PhosCan Chemical Corp.
TSX : FOS

PhosCan Chemical Corp.

April 27, 2010 16:40 ET

PhosCan Chemical Announces Results for Year Ended January 31, 2010

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

TORONTO, ONTARIO--(Marketwire - April 27, 2010) - PhosCan Chemical Corp. (TSX:FOS) announces its financial and operating results for the year ended January 31, 2010.

Financial Results

PhosCan reported net income for the year ended January 31, 2010 of $347,027 compared to a net (loss) of ($4,289,353) during the previous year. The decrease in net loss of $4,636,380 was due primarily to a decrease in expenses, an increase in reported interest income and other non- recurring items such as a future income tax recovery, as described in further detail below.

Expenses for the year ended January 31, 2010 were $2,466,630, a decrease of $1,860,810 as compared to the previous year. The main contributors to this decrease were a $1,802,957 decrease in stock-option compensation expense and a $153,430 decrease in write-off of forfeited advances, partly offset by a $243,549 increase in professional and legal fees which arose as a result of the Company engaging advisors during the year to help it source and review corporate development opportunities. General and administration, the largest contributor to expenses, was relatively unchanged during the year as cost-saving initiatives implemented by management were offset by a non-recurring termination benefit paid to a former officer of the Company.

Interest income was $285,345 for the year ended January 31, 2010 versus $Nil for the previous year. Beginning on February 1, 2009, PhosCan commenced reporting a portion of its interest income and crediting the balance to the Martison Project. Previously the Company had credited 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 of the Martison Project, such as potential corporate development opportunities.

PhosCan reported a future income tax recovery of $2,566,303 for the year ended January 31, 2010 (2009 - $Nil) due to a reduction in the future income tax liability which originally arose from the purchase of Baltic Resources Inc. in March 2008. The original value of the future income tax liability of $18,605,698 was estimated using the combined 2012 Canadian federal and Ontario provincial corporate income tax rate of 29%. As a result of the decision to defer several tasks related to the Martison Project, the Company reassessed the future income tax liability using the corporate income tax rate expected to be in effect in 2014, the earliest date the Martison Project would likely enter production under the development scenarios presented in the May 2008 pre-feasibility study. As at January 31, 2010, the reassessed future income tax liability at the revised income tax rate of 25% is $16,039,395.

For the quarter ended January 31, 2010, PhosCan recorded net income of $2,068,521 compared to a net (loss) of ($1,169,724) for same period of the previous year. The decrease in net loss of $3,238,245 was due primarily to a decrease in expenses, an increase in reported interest income and the non-recurring future income tax recovery.

Liquidity and Financial Position

Cash and cash equivalents plus short-term investments decreased by $4,195,389 during the year ended January 31, 2010 to $68,566,048 while working capital decreased by $3,512,006 to $68,440,606. The decreases were due to continued expenditures on the Martison Project and the corporate expenditures described previously.

Included in cash and cash equivalents plus short-term investments at January 31, 2010 was approximately US$6.3 million. 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. Purchases and sales of foreign currencies by PhosCan are governed by a policy approved by the Company's Board of Directors. This policy restricts the Company's foreign currency holdings to U.S. dollar-denominated cash, cash equivalents or short-term investments and limits the amount of these U.S. dollar-denominated holdings to 25% of PhosCan's total Canadian dollar-equivalent cash, cash equivalents and short-term investments.

Capitalized expenditures on the Martison Project were $86,628,497 at January 31, 2010, an increase of $1,970,509 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 January 31, 2010 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

The bench and pilot plant beneficiation tests and phosphoric acid pilot plant tests were the largest of these activities. PhosCan spent approximately $983,000 on these tests, which were conducted by Jacobs Engineering, during the year ended January 31, 2010. Results to date are encouraging and, as with each of the four activities, work is ongoing.

On March 26, 2009, PhosCan announced that it had entered into an agreement with IAMGOLD Corp. for the evaluation of the potential to recover and sell niobium contained in and overlaying the Martison phosphate deposit. Under the terms of the agreement, an extension of which is under discussion, upon completion of tests and studies, conducted at IAMGOLD's expense, IAMGOLD may elect to enter into a joint venture with PhosCan to extract, process and market the niobium. In return for funding all capital costs related to the extraction and processing of the niobium, IAMGOLD would earn the right to market the niobium and an interest in the profits from the sale of the niobium. IAMGOLD commenced testing phosphate ore and tailings from the Martison Project in the second half of calendar 2009 and this work continues.

Outlook

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. PhosCan's goal is to deploy its uncommitted cash on opportunities that have existing or near-term 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