PhosCan Chemical Corp.
TSX : FOS

PhosCan Chemical Corp.

December 10, 2009 16:45 ET

PhosCan Chemical Announces Results For Quarter Ended October 31, 2009

TORONTO, ONTARIO--(Marketwire - Dec. 10, 2009) -

(All dollar amounts are expressed in Canadian currency unless otherwise noted.)

PhosCan Chemical Corp. (TSX:FOS) announces its financial and operating results for the quarter ended October 31, 2009.

Financial Results

PhosCan reported a net loss for the quarter ended October 31, 2009 of $287,238 compared to $919,066 during the same period of the previous year. The decrease in net loss of $631,828 was due primarily to decreases in general and administrative expense and stock-option compensation expense, and an increase in other income, as described below.

General and administrative expense decreased by $139,974 to $188,223 during the quarter primarily due to a reduction in payroll expense and other cost-cutting measures implemented by management. Since announcing the slow-down in the development of the Martison Phosphate Project in December 2008, management of PhosCan have also cut corporate costs to preserve the Company's cash.

Stock-option compensation expense decreased by $372,754 to $173,250 during the quarter as no new stock options have been granted since March 2008.

Other income increased by $195,724 partly as a result of a $78,157 increase in interest income to $78,157 during the quarter. Beginning on February 1, 2009, PhosCan commenced reporting a portion of its interest income as other income and capitalizing the balance to the Martison Project. Previously the Company had capitalized all of its interest income to the Martison Project. PhosCan made the change because, following the decision to slow the development of the Martison Project, approximately 80% of the Company's funds were held for purposes other than the development the Martison Project, such as potential corporate development opportunities.

The balance of the increase in other income was due to an $117,567 increase in foreign exchange gain to $148,686 during the quarter. Since May 2009, the Company has purchased and sold U.S. dollars in part to fund anticipated U.S. dollar-denominated expenditures on the Martison Project and in part to earn additional income. The increase in foreign exchange gain of $117,567 is due to the higher U.S.-denominated cash and cash equivalent balances held during the quarter and the movements of the U.S. dollar relative to the Canadian dollar. As at October 31, 2009, the Company held approximately US$9.6 million of cash and cash equivalents out of a total of $69.3 million of cash, cash equivalents and short-term investments.

Partly offsetting the above contributions to the decrease in net income was a $60,661 increase in professional and legal fees to $133,780 during the quarter. The increase is due to the fees of financial, legal and tax advisors which PhosCan has engaged to help it source and review corporate development opportunities. The Company has been particularly active in this regard since announcing the slow-down in the development of the Martison Project in December 2008.

Cash and cash equivalents plus short-term investments decreased by $3,407,933 during the nine months ended October 31, 2009 to $69,353,504 while working capital decreased by $3,208,757 to $68,743,855. The decreases were primarily due to continued expenditures on the Martison Project and the corporate expenditures described previously.

Capitalized expenditures on the Martison Project were $86,645,889 at October 31, 2009, an increase of $1,987,901 from January 31, 2009. The increase is primarily due to the ongoing work, as described below, under the reduced development program for the Martison Project announced on December 8, 2008.

PhosCan had no long-term debt at October 31, 2009 and has met all of its financial obligations. The Company expects that existing working capital will be sufficient to advance the Martison Project under the reduced development program, as well as enable the Company to review a broad range of corporate development opportunities that have the potential to enhance shareholder value. PhosCan will be required to raise a significant amount of additional funds should it elect in the future to proceed with full-scale development of the Martison Project.

Operating Results

Under the reduced development program announced by PhosCan on December 8, 2008, the Company continued to advance the following aspects of the Martison Project during the quarter:

  • Environmental and permitting;
  • Taking the mine claims to lease;
  • Bench and pilot plant beneficiation testing of phosphate ore from the Martison Project;
  • Phosphoric acid pilot plant testing of flotation concentrate produced from the pilot plant beneficiation test program to collect critical data for engineering design; and
  • Under an agreement with IAMGOLD Corp., evaluating the niobium at the Martison Project.

While phosphate fertilizer markets appear to be stabilizing, PhosCan believes it may be several years before this market together with capital markets return to levels that will support the resumption of full-scale development of the Martison Project. The Company believes it is prudent to complete only the reduced development plan for the Martison Project and preserve its cash until it has reasonable confidence that it will be able to raise the additional approximately US$1 billion of debt and equity capital required to take the Martison Project to construction and production.

PhosCan expects to have a significant amount of uncommitted cash on hand upon completion of the reduced development program. For this reason, the Company has been actively sourcing and reviewing a broad range of corporate development opportunities which it believes would have the potential to enhance shareholder value. These opportunities have primarily been in the natural resources sector and more recently have focused on the oil and gas industry. PhosCan's goal is to deploy its uncommitted cash on opportunities that have existing cash flow and long-term growth potential.

Cautionary Note Regarding Forward-looking Statements

This press release contains forward-looking statements with respect to the Martison Phosphate Project, and matters concerning the business, operations, strategy, and financial performance of PhosCan. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the estimates and projections regarding the Martison Project are realized. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Unless otherwise stated, all forward looking statements speak only as of the date of this press release and PhosCan does not undertake any obligation to update such statements except as required by law.

Contact Information

  • PhosCan Chemical Corp.
    Stephen Case
    President & CEO
    (416) 972-9222
    or
    PhosCan Chemical Corp.
    James Pringle
    Vice President Finance & CFO
    (416) 972-9222