Silvermet Inc.

Silvermet Inc.

August 27, 2009 08:41 ET

Silvermet Announces Second Quarter Results and Operating Plans

TORONTO, ONTARIO--(Marketwire - Aug. 27, 2009) -


Silvermet Inc. ("Silvermet" or the "Company") (TSX VENTURE:SYI) is pleased to announce the release of its second quarter results. Financial statements and management's discussion and analysis of financial condition and results of operations ("MD&A") can be found on SEDAR or the Company's website. The Company reports its financial results in US dollars.

Silvermet has successfully transitioned from an exploration and development company to an operating company. The Company's Waelz kiln operations in Iskenderun, Turkey have been running since mid-May to recover zinc contained in electric arc furnace dust ("EAFD") that is produced as a waste product by local steel mills.

The initial shipment of zinc clinker took place in June, resulting in gross revenues of $837,001. Treatment and transportation costs related to such sales were $380,671. High treatment charges were the result of difficult market conditions experienced in the first half of 2009. Since then, treatment charges have been declining toward their historic norms, while at the same time, improved general market conditions have resulted in improved zinc prices.

The Company incurred direct operating costs of $733,455 plus amortization expense of $46,843 to result in a loss from operations of $322,968 in the second quarter. Direct operating costs include raw materials, labour, utilities and maintenance expenses. The re-commissioning and start-up of the kiln was successfully accomplished and the upgrading of controls, feed systems and other mechanical improvements are all adding to start-up and running costs. A stabilized production rate and reduced operating costs are expected by the fourth quarter.

Other expenses in the quarter included acquisition and pre-operating costs ($259,550), general and administrative expenses ($156,777), interest and financing costs ($71,613), foreign exchange loss ($115,376) and stock option expense ($173,931). The net result was a net loss before taxes of $1,105,101 or $0.01 per share for the 3 months ended June 30, 2009.

The Company's balance sheet included negative working capital of $4,745,763 at June 30, 2009. Subsequent to the end of the quarter, on July 28, 2009, the transaction with Cooper Island Investments, LLC ("Cooper Island") was closed, resulting in the exchange of the $2,000,000 loan from Cooper Island for a 25% equity interest in the Turkish operations. Additionally, accrued interest of $47,672 on the loan was paid to Cooper Island by the issuance of 367,000 common shares of the Company at a price of Cdn $0.1454 per share. Accounts payable and accrued liabilities include approximately $920,000 assumed liabilities owing to suppliers by the former owners of the plant and such liabilities are expected to be paid out over the next 12 months. Also included in current liabilities is a term loan of $1,130,800 which is due on February 17, 2010 and interest only is payable until that time.

Long-term liabilities include $1,649,207 for the contingent payments owing to the vendors of the Turkish assets ($2.3 million undiscounted). At this time, it is not expected that any payments will be made under this contingent consideration until after 2010. Also included is the $289,189 long-term portion of the fixed payment amounts due to the vendors of the Turkish assets ($432,638 is included in current liabilities). The fixed payment liability at June 30, 2009 was $800,000 on an undiscounted basis and is being paid at a rate of $40,000 per month.

Subsequent to June 30, 2009, the Company has drawn down $500,000 under the Cooper Island remaining financing. The Company intends to fund its proportionate share of equity ($1,500,000) within the 60 day period to maintain its 75% interest in the Turkish operations. The Company may draw down a further $1,500,000 at its discretion under the Cooper Island financing facility at any time prior to March 31, 2010.

Current and Future Growth Plans

The Company has identified a number of capital projects that total approximately $3.7 million to debottleneck and improve the plant's operations, as more fully described in its MD&A. The result of such expenditures is that the current recovery rate of 17 million pounds zinc is expected to reach 27 million pounds on an annualized basis, once operations are stabilized in the fourth quarter of this year. In 2010, annualized zinc recovery should reach 35 million pounds with the completion of the new pelletizing and material handling system.

As the available EAFD in the Iskenderun area significantly exceeds the Company's processing capacity through the existing kiln, the Company is actively studying the addition of a second kiln at the Iskenderun plant. Under the agreement with Cooper Island, they would be responsible for their 25% share of any required financing for such a project.

The Company estimates that recovered zinc would increase from 35 million pounds to 90 million pounds per annum with the expansion to a second kiln on the Iskenderun property. Operating costs would be reduced due to the sharing of certain fixed and semi-variable costs between two kilns. The Company has also studied the Izmir market in Turkey, where it believes there is a need for a kiln. Should the Izmir project proceed, annualized recovered zinc would increase to 145 million pounds.

Zinc prices hit a low of $0.47 per pound in December 2008. By June 30, 2009, prices had increased to $0.70 per pound and as of the current date, the zinc price has increased to $0.82 per pound. The Company's operating results are highly leveraged to the price of zinc and should benefit significantly from any continued increase in zinc prices.

Management believes it has laid the foundations for what will become a profitable participant in the global zinc market and return substantial value to its shareholders as a result.

The TSX Venture Exchange has in no way passed upon the merits of the transaction and has neither approved nor disapproved the contents of this press release.

Caution concerning forward-looking statements: The information in this release may contain forward-looking information under applicable securities laws. This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by the forward-looking information. Factors that may cause actual results to vary include, but are not limited to, inaccurate assumptions concerning the exploration for and development of mineral deposits, political instability, currency fluctuations, unanticipated operational or technical difficulties, changes in laws or regulations, the risks of obtaining necessary licenses and permits, changes in general economic conditions or conditions in the financial markets and the inability to raised additional financing. Readers are cautioned not to place undue reliance on this forward-looking information. The Company does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events except as may be required under applicable securities laws.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Silvermet Inc.
    Stephen G. Roman
    Chairman & CEO
    (416) 203-8336
    Silvermet Inc.
    Rein A. Lehari
    President & COO
    (416) 203-8336
    (416) 368-5146 (FAX)