Farallon announces fourth quarter and 2009 financial results
$4.4 million in Cash Flow from Operations in the Fourth Quarter
VANCOUVER, March 30 /CNW/ - Dick Whittington, President and CEO of Farallon Mining Ltd. ("Farallon" or the "Company") (TSX:FAN) is pleased to announce the unaudited financial results for the fourth quarter ("the quarter") and the audited financial results for the year ended December 31, 2009 ("the year").
This news release should be read in conjunction with the Company's financial statements and MD&A which are available on SEDAR and the Company's website. Currency is United States dollars unless otherwise indicated. Farallon will hold a conference call tomorrow, Wednesday March 31st, at 8:00am Pacific time (11:00am Eastern) to discuss these results. Call-in details are provided at the end of this release.
The Company recorded earnings in the fourth quarter for the first time in its history based on a strong quarter in which the milling operations exceeded the design capacity of 1,500 tonnes per day, as previously announced (see news release dated January 21, 2010).
Financial highlights for the quarter and the year are as follows:
- Earnings of $0.1 million before taxes for the quarter and a loss of
$15.7 million for the year.
- Cash flow from operations of $4.4 million for the quarter and cash
used of $6.2 million for the year.
- Total cash cost(i) of $0.44/lb of payable zinc for the quarter and
$0.44/lb for the year.
- Gross revenues of $32.3 million for the quarter and $89.1 million for
the year.
- Earnings from operations of $3.9 million for the quarter and
$2.9 million for the year.
- EBITDA(ii) of $4.5 million for the quarter and $6.3 million for the
year.
- Cash on hand at December 31, 2009 of $21.6 million and working
capital of $14.9 million.
Farallon's President and CEO, Dick Whittington, said "2009 was a transformational year for the Company in which we moved from an exploration and development company to an operational mining company. The G-9 mine achieved commercial production on April 1st and was generating cash flow from operations by year-end. The Company has restructured its balance sheet by securing a term loan facility with Credit Suisse and held $21.6 million in cash at year-end. The growth foundation for any company needs to be a strong balance sheet, which we now have. Consequently, we believe we are well positioned, financially, to execute on our strategy of becoming a mid-tier, multi-mine company".
The Company's balance sheet was strengthened considerably during the year with cash on-hand increasing from $14.1 million at December 31, 2008 to $21.6 million at December 31, 2009 and accounts payable and accrued liabilities decreasing from $17.7 million to $15.4 million over the same period. The Company had additions to Property Plant and Equipment of $11.6 million during the year, which was mostly offset by depreciation of $11.0 million. Working capital was $14.9 million at December 31, 2009, up from a working capital deficit of $16.5 million at December 31, 2008.
A summary of the balance sheet is shown in the following table.
Summary of Consolidated Balance Sheets (USD '000s)
31-Dec-09 31-Dec-08
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Assets
Cash and equivalents 21,574 14,115
Other Current Assets 17,744 17,583
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Current Assets 39,318 31,698
Property, Plant and Equipment 127,530 127,860
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TOTAL ASSETS 166,848 159,558
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Liabilities and Shareholders' Equity (USD '000s)
Accounts payable and accrued liabilities 15,428 17,728
Other Current Liabilities 9,007 30,497
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Current liabilites 24,435 48,225
Long term debt (Credit Suisse) 24,319 -
Silver Wheaton deferred revenue 74,499 80,000
Site closure and reclamation obligation 561 1,374
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Long term liabilities 99,379 81,374
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Shareholders' equity 43,034 29,959
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TOTAL LIABILITIES & EQUITY 166,848 159,558
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Working Capital 14,883 (16,527)
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Earnings in the quarter were $0.1 million before current taxes with a net loss of $15.7 million for the year. EBITDA(ii) for the quarter was $4.5 million and $6.2 million for the year. A summary of the statement of operations and comprehensive loss for the year and the quarter are shown in the table below.
Summary of Consolidated Statements of Operations and Comprehensive Loss
(USD '000s)
Q4
2009 2009
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Gross Sales Revenue 89,137 32,343
Cost of Sales (75,210) (25,142)
Depreciation, depletion and amortization (11,032) (3,262)
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Earnings (loss) from operations 2,895 3,939
Exploration 907 599
Office Costs 6,829 2,059
Other Expenses (income) 10,762 1,163
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Expenses (income) 18,498 3,839
Current income tax (recovery) expense 74 74
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Net Earnings (loss) (15,677) 44
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Earnings before Interest, Tax and Deprecition
("EBITDA") 6,191 4,543
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The Company also reported its strongest quarter, with cash flow from operations of $4.4 million. For the year, cash used in operations was $6.2 million. Financing activity, including a CAD $10 million bought-deal completed in October resulted in an increase in cash for the year of $7.5 million or $10.5 million for the quarter. The cash on hand as at December 31, 2009 was $21.6 million.
A summary of the statement of cash flows is given in table below.
Summary of Consolidated Statement of Cash Flows
Q4
2009 2009
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Earnings (loss) for the period (15,677) 44
Amortization of Deferred Revenue (5,501) (2,304)
Items not involving cash 17,711 4,511
Changes in non-cash working capital (2,774) 2,156
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Cash Flow from (used in) Operations (6,241) 4,407
Investing Activity - Additions to Property
Plant Equipment (11,596) (1,919)
Financing Activity 26,400 9,894
Foreign Exchange Gain (loss) (1,104) (1,854)
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Increase (Decrease) in cash and equivalents 7,459 10,528
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Cash and equivalents, beginning of period 14,115 11,046
Cash and equivalents, end of period 21,574 21,574
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Other notable financial activities were as follows:
- Sold 22,730 dry metric tonnes ("dmt") of zinc concentrate and
6,421 dmt of copper concentrate during the quarter. For the year,
the Company recorded sales of 84,798 dmt of zinc concentrate
grading 50% zinc and 18,045 tonnes of copper concentrate grading
16% copper. The payable metals in the zinc and copper concentrates
sold were 78.0 million pounds of payable zinc, 5.8 million pounds
of payable copper, 657,383 ounces of payable silver and 5,988
ounces of payable gold. In addition, the Company sold
approximately 3,600 dmt of lead concentrate.
- Arranged, and fully drew down, a $30 million term facility with
Credit Suisse. The terms of the repayment are 48 months, with the
first 12 months requiring interest-only repayments at a fixed
interest rate of 6.97%. Principal repayments begin in July 2010.
Proceeds were used to repay promissory notes carrying a 15%
interest rate which were due in September 2009. As such, the
Company was able to significantly lower its interest costs and
restructure its balance sheet.
- Sold, by way of a bought-deal and two private placements,
94.4 million common shares. The proceeds were used to commence the
G-9 mill expansion, resume exploration drilling and for other
corporate and working capital requirements.
- Began delivering silver to Silver Wheaton under an agreement
whereby Silver Wheaton paid $80 million in 2008 and the Company
agreed to sell 75% of the payable silver produced at G-9 to Silver
Wheaton for $3.90/ounce. During the year, the Company delivered
430,880 ounces to Silver Wheaton and subsequent to year-end, a
further 88,932 ounces was delivered relating to the production in
December 2009. It should be noted that the accounting treatment of
the Silver Wheaton agreement was reviewed at year-end and the
$80 million deposit was reclassified as deferred revenue. As such,
revenue is recognized on a dollar per unit basis using the total
number of ounces expected to be delivered to Silver Wheaton over
the life of mine. Deferred revenue amortized as a result of
delivery of silver during the year was recorded as a non-cash
operating item.
The Company's conference call on Wednesday March 31, 2010 at 8:00 PST to further discuss these results can be accessed at (647) 427-7450 or toll-free at (888) 231-8191. A live webcast will also be available at www.farallonmining.com. A replay of the conference call will be available for a period of time on the Company's website after the call is completed.
Farallon's G-9 zinc, copper, silver, gold and lead mine at the Campo Morado Property in Mexico reached commercial production in April 2009. The Company is targeting to produce at an annualized production rate of 120 million pounds of zinc and 15 million pounds of copper per year. For further details on Farallon Mining Ltd., please visit the Company's website at www.farallonmining.com or contact Neil MacRae, Investor Relations Manager, at (604) 638-2160 or within North America at 1-877-688-2050.
ON BEHALF OF THE BOARD OF DIRECTORS
J.R.H. (Dick) Whittington
President & CEO
No regulatory authority has approved or disapproved the information contained in this news release
Forward Looking Information
This release includes certain statements that may be deemed "forward-looking statements." All statements in this release, other than statements of historical facts, that address future production, reserve or resource potential, continuity of mineralization, exploration drilling, operational activities, production rates, costs to completion and events or developments that the Company expects, or is targeting, are forward-looking statements. Although the Company believes that the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward looking statements and may require achievement of a number of operational, technical, economic, financial and legal objectives. The likelihood of continued future mining at Campo Morado is subject to a large number of risks, including obtaining lower than expected grades and quantities of mineralization and resources, lower than expected mill recovery rates and mining rates, changes in and the effect of government policies with respect to mineral exploration and exploitation, the possibility of local disputes including blockades of the company's property, the possibility of adverse developments in the financial markets generally, fluctuations in the prices of zinc, gold, silver, copper and lead, obtaining additional mining and construction permits, preparation of all necessary engineering for ongoing underground and processing facilities as well as receipt of additional financing to fund mine construction, development and operation, if needed. Such funding may not be available to the Company on acceptable terms or on any terms at all. For more information on the Company and the risk factors inherent in its business, investors should review the Company's Annual Information Form at www.sedar.com.
Information Concerning Estimates of Measured, Indicated and Inferred Resources
This news release uses the terms "measured resources", "indicated resources" and "inferred resources". Farallon advises investors that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects), the U.S. Securities and Exchange Commission does not recognize them. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for Preliminary Assessment as defined under 43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.
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(i) Total cash cost is stated after transportation, treatment and
refining charges and is net of by-product credits. Total cash costs are a
non-GAAP financing measure - please see page 12 of the Company's MD&A for
more information.
(ii) EBITDA is a non-GAAP financial measure which represents Earnings
Before Interest, Taxes, Depreciation and Amortization. The calculation is
Earnings from Operations, add back depreciation, subtract exploration and
office costs.
For further information: please visit the Company's website at www.farallonmining.com or contact Neil MacRae, Investor Relations Manager, at (604) 638-2160 or within North America at 1-877-688-2050
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