption due to heavy rainfall encountered during the
first quarter, full year production and sales guidance remains unchanged, at
between 80,000 and 85,000 tonnes of lead contained in concentrate ("2014
Guidance"). Production during the second quarter of 2014 is expected to exceed
the first quarter as head grades improve and weather conditions return to
normal. The 2014 Guidance is a forward-looking statement based on certain
material factors and assumptions. See "Forward-Looking Statements".
Capital Resources, Liquidity and Working Capital Requirements
As of March 31, 2014, the Company had approximately $8.0 million in cash and
cash equivalents and has a working capital deficiency of $0.03 million. The
Company had a working capital deficiency as at December 31, 2013 of
approximately $7.1 million due, in part, to the current portion of its long term
debt. As a result, the Finance Committee of the Board of Directors worked with
management starting at the end of 2013 to help ensure that the Company remains
cash flow positive in 2014 and to improve the Company's working capital
position. The Finance Committee and management determined that given the
budgeted expenditures for 2014, the state of lead prices in recent months,
interest payments, the commencement of principal repayments to Sprott on March
31, 2014 and the potentially significant consequences that even a minor
transportation disruption (such as the one that occurred in late January 2014)
could have on the Company's cash flows, that it was necessary for the Company to
take proactive steps to improve its working capital position and to reduce the
risk of the Company becoming cash flow negative in 2014. Accordingly, the
Finance Committee engaged in discussions with Sprott which resulted in amending
the Sprott Facility on March 31, 2014 and closing a related private placement of
common shares for proceeds of C$5 million on April 11, 2014. The Sprott
Facility, as amended, and related private placement proceeds have improved the
Company's working capital position since year end. In particular, the Sprott
Facility, as amended, postpones the commencement of principal repayments by
three months until June 30, 2014 and allows Ivernia to repay the C$20 million
principal in equal monthly instalments of C$833,333 over 24 months compared to
monthly instalments of C$1,666,667 over 12 months. Management expects that the
Company will remain cash flow positive for 2014, assuming current lead prices
and foreign exchange rates do not materially deteriorate. However, ongoing cash
flow from operating activities continues to be exposed to fluctuations in metal
prices, production and shipping rates, the A$/US$ exchange rate and demand for
lead concentrate. See "Risk Factors - Funding Requirements" in the annual
information form dated March 24, 2014 ("2013 AIF") and "Forward-Looking
Statements" below. If management considers cash flow from operating activities
to be insufficient to fund non-operating activities going forward or that
working capital will not be sufficient to meet the covenants under the Sprott
Facility, the Company may need to consider additional financing in the future.
Management's Discussion and Analysis and Consolidated Financial Statements
Ivernia's unaudited financial statements and management's discussion and
analysis for the three months ended March 31, 2014 will be filed today and will
be available on the Ivernia website at www.ivernia.com or SEDAR at www.sedar.com
About Ivernia
Ivernia is an international base metal mining company and the owner of the Paroo
Station Mine, located in Western Australia. Ivernia trades under the symbol
"IVW" on the Toronto Stock Exchange. Ivernia and the Mining Operations operate
under a management services arrangement with Enirgi Group Corporation, Ivernia's
majority shareholder.
Additional information on Ivernia is available on the Company's website at
www.ivernia.com and at SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements contained in this news release are forward-looking
information within the meaning of securities laws. All statements included
herein (other than statements of historical facts) which address activities,
events or developments that management anticipates will or may occur in the
future are forward-looking statements, including statements as to the following:
the 2014 Guidance or other future targets and estimates for production and
sales, the Company's ability to meet its working capital needs and debt
repayments in the near term, projections with respect to cash flows and working
capital, any additional financing requirements to operate the Mine, the cost and
timing for completion of capital projects necessary for ongoing operations, the
Company's ability to comply with the transportation and operating conditions for
the Mine, capital expenditures, operating costs, cash costs, mineral resources,
mineral reserves, life of mine, recovery rates, grades and prices, business
strategies and measures to implement such strategies, competitive strengths,
estimated goals and plans for Ivernia's future business operations, lead market
outlook and other such matters. Forward-looking statements are often, but not
always, identified by the use of words such as "seek", "anticipate",
"contemplate", "target", "believe", "plan", "estimate", "expect", and "intend"
and statements that an event or result "may", "will", "can", "should", "could"
or "might" occur or be achieved and other similar expressions.
These statements are based upon certain reasonable factors, assumptions and
analyses made by management in light of its experience and perception of
historical trends, current conditions and expected future developments, as well
as other factors management believes are appropriate in the circumstances.
However, whether actual results and developments will conform with management's
expectations is subject to a number of risks and uncertainties, including
factors underlying management's assumptions, such as, expected concentrate
sales, the costs and other capital expenditures required to maintain operations
and transportation, the timing, need and ability to raise any additional
financing and the risks relating to ramping up mining and milling throughput and
operations, funding requirements, operations being placed on care and
maintenance, matters relating to regulatory compliance and approvals,
shareholder dilution, matters relating to public opinion, presence of a majority
shareholder and Management Services Agreements, matters related to the Esperance
settlement and shipments through the Port of Fremantle, regulatory proceedings
and litigation and general operating risks such as metal price volatility, lead
carbonate concentrate treatment charges, exchange rates, the fact that the
Company has a single mineral property, health and safety, environmental factors,
mining risks, metallurgy, labour and employment regulations, government
regulations, insurance, dependence on key personnel, constraints on cash
distribution from the Mine, the nature of mineral exploration and development
and common share price volatility. Additional factors and considerations are
discussed in the 2013 AIF and elsewhere in other documents filed from time to
time by Ivernia with Canadian securities regulatory authorities. While Ivernia
considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect. These factors may cause the
actual results of the Company to differ materially from those discussed in the
forward-looking statements, and there can be no assurance that the actual
results or developments anticipated by management will be realized or, even if
substantially realized, that they will have the expected results on the Company.
Undue importance should not be placed on forward-looking information nor should
reliance be placed upon this information as of any other date. Except as
required by law, while it may elect to, Ivernia is under no obligation and does
not undertake to update this information at any particular time.
FOR FURTHER INFORMATION PLEASE CONTACT:
Ivernia Inc.
Jessica Helm
VP, Corporate Communications
(416) 867 9298
investor@ivernia.ca
www.ivernia.com
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