Comaplex Minerals Corp. Announces Third Quarter 2009 Results
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE
UNITED STATES./
Financial and Operational Highlights
Three Months Nine Months
Ended Ended
September 30 September 30
2009 2008 2009 2008
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Financial ($000, except $ per share)
Revenue
Mineral Division 59 328 175 656
Oil and Gas Division 367 948 1,349 2,651
Cash Flow from Operations 202 774 165 1,916
Per Share Basic 0.00 0.01 0.00 0.04
Per Share Diluted 0.00 0.01 0.00 0.04
Net Earnings (loss) (397) 95 (1,713) 1,794
Per Share Basic (0.01) 0.00 (0.03) 0.04
Per Share Diluted (0.01) 0.00 (0.03) 0.04
Capital Expenditures
Mineral Division 5,684 9,559 12,657 26,757
Oil and Gas Division 112 115 460 174
Total Assets
Mineral Division 144,245 127,725
Oil and Gas Division 7,837 8,687
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Oil and Gas Operations
Barrels of Oil Equivalent (BOE)
per Day(1) 139 179 157 176
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(1) Barrels of Oil Equivalent (BOE) are calculated using a conversion
ratio of 6 MCF to 1 barrel of oil. The conversion is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead
and as such may be misleading if used in isolation.
The TSX does not accept responsibility for the accuracy of this release.
Report to Shareholders
Comaplex Minerals Corp (Comaplex or the Company) is pleased to report its operating and financial results for the three months and nine months ended
Comaplex continued to make significant progress during the third quarter of 2009 in advancing its high-grade Meliadine West gold project towards completion of a Feasibility Study and a production decision thereafter. The Company continues to be very encouraged by the progress and results obtained to date.
Strong drilling results and robust gold prices have assisted in increasing share value for Comaplex. The higher pricing environment continues to provide additional incentive for the rapid advancement of the Meliadine project and will result in less dilution to existing shareholders when future financings are completed.
Financial and Budgeting
Comaplex's working capital position at
During the third quarter, Comaplex completed a private placement for 5,530,000 common shares at a price of
Comaplex has completed its 2009 Meliadine West exploration program which consisted of the completion of a preliminary assessment during the first quarter of 2009, a 23,600 meter drill program to increase and upgrade its gold resource and the commencement of studies required for a Feasibility Study which will be completed in the fourth quarter of 2009. Comaplex expects to begin initiation of a full Feasibility Study during the first quarter of 2010.
The current working capital, anticipated cash flow from oil and gas operations and investment income are more than adequate to cover all planned expenditures for the remainder of the year and provides the necessary financing for the Company in 2010 to complete Feasibility and if positive, obtain permitting to commence with the development of facilities.
Meliadine West Project Update
An aggressive exploration program was completed on the Meliadine West property in 2009 with approximately 85 percent of the
The 2009 drilling program of 23,600 meters was completed in mid-September with 109 holes drilled consisting of 33 holes (2,712 meters) in F Zone, 35 holes (16,732 meters) in Tiriganiaq, 16 holes (3,013 meters) in reconnaissance and 25 geotechnical holes (1,143 meters).
The 2009 program results continue to underscore the high-quality nature of the Meliadine West property and its exploration upside. Drilling in the Western Deeps portion of the Tiriganiaq gold deposit was very successful with additional gold mineralization outlined in the 1255 lode and delineation of multiple mineralized surfaces in the 1150 series of lodes. Gold mineralization in the 1153 lode has been extended over more than 800 meters of plunge/strike length with a gold tenor comparable to the 1255 lode. Additional mineralized surfaces in the 1154 and 1152 lodes are also expected to add to the resource base. All of the lodes are open down plunge to the west and drilling in the Western Deeps also intersected strong gold mineralization in several new lodes that will be targets for delineation drilling in 2010.
F Zone drilling was undertaken to increase the open pit resource base in the zone with a goal of moving as much of the potential open pit resources as possible to the indicated category for inclusion in the Feasibility study. The assay results were very positive with widening of existing mineralization and addition of new open pittable zones in the deposit.
Meliadine East Project Update
Drilling results from the 2009 drilling program for the Discovery deposit were recently released. The Discovery deposit is located approximately 15 kilometers east of the Tiriganiaq gold deposit, located on the Meliadine West property and is owned 50 percent by Comaplex and 50 percent by Meliadine Resources Ltd., who is the operator.
The 2009 drilling program at Meliadine East was concentrated on the Discovery gold deposit with the primary goal of testing the margins of the potential open pit resources in the deposit. A total of 3,007 meters in 24 drill holes were completed, including ten geotechnical holes. Further evaluation work is presently being conducted on this property.
Note: Detailed drill results from the 2009 programs at both Meliadine West and Meliadine East were press released as results were obtained and can be accessed on SEDAR or the Company's website at www.comaplex.com.
Interim Studies
Golder Associates is presently in the process of processing and compiling geotechnical, geochemical and environmental data completed on the two gold deposits in the Meliadine West (Tiriganiaq and F Zone) and on the Discovery deposit on the Meliadine East property. These studies are required and will be used in the Feasibility Study and the regulatory/permitting documentation.
Comaplex is nearing completion of a Preliminary Project Description (PPD) for the regulators. Comaplex anticipates filing this document in the fourth quarter of 2009 which represents the first major step in permitting the Meliadine gold project.
Future Resource Estimates
Comaplex will incorporate the 2009 drill results into updated resource estimates for the F Zone and Tiriganiaq deposits at Meliadine West. The Company also plans to complete an updated resource estimate for the Discovery deposit on Meliadine East and new resource estimates on the Wolf and Pump gold deposits on the Meliadine West property. Comaplex has not released resource estimates on either of these deposits although they have undergone considerable drilling by Western Mining Corporation in the latter half of the 1990's. This work will form the basis for drill testing of the two deposits in 2010. Comaplex anticipates releasing these updated and new resource estimates prior to the end of the fourth quarter of 2009.
Outlook
Comaplex continues to rapidly advance the project towards completion of Feasibility and permitting applications. Present studies are proceeding as planned and should be completed as scheduled in 2009. The Company is adequately financed to complete Feasibility and permitting.
(signed)
George F. Fink
President, Chief Executive Officer and Director
The following press release is a review of the operations and financial position for Comaplex Minerals Corp. (the Company or Comaplex) and should be read in conjunction with the unaudited financial statements for the nine months ended
Forward-looking Information
Certain statements contained in this press release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this press release includes, but is not limited to: expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; gold, oil and natural gas prices and demand; expansion and other development trends of the precious metal industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.
All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.
The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: the risks of foreign exchange fluctuations; inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the existence of operating risks; volatility of precious metals and oil and natural gas prices; precious metal and oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control.
In particular, the Company's largest project, the 'Meliadine West Gold Project', faces risks which are common to all projects in the current economic climate. These include delays caused by weather, labour and equipment shortages, available technical expertise, and contractor availability. Additional risks could include reductions in gold resources and mineable grades and non-technical issues, such as variations in commodity prices; all would impact the Company's ability to raise capital and influence project economics.
Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Except as required by law, Comaplex disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
The forward-looking information contained herein is expressly qualified by this cautionary statement.
Financial and Operational Discussion
QUARTERLY COMPARISONS
2009 2008
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Q3 Q2 Q1 Q4 Q3 Q2 Q1
Financial ($000, except
$ per share)
Revenue
Mineral Division 59 77 39 152 328 136 192
Oil and Gas Division 367 425 557 817 948 914 789
Cash Flow from Operations 202 (358) 321 336 774 421 721
Per Share Basic 0.00 (0.01) 0.01 0.01 0.01 0.01 0.02
Per Share Diluted 0.00 (0.01) 0.01 0.01 0.01 0.01 0.02
Net Earnings (Loss) (397) (984) (332) 328 95 1,601 98
Per Share Basic (0.01) (0.02) (0.01) 0.01 0.00 0.03 0.00
Per Share Diluted (0.01) (0.02) (0.01) 0.01 0.00 0.03 0.00
Capital Expenditures
and Acquisitions
Mineral Division 5,684 3,851 3,122 8,292 9,559 8,749 8,449
Oil and Gas Division 112 184 164 253 115 41 18
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Oil and Gas Operations
Barrels of Oil Equivalent
(BOE) per day(1) 139 150 177 195 179 162 186
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2007
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Q4 Q3 Q2 Q1
Financial ($000, except $ per share)
Revenue
Mineral Division 282 288 407 89
Oil and Gas Division 818 671 759 781
Cash Flow from Operations (76) 645 851 685
Per Share Basic (0.00) 0.01 0.02 0.01
Per Share Diluted (0.00) 0.01 0.02 0.01
Net Earnings (Loss) 2,854 (40) 270 (711)
Per Share Basic 0.06 (0.00) 0.01 (0.02)
Per Share Diluted 0.06 (0.00) 0.01 (0.02)
Capital Expenditures and Acquisitions
Mineral Division 3,686 9,344 4,468 2,701
Oil and Gas Division 38 71 81 42
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Oil and Gas Operations
Barrels of Oil Equivalent (BOE) per day(1) 207 195 196 227
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(1) Barrels of Oil Equivalent (BOE) are calculated using a conversion
ratio of 6 MCF to 1 barrel of oil. The conversion is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead
and as such may be misleading if used in isolation.
Revenues
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Revenue:
Mineral Division 59 77 328 175 656
Oil and Gas Sales 369 394 1,002 1,244 2,944
Investment income 86 78 196 246 446
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Gross Revenue 514 549 1,526 1,665 4,046
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Average Realized
Prices:
Natural gas
(per MCF) 3.48 3.76 9.11 4.20 9.13
Natural gas liquids
(per barrel) 49.62 41.13 82.20 37.04 84.83
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The mineral revenue decrease of
Gross revenue from the Company's petroleum and natural gas properties for the three and nine months ended
Production
Three months ended Nine months ended
September June 30, September September September
30, 2009 2009 30, 2008 30, 2009 30, 2008
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Natural gas
(MCF per day) 602 672 846 718 832
Natural gas liquids
(barrels per day) 39 43 38 37 37
Total BOE per day 139 150 179 157 176
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The Company anticipates an approximate 12 percent annual decline rate in
2009 from its existing production. The decline rate for the first nine months
of 2009 was partially offset from production from drilling on the Garrington
Elkton property. The above mentioned dispute will also impact production
volumes by 10 BOE per day until the situation is resolved.
Royalties
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Crown royalties 70 30 199 77 566
Gross overriding
royalties 18 17 51 64 173
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Total royalty expense 88 47 250 141 739
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Crown royalties for the first nine months of 2009 decreased by
Production Costs
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Production costs -
natural gas/NGLs 266 116 400 571 679
$ per BOE 20.73 8.58 24.25 13.32 14.11
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Production costs for the first nine months of 2009 over the first nine
months of 2008 decreased by $108,000. The decrease relates primarily to lower
production volumes. The increase in Q3 2009 production costs over the second
quarter of 2009 was due to a $143,000 thirteen month equalization adjustment
relating to prior years by the operator of the Harmattan Elkton gas plant.
General and Administrative (G&A) Costs
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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G&A costs -
Minerals Division 263 447 294 1,018 997
G&A costs - Oil
and Gas Division 36 37 29 107 119
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Total G&A 299 484 323 1,125 1,116
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Mineral division G&A for the first nine months of 2009 over the first nine months of 2008 increased by
G&A costs related to the mineral division decreased by
Foreign Exchange Loss (Gain)
The foreign exchange gain decreased by
Stock-Based Compensation
Stock-based compensation is a statistically calculated value representing the estimated expense of issuing employee stock options. The Company records a compensation expense over the vesting period based on the fair value of options granted to employees, directors and consultants. Stock-based compensation increased to
Depletion, Depreciation and Accretion Expense
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Depletion,
depreciation and
accretion expense 187 188 111 566 309
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The increase in depletion, depreciation and accretion expense for the nine months of 2009 compared with the first nine months of 2008 was due primarily to
Income Tax Expense
Comaplex has no current income tax expense. Comaplex has sufficient tax pools to ensure that no current income taxes are payable.
The tax pool balances at
Rate of Utilization % Amount ($ 000s)
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Undepreciated capital costs 10-100 3,093
Foreign exploration expenditures 10 726
Share issue costs 20 3,579
Earned depletion expenses (successored) 25 2,299
Canadian development expenditures 30 21,778
Non-capital loss carryforward(1) 100 3,344
Canadian exploration expenditures (successored) 100 33,368
Canadian exploration expenditures 100 56,300
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124,487
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(1) The non-capital losses expire $2,235,000 in 2010 and $1,109,000 in
2029.
The ability to claim the above successored amounts is restricted to income
from 56 percent of the Meliadine property (71.8 percent of the Company's
interest).
Net Earnings (Loss)
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Net earnings (loss) (397) (984) 95 (1,713) 1,794
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Net earnings (loss) for the first nine months of 2009 decreased by
Other Comprehensive Income
Other comprehensive income relates entirely to the mark to market valuation on the Company's investments in Bonterra Oil & Gas Ltd. (Bonterra O&G) and Pine Cliff Energy Ltd. (Pine Cliff). During the first three quarters of 2009, the market price of Bonterra O&G increased by approximately fifty-four percent (twenty-one percent for the third quarter of 2009 over the second quarter of 2009) resulting in an increase in the carrying value of Comaplex's investments of
Cash Flow from Operations
Three months ended Nine months ended
September June 30, September September September
($ 000s) 30, 2009 2009 30, 2008 30, 2009 30, 2008
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Cash flow from
operations 202 (358) 774 165 1,916
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Cash flow from operations decreased by 91 percent in the first nine months of 2009 compared to the first nine months of 2008. The decrease was primarily due to decreased oil and gas revenue resulting from lower commodity prices and production, as well as reduced interest income. The cash flow increase from Q3 2009 of
Liquidity and Capital Resources
At
On
The Company currently has a projected capital expenditure budget of
Related Party
The Company paid a management fee to Bonterra Energy Corp. (Bonterra Corp.), a wholly owned subsidiary of Bonterra O&G, of
The Company at
During the first quarter of 2009, the Company loaned Bonterra Corp.
The Company at
The following consolidated financial statements and notes to the consolidated financial statements have been provided for further details.
Consolidated Balance Sheets
As at September 30, 2009 and December 31, 2008
(unaudited)
($ 000s) 2009 2008
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Assets
Current
Cash 18,654 21,870
Accounts receivable 447 817
Prepaid expenses 162 187
Loan to related party (Note 3) 12,000 -
Investments (Note 3) 5,509 3,621
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36,772 26,495
Future Income Tax Asset (Note 4) 3,917 7,056
Property and Equipment
Property and equipment 119,930 106,813
Accumulated depletion, depreciation
and amortization (8,537) (7,999)
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Net Property and Equipment 111,393 98,814
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152,082 132,365
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Liabilities
Current
Accounts payable and accrued liabilities (Note 3) 3,455 4,566
Asset Retirement Obligations 747 740
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4,202 5,306
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Shareholders' Equity (Note 5)
Share capital 128,400 108,502
Contributed surplus 4,020 3,508
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132,420 112,010
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Retained earnings 12,405 14,118
Accumulated other comprehensive income (Note 6) 3,055 931
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15,460 15,049
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Total Shareholders' Equity 147,880 127,059
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152,082 132,365
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Consolidated Statements of Earnings (Loss) and Retained Earnings
For the Periods Ended September 30
(unaudited)
Three Months Nine Months
($ 000s except $ per share) 2009 2008 2009 2008
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Minerals Division
Interest 59 266 175 571
Loss on sale of property and
investments - - - (38)
Mineral production royalty - 62 - 123
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59 328 175 656
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Oil and Gas Division
Oil and gas sales 369 1,002 1,244 2,944
Royalties (88) (250) (141) (739)
Investment income (Note 3) 86 196 246 446
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367 948 1,349 2,651
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Total Net Revenue 426 1,276 1,524 3,307
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Expenses
Oil and gas production costs 266 400 571 679
General and administrative (Note 3)
Minerals division 263 294 1,018 997
Oil and gas division 36 29 107 119
Foreign exchange loss (gain) 6 (58) - (97)
Stock-based compensation (Note 5) 247 261 727 700
Depletion, depreciation and accretion 187 111 566 309
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1,005 1,037 2,989 2,707
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Earnings (Loss) Before Taxes (579) 239 (1,465) 600
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Income Taxes (Recovery)
Current - - - -
Future (Note 6) (182) 144 248 (1,194)
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(182) 144 248 (1,194)
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Net Earnings (Loss) for the Period (397) 95 (1,713) 1,794
Retained earnings, beginning
of period 12,802 13,695 14,118 11,996
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Retained Earnings, End of Period 12,405 13,790 12,405 13,790
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Net Earnings (Loss) Per Share -
Basic and Diluted (0.01) 0.00 (0.03) 0.04
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Consolidated Statements of Comprehensive Income (Loss)
For the Periods Ended September 30 (unaudited)
Three Months Nine Months
($ 000s except $ per share) 2009 2008 2009 2008
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Net earnings (loss) for the period (397) 95 (1,713) 1,794
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Other Comprehensive Income (Loss)
Gain (loss) on investments 979 (1,096) 1,888 1,504
Future taxes on loss (gain) on
investments (142) 147 (278) (237)
Losses on investments transferred
to net income - - - 6
Future taxes on loss on investments
transferred to net income - - - (1)
Future tax adjustment on exchange
of investments (Note 6) - - 514 -
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Other Comprehensive Income (Loss)
(Note 6) 837 (949) 2,124 1,272
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Comprehensive Income (Loss) 440 (854) 411 3,066
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Comprehensive Income (Loss)
Per Share - Basic and Diluted 0.01 (0.02) 0.01 0.06
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Consolidated Statements of Cash Flow
For the Periods Ended September 30 (unaudited)
Three Months Nine Months
($ 000s) 2009 2008 2009 2008
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Operating Activities
Net earnings (loss) for the period (397) 95 (1,713) 1,794
Items not affecting cash
Loss on sale of property
and investments - - - 38
Stock-based compensation 247 261 727 700
Depletion, depreciation and
accretion 187 111 566 309
Unrealized foreign exchange gain - (58) - (97)
Future income taxes (recovery) (182) 144 248 (1,194)
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(145) 553 (172) 1,550
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Change in non-cash operating
working capital items
Accounts receivable (177) 20 370 (86)
Prepaid expenses 22 67 25 57
Accounts payable and accrued
liabilities 516 135 (37) 398
Asset retirement obligations settled (14) (1) (21) (3)
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347 221 337 366
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Cash Provided By Operating Activities 202 774 165 1,916
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Financing Activities
Issue of shares pursuant to
private placements 23,502 - 23,502 35,310
Share option proceeds 603 9 603 171
Share issue costs (1,296) 6 (1,296) (2,376)
Changes in non-cash working capital
Accounts payable and
accrued liabilities 49 - 49 -
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Cash Provided By Financing Activities 22,858 15 22,858 33,105
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Investing Activities
Mineral exploration property and
equipment expenditures (5,684) (9,559) (12,657) (26,757)
Oil and gas property and equipment
expenditures (112) (115) (460) (174)
Loan to related party - - (12,000) -
Investments sold - - - 57
Changes in non-cash working capital
Accounts payable and
accrued liabilities 688 184 (1,122) 2,783
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Cash Used in Investing Activities (5,108) (9,490) (26,239) (24,091)
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Foreign Exchange Gain on Cash Held
in Foreign Currency - 58 - 97
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Net Cash Inflow (Outflow) 17,952 (8,643) (3,216) 11,027
Cash, Beginning of Period 702 40,657 21,870 20,987
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Cash, End of Period 18,654 32,014 18,654 32,014
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Cash interest paid - - - -
Cash taxes paid - - - -
Notes to the Consolidated Interim Financial Statements
Periods ended September 30, 2009 and 2008 (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements for Comaplex Minerals
Corp. ("Comaplex" or the "Company") as at and for the three and nine
months ended September 30, 2009 should be read in conjunction with
the audited consolidated financial statements as at and for the year
ended December 31, 2008. The notes to these interim consolidated
financial statements do not conform in all respects to the note
disclosure requirements of generally accepted accounting policies
("GAAP") for annual consolidated financial statements. These interim
consolidated financial statements are prepared using the same
accounting policies and methods of computation as disclosed in the
annual consolidated financial statements as at and for the year ended
December 31, 2008, except for those disclosed in Note 2 below. The
disclosures provided within are incremental to those included with
the annual financial statements.
2. CHANGE IN ACCOUNTING POLICIES
On January 1, 2009, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3064, "Goodwill and
Intangible Assets". The new section replaces the previous goodwill
and intangible asset standard and revises the requirement for
recognition, measurement, presentation and disclosure of intangible
assets. The adoption of this standard had no impact on the Company's
consolidated financial statements.
On January 1, 2009, the Company adopted the CICA's EIC-173, "Credit
Risk and the Fair Value of Financial Assets and Financial
Liabilities". The EIC provides guidance on how to take into account
credit risk of an entity and counterparty when determining the fair
value of financial assets and financial liabilities, including
derivative instruments. The adoption of this EIC had no impact on the
Company's consolidated financial statements.
Effective January 1, 2009, the Company prospectively adopted the CICA
issued Section 1582, "Business Combinations", which will replace the
former guidance on business combinations. Under the new standard, the
purchase price used in a business combination is based on the fair
value of consideration exchanged at the date of exchange. Currently
the purchase price used is based on the fair value of the
consideration for a reasonable period before and after the date of
acquisition is agreed upon and announced. The new standard generally
requires all acquisition costs be expensed, which are currently
capitalized as part of the purchase price. In addition, the new
standard modified the accounting for contingent consideration and
negative goodwill.
Effective January 1, 2009, the Company prospectively adopted the CICA
issued Sections 1601, "Consolidated Financial Statements", and 1602,
"Non-controlling Interests", which replace existing guidance. Section
1601 establishes standards for the preparation of consolidated
financial statements and Section 1602 provides guidance on accounting
for a non-controlling interest in a subsidiary subsequent to a
business combination.
Recent and Pending Accounting Pronouncements
In September 2009, the CICA issued amendments to CICA Handbook
Section 3862, "Financial Instruments - Disclosures". The amendments
include enhanced disclosures related to the fair value of financial
instruments and the liquidity risk associated with financial
instruments. The amendments will be effective for annual financial
statements for fiscal years ending after September 30, 2009. The
amendments are consistent with recent amendments to financial
instrument disclosure standards in International Financial Reporting
Standards ("IFRS"). The Company will include these additional
disclosures in its annual consolidated financial statements for the
year ending December 31, 2009.
The Canadian Accounting Standards Board has confirmed that IFRS will
replace Canadian GAAP effective January 1, 2011, including
comparatives for 2010, for Canadian publicly accountable enterprises.
The Company has completed its high-level IFRS impact study and
established a preliminary timeline for the execution and completion
of the conversion project. The impact of IFRS on the Company's
consolidated financial statements is not reasonably determinable at
this time.
3. RELATED PARTIES
The Company paid a management fee of $247,500 (2008 - $247,500) to
Bonterra Energy Corp. (Bonterra Corp.) (a wholly owned subsidiary of
Bonterra Oil & Gas Ltd. (Bonterra O&G) a publicly traded oil and gas
corporation that is listed on the Toronto Stock Exchange) a company
that has common directors and management with the Company. Services
provided by Bonterra Corp. include executive services (CEO, president
and vice president, finance duties), accounting services, oil and gas
administration and office administration. The Company also shares
office rental costs and reimburses Bonterra Corp. for costs related
to employee benefits and office materials. These costs have been
included in general and administrative expenses.
Bonterra Corp. owns 689,682 (December 31, 2008 - 689,682) common
shares in the Company. Bonterra Corp. is the administrator for
Bonterra O&G.
As at September 30, 2009, the Company had an account payable to
Bonterra Corp. of $75,000 (December 31, 2008 - $56,000).
During the first quarter of 2009, the Company loaned Bonterra Corp.
$12,000,000. Until June 30, 2009, the Company received interest at a
rate of Canadian Chartered Bank Prime plus 0.25 percent. On July 1,
2009, the interest rate was reduced to prime less 0.25 percent. The
loan is subordinated to Bonterra Corp.'s bank debt and is unsecured.
The loan is payable upon demand subject to availability under
Bonterra Corp.'s line of credit. As at September 30, 2009, Bonterra
Corp. has sufficient room under its line of credit to repay the loan.
Interest earned on the loan during the first nine months of 2009 was
$134,000.
The Company, at September 30, 2009, owns 204,633 (December 31, 2008 -
204,633) shares in Bonterra O&G representing just over one percent of
the outstanding shares of Bonterra O&G. The shares have a fair value
of $5,443,000 (December 31, 2008 - $3,534,000). In 2009, the Company
received investment income of $246,000 (2008 - $446,000).
The Company, at September 30, 2009, owns 346,000 (December 31, 2008 -
346,000) common shares in Pine Cliff Energy Ltd. (Pine Cliff). Pine
Cliff has common directors and management with the Company. Pine
Cliff shares trade on the TSX Venture Exchange. As of September 30,
2009, the common shares have a fair value of $66,000 (December 31,
2008 - $87,000). The Company's ownership of 346,000 common shares
represents less than one percent of the total issued and outstanding
common shares of Pine Cliff.
These transactions are in the normal course of operations and are
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
4. INCOME TAXES
The Company has recorded a future income tax asset. The asset relates
to the following temporary differences:
($ 000s) September 30, December 31,
2009 2008
Amount Amount
---------------------------------------------------------------------
Future income tax assets:
Capital assets 1,721 5,090
Investments (13) (207)
Asset retirement obligations 191 190
Share issue costs 994 807
Loss carry-forward 923 1,104
Other 101 72
---------------------------------------------------------------------
3,917 7,056
---------------------------------------------------------------------
The Company has the following tax pools which may be used to reduce
taxable income in future years, limited to the applicable rates of
utilization:
Rate of Amount
Utilization (%) ($000)
---------------------------------------------------------------------
Undepreciated capital costs 10-100 3,093
Foreign exploration expenditures 10 726
Share issue costs 20 3,579
Earned depletion expenses (successored) 25 2,299
Canadian development expenditures 30 21,778
Non-capital loss carried forward(1) 100 3,344
Canadian exploration expenditures (successored) 100 33,368
Canadian exploration expenditures 100 56,300
---------------------------------------------------------------------
124,487
---------------------------------------------------------------------
(1) The non-capital losses expire $2,235,000 in 2010 and $1,109,000
in 2029.
During the first quarter of 2009, the Company renounced $12,000,000
of Canadian exploration expenditures with an effective date of
December 31, 2008.
5. SHARE CAPITAL
Authorized
Unlimited number of common shares without nominal or par value
Unlimited number of first preferred shares
Issued
2009
Amount
Number ($000)
---------------------------------------------------------------------
Common Shares
Balance, January 1, 2009 52,706,531 108,502
Issued pursuant to private placements 5,530,000 23,502
Issue costs on private placements (1,296)
Issued on exercise of stock options 188,000 603
Transfer of contributed surplus to
share capital 215
Future tax adjustment on share issue costs 354
Future tax adjustment on renouncement of
tax pools (3,480)
---------------------------------------------------------------------
Balance, September 30, 2009 58,424,531 128,400
---------------------------------------------------------------------
A summary of the changes of the Company's contributed surplus is
presented below:
Contributed surplus
($ 000s) 2009 2008
---------------------------------------------------------------------
Balance, January 1 3,508 2,620
Stock-based compensation expensed (non-cash) 727 439
Stock-based compensation transferred to share
capital on exercise of stock options (non-cash) (215) (54)
---------------------------------------------------------------------
Balance, September 30 4,020 3,005
---------------------------------------------------------------------
The number of weighted average shares used to calculate basic and
diluted net earnings per share for the periods ended September 30:
Three Months Nine Months
2009 2008 2009 2008
---------------------------------------------------------------------
Basic shares
outstanding 54,982,118 52,705,661 53,470,597 49,194,330
Dilutive effect of
share options - 848,376 - 848,376
---------------------------------------------------------------------
Diluted shares
outstanding 54,982,118 53,554,037 53,470,597 50,042,706
---------------------------------------------------------------------
The Company provides a stock option plan for its directors, officers,
employees and consultants. Under the plan, the Company may grant
options for up to 10 percent of the outstanding common shares which
as of September 30, 2009 was 5,842,453 (December 31, 2008 -
5,270,653). The exercise price of each option granted equals the
market price of the Company's stock on the date of grant and the
option's maximum term is five years. Options generally vest one-third
each year for the first three years of the option term.
On August 25, 2009, the Company completed a private placement for
5,530,000 common shares at a price of $4.25 per common share for
gross proceeds of $23,502,500 and net proceeds after share issuance
costs of $22,207,500. The proceeds of the placement will be used for
the further exploration and development of the Meliadine properties
and for general corporate purposes.
A summary of the status of the Company's stock option plan as of
September 30, 2009 and December 31, 2008 and changes during the nine
months ended September 30, 2009 and year ended December 31, 2008 is
presented as follows:
September 30, 2009 December 31, 2008
---------------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
---------------------------------------------------------------------
Outstanding at
beginning of period 2,890,500 $ 4.11 2,141,000 $ 3.40
Options issued 22,500 3.20 812,000 5.85
Options exercised (188,000) 3.21 (62,500) 2.74
Options cancelled (18,000) 4.71 - -
---------------------------------------------------------------------
Outstanding at end
of period 2,707,000 $ 4.16 2,890,500 $ 4.11
---------------------------------------------------------------------
Options exercisable
at end of period 1,218,000 $ 3.46 1,290,000 $ 3.32
---------------------------------------------------------------------
The following table summarizes information about options outstanding
at September 30, 2009:
Options Outstanding Options Exercisable
-------------------------------------------------------------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise At Contractual Exercise At Exercise
Prices 09/30/09 Life Price 09/30/09 Price
-------------------------------------------------------------------------
$3.20 to $3.60 1,665,000 0.5 years $ 3.20 1,062,500 $ 3.20
4.70 to 5.30 225,000 1.5 years 5.06 120,000 5.03
5.40 to 5.90 767,000 1.8 years 5.84 18,000 5.49
6.00 to 6.30 50,000 1.7 years 6.03 17,500 6.04
-------------------------------------------------------------------------
$3.20 to $6.30 2,707,000 0.9 years $ 4.16 1,218,000 $ 3.46
-------------------------------------------------------------------------
The Company records a compensation expense over the vesting period
based on the fair value of options granted to employees, directors
and consultants. The Company issued 22,500 (December 31, 2008 -
812,000) stock options with an estimated fair value of $25,769
(December 31, 2008 - $1,460,171) ($1.15 per option (December 31, 2008
- $1.80 per option)) using the Black-Scholes option pricing model
with the following key assumptions:
September 30, December 31,
2009 2008
---------------------------------------------------------------------
Weighted-average risk free interest rate (%) 1.4 2.8
Dividend yield (%) 0.0 0.0
Expected life (years) 3.0 2.7
Weighted-average volatility (%) 51.0 44.0
6. ACCUMULATED OTHER COMPREHENSIVE INCOME
Other
Compre-
January 1, hensive September 30,
($ 000s) 2009 Income 2009
---------------------------------------------------------------------
Unrealized gains net of
tax on available-for-sale
investments 931 2,124 3,055
---------------------------------------------------------------------
Other
Compre-
January 1, hensive December 31,
2008 Loss 2008
---------------------------------------------------------------------
Unrealized gains (losses)
net of tax on available-for-
sale investments 2,272 (1,341) 931
---------------------------------------------------------------------
The Company elected for tax purposes to recognize a tax gain of
$3,510,000 on its investment in Bonterra O&G shares (formerly
Bonterra Energy Income Trust) when it converted from a trust to a
corporation. This election increased its cost base for tax purposes.
The tax election resulted in the elimination of previously recorded
future taxes of $514,000 on gain on investments in other
comprehensive income.
The election resulted in a corresponding $1,755,000 of non-capital
loss carryforwards being utilized and as a result, $514,000 of future
tax was expensed to net loss for the period.
7. BUSINESS SEGMENT INFORMATION
The Company's activities are represented by two industry segments
comprised of mineral exploration and oil and gas production:
Three Months Nine Months
ended ended
September 30 September 30
---------------------------------------------------------------------
($ 000s) 2009 2008 2009 2008
---------------------------------------------------------------------
Gross revenue
Mineral exploration 59 328 175 656
Oil and Gas 455 1,198 1,490 3,390
---------------------------------------------------------------------
514 1,526 1,665 4,046
---------------------------------------------------------------------
Depletion, depreciation,
accretion, and abandonment
Mineral exploration 109 38 357 111
Oil and Gas 78 73 209 198
---------------------------------------------------------------------
187 111 566 309
---------------------------------------------------------------------
Net earnings (loss)
Mineral exploration (388) (327) (2,057) 565
Oil and Gas (9) 422 344 1,229
---------------------------------------------------------------------
(397) 95 (1,713) 1,794
---------------------------------------------------------------------
Property and equipment
expenditures
Mineral exploration 5,684 9,559 12,657 26,757
Oil and Gas 112 115 460 174
---------------------------------------------------------------------
5,796 9,674 13,117 26,931
---------------------------------------------------------------------
Total assets (2008 amounts as
of December 31, 2008)
Mineral exploration 144,245 126,553
Oil and Gas 7,837 5,812
---------------------------------------------------------------------
152,082 132,365
---------------------------------------------------------------------
8. FINANCIAL AND CAPITAL RISK MANAGEMENT
Financial Risk Factors
The Company undertakes transactions in a range of financial
instruments including:
- Cash deposits;
- Receivables;
- Loan to related party;
- Investments;
- Payables;
The Company's activities result in exposure to a number of financial
risks including market risk (commodity price risk, interest rate
risk, foreign exchange risk, credit risk, and liquidity risk).
Financial risk management is carried out by senior management under
the direction of the Directors.
The Company does not enter into risk management contracts to sell its
oil and gas commodities. Commodities are sold at market prices at the
date of sale in accordance with the directive of the Board of
Directors and management.
Capital Risk Management
-----------------------
The Company's objectives when managing capital, which includes
current assets and long-term assets, are to safeguard the Company's
ability to continue as a going concern, so that it can continue to
provide returns to its Shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Company may issue new shares.
The Company monitors capital on the basis of the ratio of budgeted
exploration capital requirements to current working capital. This
ratio is calculated using the projected cash requirements for nine
months to 18 months in advance and maintaining a working capital
balance of at least six months to satisfy this requirement on a
continuous basis.
The Company believes that maintaining at least a six month current
working capital balance to the exploration capital budget requirement
is an appropriate basis to allow it to continue its future
development of the Company's biggest asset; the "Meliadine West
Project."
The following section (a) of this note provides a summary of the
underlying economic positions as represented by the carrying values,
fair values and contractual face values of the financial assets and
financial liabilities. The Company's working capital to capital
expenditure requirement ratio is also provided.
The following section (b) addresses in more detail the key financial
risk factors that arise from the Company's activities including its
policies for managing these risks.
a) Financial assets, financial liabilities
The carrying amounts, fair value and face values of the Company's
financial assets and liabilities other than cash are shown in
Table 1.
Table 1
As at September 30, 2009 As at December 31, 2008
---------------------------------------------------------------------
Carrying Fair Face Carrying Fair Face
($ 000s) Value Value Value Value Value Value
---------------------------------------------------------------------
Financial assets
Accounts
receivable 447 447 455 817 817 906
Loan to related
party 12,000 12,000 12,000 - - -
Investments 5,509 5,509 - 3,621 3,621 -
---------------------------------------------------------------------
Financial
liabilities
Accounts payable
and accrued
liabilities 3,455 3,455 3,455 4,566 4,566 4,566
---------------------------------------------------------------------
The budgeted capital expenditure to working capital base figures for
September 30, 2009 and December 31, 2008 are presented below:
September 30, December 31,
($ 000s) 2009 2008
---------------------------------------------------------------------
Budgeted capital expenditure(1) 15,000 12,500
---------------------------------------------------------------------
Number of months budgeted 15 12
---------------------------------------------------------------------
Current assets 36,772 26,495
Current liabilities (3,455) (4,566)
---------------------------------------------------------------------
Working capital 33,317 21,929
---------------------------------------------------------------------
Budgeted capital expenditure to
working capital base 0.5 0.6
---------------------------------------------------------------------
Working capital to budgeted
capital expenditure (in months) 33.3 21.1
---------------------------------------------------------------------
(1) Budgeted capital expenditure represents the Company's estimated
future fifteen months (December 31, 2008 - twelve months) capital
expenditures and may materially change between quarters. Actual
capital expenditure from quarter to quarter can be materially
different from the budgeted capital expenditure.
b) Risks and mitigations
Market risk is the risk that the fair value or future cash flow of
the Company's financial instruments will fluctuate because of changes
in market prices. Components of market risk to which Comaplex is
exposed are discussed below.
Commodity price risk
--------------------
The Company's principal operation is the development of its Meliadine
gold properties. The Company also engages to a much lesser extent in
the production and sale of oil and natural gas. Fluctuations in
prices of these commodities may directly impact the Company's
performance and ability to continue with its operations.
The Company's management, at the direction of the Board of Directors,
currently does not use risk management contracts to set price
parameters for its production.
Interest rate risk
------------------
Interest rate risk refers to the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate risk
arises from interest bearing financial assets and liabilities that
Comaplex uses. The principal exposure to the Company is on its cash
balances which have a variable interest rate which gives rise to a
cash flow interest rate risk.
Comaplex's cash consists of Canadian and U.S. investment chequing
accounts. Since these funds need to be accessible for the development
of the Company's capital projects, management does not reduce its
exposure to interest rate risk through entering into term contracts
of various lengths. As discussed above, the Company generally manages
its capital such that its budgeted capital requirements to current
working capital ratio are at least six months.
Sensitivity Analysis
Based on historic movements and volatilities in the interest rate
markets and management's current assessment of the financial markets,
the Company believes that a one percent variation in the Canadian
prime interest rate is reasonably possible over a 12-month period. No
income tax effect has been calculated as the Company is expected to
be non-taxable until January 1, 2015.
A one percent change in the Canadian prime rate would increase or
decrease annual cash flow by $306,000.
Foreign exchange risk
---------------------
The Company has no foreign operations and currently sells all of its
product sales in Canadian currency. The Company has a U.S. cash
balance and earns an insignificant amount of interest on its U.S.
bank account. Comaplex does not mitigate CAD/USD exchange rate risk
by using risk management contracts.
Credit risk
-----------
Credit risk is the risk that a contracting party will not complete
its obligations under a financial instrument and cause the Company to
incur a financial loss. Comaplex is exposed to credit risk on all
financial assets included on the balance sheet. To help mitigate this
risk:
- The Company only invests its cash balances in low risk liquid
investments which frequently results in receiving lower interest
rates.
- The majority of the loans and investments are only with entities
that have common management with the Company.
Of the accounts receivable balance at September 30, 2009 ($447,000)
and December 31, 2008 ($817,000), over 90 percent relates to product
sales with major oil and gas marketing companies all of which have
always paid within 30 days, amounts due from the government of Canada
for goods and services tax credits and interest from a related party.
The Company assesses quarterly if there has been any impairment of
the financial assets of the Company. During the year ended
December 31, 2008, there was a full impairment provision required on
an outstanding receivable for the mineral production royalty of
$84,000 as the operator of the production facility went into CCAA
protection. No impairment provision is required on the oil and gas
financial assets of the Company due to historical success of
collecting receivables. The Company does not have any significant
credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics.
The carrying value of accounts receivable approximates their fair
value due to the relatively short periods to maturity on these
instruments. The maximum exposure to credit risk is represented by
the carrying amount on the balance sheet. There are no material
financial assets that the Company considers past due.
Liquidity risk
--------------
Liquidity risk includes the risk that, as a result of Comaplex's
operational liquidity requirements:
- The Company will not have sufficient funds to settle a transaction
on the due date;
- Comaplex will not have sufficient funds to continue with its
financing of its major exploration project;
- The Company will be forced to sell assets at a value which is less
than what they are worth; or
- Comaplex may be unable to settle or recover a financial asset at
all.
To help reduce these risks, the Company:
- Has a general capital policy of maintaining at least six months of
annual budgeted capital requirements as its working capital base;
- Holds current investments that are readily tradable should the
need arise; and
- Maintains a continuous evaluation approach as to the financing
requirements for its largest exploration program; the "Meliadine
West Project."
%SEDAR: 00001166E
For further information: Additional information relating to the Company may be found on www.sedar.com and by visiting our website at www.comaplex.com or please contact George F. Fink, President and CEO, Mark J. Balog, Chief Operating Officer, or Kirsten Kulyk, Manager - Investor Relations at (403) 265-2846 or [email protected]
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