Ashton Mining of Canada Inc.
TSX : ACA

Ashton Mining of Canada Inc.

November 10, 2006 09:00 ET

Ashton Announces Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 10, 2006) - While Ashton Mining of Canada Inc. ("Ashton" or the "Corporation") (TSX:ACA) was engaged in intense corporate activity during the third quarter, the Corporation's exploration programs continued to make significant progress during this period, particularly the collection of a 10,000 tonne bulk sample from the three key Renard kimberlites on the Foxtrot property in north-central Quebec.

The bulk sample program remains on track to deliver a parcel of at least 6,000 carats of diamonds during the first half of 2007. The construction of the 10 tonne per hour dense media separation ("DMS") test facility is substantially complete and commissioning will commence shortly. Approximately 2,400 tonnes of kimberlite from a surface exposure of Renard 4 has been stockpiled at the property and will be processed starting in December.

During the third quarter, further progress was also made on exploration programs in Alberta and Nunavut and particularly on the Foxtrot property in Quebec. There the Corporation discovered a new diamondiferous kimberlite dyke, commenced a sampling program at the Lynx/Hibou dyke systems, and collected an 18.4 tonne mini-bulk sample from the North Anomaly dyke. This sample returned 16.7 carats of diamonds for an estimated diamond content of 91 cpht.

Ashton is also pleased to report that in August it acquired an option to increase its current interest in the Alberta Buffalo Hills joint venture from 45 to 72.5 percent. In 2007, the Corporation plans to systematically drill the K14 and K91 kimberlites to define the tonnage potential of these large tonnage, low-grade kimberlites. In addition, Ashton expects to collect a 200 tonne bulk sample from K14.

In Nunavut, Ashton's joint venture partner on the Coronation Gulf properties collected a 100 tonne sample from the Artemisia kimberlite in August. The Corporation expects diamond results from this sample by year-end or in early 2007.

A detailed description of the Corporation's activities during the third quarter is presented below. The information is provided pursuant to National Instrument 54-102 and, unless otherwise indicated, reflects the Corporation's results and activities to November 1, 2006.

RESULTS OF OPERATIONS

The loss for the three and nine months ended September 30, 2006 amounted to $3.5 million (2005 - $3.5 million) or $0.04 per share (2005 - $0.05) and $4.2 million, (2005 - $5.6 million) or $0.05 per share (2005 - $0.07) respectively.

Excluding exploration costs written off to operations, corporate costs for the third quarter of 2006 were $2.8 million compared to $483,000 during the same period in 2005. The significant increase is due to the expenses incurred in responding to Stornoway's takeover bid. The expenses described as "Investor Relations and Shareholder Reporting" reflect the cost of Ashton's communication program during the course of the takeover bid. The increase in "Office and Administration" expenses is due to additional insurance for directors and officers required as a result of the takeover bid. "Professional and Consultants Fees" include legal and financial advisory services provided to the Corporation's Board of Directors to enable them to fulfil their responsibilities in response to the takeover bid. Remuneration includes the additional expenses and remuneration paid to directors arising from the meetings and other initiatives that were required during this period. Stock-based remuneration reflects the unamortized portion of the benefit of previously granted stock options. This amount was recognized when the options vested pursuant to certain provisions of the Corporation's Stock Option Plan that take effect upon initiation of a transaction that may result in a change of control of the Corporation.

Deferred exploration costs attributable to projects and properties that are abandoned or no longer deemed to be significant with respect to their mineral potential are written off when that determination is made. During the third quarter of 2006, only approximately $190,000 of exploration costs written off to operations (2005 - $2.5 million) related to drilling programs that did not result in the identification of kimberlites that warrant further evaluation. The balance consisted primarily of regional exploration costs incurred in the period.

Investment income is affected by the amount of funds under management in a given period and the interest rates that prevail from period to period. During the third quarter of 2006, the Corporation's cash resources were higher than during the comparable period in 2005. In addition, interest rates have increased over the past twelve months. As a result, investment income is higher for the most recent quarter.

The table below summarizes the Corporation's net income or loss, its net income or loss per share and its administrative expenses (excluding exploration costs written off to operations) for the eight most recent quarters.



---------------------------------------------------------------
Quarter
2004 2005 2006
Fourth First Second Third Fourth First Second Third
------------------ ------------------------------- -----------------------
Net
income
(loss)
(i) $(2,707) $ 500 $(2,620) $(3,489) $(4,657) $ 944 $(1,680) $(3,495)
Net
income
(loss)
per
share (0.04) 0.01 (0.03) (0.05) (0.06) 0.01 0.02 0.04
Administ-
rative
expenses
(i) 784 652 555 483 826 650 579 2,787
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(i) Amounts in thousands of dollars


As described on the previous page, in the third quarter of 2006 the Corporation incurred significant legal, financial advisory, communication and remuneration costs in response to Stornoway's unsolicited offer for all of the common shares of Ashton. Quarterly administrative expenses have otherwise not changed significantly over time except for variations attributable to the effect of stock-based remuneration resulting from the granting of stock options. These grants were made primarily in the fourth quarters of 2004 and 2005. Stock-based remuneration is a non-cash cost.

During the first quarter of 2006, the Corporation recognized a future tax recovery of $1.65 million (2005 - $1.1 million) that resulted in the recognition of net income for the period. Otherwise, except for the effect of the costs incurred in third quarter of 2006 as described above, variations in the quarterly loss and the corresponding loss per share are principally due to the write-off of exploration costs.

Exploration Activities

Including the contribution of the Corporation's joint venture partners, gross exploration costs in the third quarter of 2006 were $6.4 million (2005 - $5.8 million) of which more than 90 percent was expended in Quebec. Most of these expenditures relate to drilling and underground bulk sampling work for the collection of the bulk sample from the Renard cluster that began in early July. Ashton's share of these expenditures for the quarter amounted to $3.9 million (2005 - $3.6 million). In the first nine months of 2006, Ashton's total net exploration expenditures amounted to $9.3 million (2005 - $7.5 million) net of a government of Quebec tax credit of $900,000 (2005 - $1.2 million) relating to 2005 Quebec exploration costs.

The table below provides, for each of the eight most recent quarters, a summary of exploration costs on a project-by-project basis.



Amount in Thousands of Dollars per Quarter
---------------------------------------------------------------
2004 2005 2006
Fourth First Second Third Fourth First Second Third
------------------ ------------------------------- -----------------------
Quebec $1,684 $2,483 $ 162 $2,277 $1,150 $3,417 $1,409 $3,428
Alberta 119 218 77 421 59 20 6 33
Nunavut and
Northwest
Territories 240 443 409 836 228 88 124 47
Others 33 59 34 66 88 66 239 440
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Ashton explores in remote areas of Canada. At this stage of the Corporation's initiatives, prevailing weather and ground conditions strongly influence the timing of activities in the field. As a result, the Corporation incurs higher exploration costs during periods of the year when field operations are at their peak, generally during the winter and summer months. Field exploration programs are sometimes suspended for short periods in late spring and fall.

Brooke Clements, Professional Geologist and Ashton's Vice President Exploration, is a Qualified Person under National Instrument 43-101 and is responsible for the design and conduct of the Corporation's exploration programs, and for the verification and quality assurance of analytical results.

Quebec

Program activities on the Quebec project during the third quarter of the year included:

- commencement of the collection of the 10,000 tonne bulk sample of kimberlitic material from Renard 2, 3 and 4. Approximately 2,400 tonnes was collected by trenching at Renard 4. The construction of a portal and the excavation of an underground ramp also commenced to enable the collection of 4,000 tonnes of material from each of Renard 2 and 3;

- laboratory analysis of both indicator mineral and kimberlitic samples. Diamond work included the recovery of 31.9 carats from 71.3 tonnes of kimberlitic material collected from Renard 9, giving this sample an estimated diamond content of 45 carats per hundred tonnes ("cpht"). On a cumulative basis, samples processed to date from this body have returned an estimated diamond content of 52 cpht. In addition, a sample of approximately three tonnes of kimberlitic material from surface material at Renard 4 was shown to have an estimated diamond content of 171 cpht;

- target drilling on the Foxtrot property. This work resulted in the discovery of a new diamondiferous kimberlitic dyke within the boundaries of the Southeast Anomaly; and

- further evaluation of the North Anomaly and Hibou dykes by trenching. Samples of approximately 18 and 35 tonnes, respectively, were collected from the two bodies. The material from the North Anomaly dyke was processed for diamonds and returned an estimated diamond content of 91 cpht.

Alberta, Nunavut and the Northwest Territories

During the third quarter, Ashton conducted very limited work in Alberta, Nunavut and the Northwest Territories. Activities included laboratory analysis of indicator mineral samples collected in 2005 on the Corporation's properties in Nunavut. This work will continue during the last quarter of the year and will assist in determining the extent of future programs. During the third quarter of 2005, the Corporation conducted more extensive laboratory analytical work, resulting in higher costs compared to the corresponding period in 2006.

In August 2006, Ashton entered into an option agreement with its joint venture partners on the Alberta project. Under this agreement, Ashton can increase its interest in the joint venture to 72.5 percent by incurring $15 million of exploration costs not later than April 30, 2010. Ashton has committed to spend not less than $4 million by the end of 2008, of which $2 million must be spent by the end of 2007.

In July 2006, Ashton granted Vaaldiam Resources Ltd. ("Vaaldiam") an exclusive option to earn a 40 percent interest in the Corporation's wholly owned Eokuk, James River, Kim, Ric and Vic properties in the Coronation Gulf region of Nunavut. In order to earn this interest, Vaaldiam must incur $3 million in exploration costs not later than December 31, 2008, $1 million of which must be incurred not later than December 31, 2006. In addition, Vaaldiam must issue 65,000 and 130,000 common shares to Ashton on April 1, 2007 and 2008 respectively. During the third quarter, Vaaldiam completed a summer exploration program that included the collection of a 100 tonne bulk from Artemisia, a kimberlite discovered by Ashton on the Kim property in 2001.

Other Exploration Activities

In addition to the work in the project areas described above, Ashton undertakes other initiatives to identify new exploration opportunities to ensure that new programs and projects are generated as others are completed or terminated. This work includes grassroots reconnaissance exploration and evaluation of joint venture and acquisition opportunities. This approach enhances the Corporation's ability to maximize its exposure to potential success by maintaining a balanced portfolio of exploration initiatives.

FINANCIAL CONDITIONS AND LIQUIDITY

Cash on hand at September 30, 2006 was approximately $17.5 million (December 31, 2005 - $16.1 million) and working capital was $16.2 million (December 31, 2005 - $15.7 million).

The Management's Discussion and Analysis report for the year ended December 31, 2005 contained in the 2005 annual report mailed to shareholders in March 2006 (the "Annual MD&A") accurately describes the Corporation's current financial commitments.

CAPITAL RESOURCES

The majority of the capital expenditures incurred during the third quarter of 2006 relate to the bulk sample program underway in Quebec and, more specifically, to the installation and construction of a DMS test facility on site. The commissioning of this facility is currently scheduled for November.

With the construction of the DMS test facility and increased infrastructure to support the 2006 bulk sample program in Quebec, Ashton has adjusted its estimated share of asset retirement obligations for this project from $200,000 at the beginning of the year to $600,000 at the end of September. This amount is an estimate of the costs that would be incurred to remove all machinery and equipment currently used at its remote Quebec field site and to restore terrain affected by exploration to its original condition.

SHARE CAPITAL

The table below presents the Corporation's share capital data as of November 1, 2006.



----------------------------------------
Number of
Exercise Common
Price Expiry Date Shares
---------------------------------------------------------------------------
Common shares, issued
and outstanding 95,255,286
Securities convertible into
common shares:
Warrants: $1.30 May 19, 2007 2,500,000
Options: $0.95 to January 10, 2007 3,731,950
$3.38 to
December 1, 2015
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---------------------------------------------------------------------------
Common shares, fully diluted 101,487,236
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SUSEQUENT EVENT

Subsequent to September 30, 2006, Ashton reached an agreement with its President and Chief Executive Officer to terminate his employment agreement effective October 16, 2006, concurrent with the expiry of the Stornoway takeover bid. In accordance with the employment agreement, Ashton has agreed to make a lump sum payment of approximately $850,000 as a result of the termination. Ashton and its President and CEO have also entered into a contract for services under which he will continue to act as the Corporation's President and CEO on an interim basis, pending the appointment of a successor.

Contact Information

  • Ashton Mining of Canada Inc.
    Robert T. Boyd
    President and CEO
    (604) 983-7750
    or
    Ashton Mining of Canada Inc.
    Ariel Bowers
    Investor Relations
    (604) 983-7750
    Email: contact@ashton.ca
    Website: www.ashton.ca