Crowflight Minerals Inc.
TSX : CML

Crowflight Minerals Inc.

November 16, 2010 07:30 ET

Crowflight Announces Third Quarter 2010 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 16, 2010) - CROWFLIGHT MINERALS INC. ("Crowflight" or the "Company") (TSX:CML) today announces its financial results for the third quarter of 2010.

Complete interim financial statements and related Management's Discussion and Analysis are filed under the Company's profile on www.sedar.com. All amounts are in Canadian dollars unless otherwise indicated.

Q3 2010 Financial and Operational Highlights:

  • For the quarter ended September 30, 2010, Crowflight produced 989,265 pounds of nickel, and sold 911,092 pounds of nickel payable as compared to 384,327 pounds of nickel produced and 276,918 pounds of nickel sold in the third quarter of last year.

  • Total metal revenue for the quarter ended September 30, 2010 was $8.5 million compared to $2.3 million for the third quarter last year.

  • Operating cash flow for the quarter ended September 30, 2010 was ($12.5 million) compared to operating cash flow of $0.4 million in the third quarter last year.

  • Loss for the quarter ended September 30, 2010 was $14 million or ($0.02) per share compared to net loss of $2.9 million or ($0.01) per share in the third quarter last year.

  • Commercial nickel sales settled during the quarter ended September 30, 2010 were realized at an average price of US$8.97 per pound compared with US$7.41 per pound in the third quarter of 2010.

  • Net working capital as at September 30, 2010 was ($17 million) (including cash and cash equivalents of $1.6 million) compared to $3.2 million as at December 31, 2009.

2010 Quarterly Bucko Mine Operations Production and Financial Data

    Q1-2010     Q2-2010     Q3-2010  
Operating Statistics:                  
Tonnes ore mined   11,177     67,189     53,518  
Average Nickel head grade (%Ni)   1.02%     1.31%     1.20%  
Tonnes ore milled   9,431     58,605     53,523  
Average Recovery   66.94%     69.42%     70.79%  
Nickel pounds:                  
  Produced   141,970     1,177,468     989,265  
  Payable sold1   117,600     917,977     911,092  
                   
Commercial Production Metal Sales Revenue:                  
Average Ni price (US$/lb) $ 9.77   $ 10.25   $ 8.97  
CAD/US exchange rate $ 1.04   $ 1.03   $ 1.04  
Nickel revenue   893,266     9,594,466     9,322,945  
Pricing adjustments3   304,756     80,902     (826,027 )
Total metal revenue   1,198,022     9,675,368     8,496,918  
Cost of sales2   3,867,822     12,250,533     19,432,607  
Temporary shutdown costs   4,480,891     -     -  
Depreciation, depletion, and amortization   36,432     1,580,676     1,416,476  
Gross profit   (7,187,123 )   (4,155,841 )   (12,352,165 )
Net earnings (loss) before tax   (8,935,360 )   (5,142,199 )   (15,071,957 )
Basic and diluted earnings (loss per share) $ (0.01 ) $ (0.01 ) $ (0.02 )
Cash flow from operating activities   (8,944,040 )   (8,769,568 )   (12,461,461 )
USD Cash Cost of sales per pound sold1,4 $ 37.34   $ 14.43   $ 20.46  
1. Includes settlement of prior quarter sales
2. Other metal revenue is recorded as an offset to cost of sales in the Company's financial statements
3. Pricing adjustments reflect final pricing/volume adjustments on lots sold in prior quarters
4. Cash cost per pound sold is a Non-GAAP measure. Refer to "Non-GAAP Measures" section for reconciliation to GAAP

 

  • On September 3, 2010, Crowflight issued and sold a convertible debenture (the "Convertible Debenture") to King Place Enterprises Limited ("King Place") in the principal amount of $10,050,000 (see press release of August 27, 2010). The Convertible Debenture shall mature on February 27, 2011. Amounts owing under the Convertible Debenture shall be unsecured and interest shall accrue at a rate of 10% per annum, compounded annually. The holder shall be entitled to convert amounts owing under the Convertible Debenture into common shares of Crowflight at a price equal to the five-day Volume Weighted Adjusted Price (VWAP) at the time of conversion less the maximum discount allowed under Toronto Stock Exchange regulations at the time of conversion. However, King Place may not convert any portion of the amounts outstanding hereunder in excess of the amount that would result in the obligation to issue an aggregate number of shares exceeding 58,356,471 Common Shares without prior approval of disinterested shareholders. King Place, who purchased the Convertible Debenture, is currently the largest shareholder of Crowflight. King Place owns and controls a total of 247,029,971 common shares and 50,588,235 warrants of Crowflight prior to this private placement, or 42.5% of the issued and outstanding common shares of Crowflight on a non-diluted basis. Crowflight previously issued and sold a non convertible debenture in the principal amount of $5,050,000 to King Place (see press release of August 9, 2010), which was cancelled and replaced by the $10,050,000 Convertible Debenture.

  • On September 20, 2010, Crowflight announced the appointment of Kevin Zhu (Xuexin), M. Eng, PMP to its Board of Directors. Kevin will act as King Place's representative on the Crowflight Board of Directors. King Place and Crowflight agreed to appoint a representative of King Place to the Crowflight Board of Directors.

  • On September 23, 2010, Crowflight announced a private placement financing in the form of a convertible debenture issued to King Place in the principal amount of $3,000,000 (the "Convertible Debenture"). The Convertible Debenture shall mature on the date that is six months from the date of issue. Amounts owing under the Convertible Debenture shall be unsecured and interest shall accrue at a rate of 10% per annum, compounded annually. The Convertible Debenture holder shall be entitled to convert amounts owing into common shares of Crowflight at a price equal to the five-day value weighted average price on the Toronto Stock Exchange (the "TSX") at the time of conversion less the maximum discount allowed under TSX regulations, subject to the Company not issuing an aggregate of more than 58,356,471 common shares of Crowflight in total pursuant to the Convertible Debenture and the convertible debenture of the Company issued to King Place on September 3, 2010, without prior approval from a simple majority of disinterested shareholders. In addition, King Place holds a pre-emptive right to maintain its 42.5% interest (see press release of September 3, 2010).

  • On October 1, 2010, Crowflight announced that it was temporarily suspending ore production mining operations at the Bucko Lake Nickel Mine, located in the Thompson Nickel Belt near Wabowden, Manitoba. Crowflight plans to temporarily suspend the Bucko Lake Mine to facilitate the introduction of its own underground mining equipment and team and to make readjustments to address certain operational issues. The Company intends to provide further details regarding the re-start of production mining operations at Bucko Lake, including a timetable for the re-start, in the coming weeks.

  • Crowflight also announced on October 1, 2010, that its Board of Directors has commenced a review of the potential of the Company's exploration properties for possible spin-off, joint venturing or other value realization event. Crowflight intends to review strategic options in relation to its exploration assets with the objective of finding ways to unlock Crowflight shareholder value.

  • Also on October 1, 2010, the Company announced that an extension to the offer letter from Jinchuan Group Ltd. ("Jinchuan") had not been received (see previous press releases dated April 6, 2010 and September 3, 2010 regarding the offer letter). Accordingly, the Company considers negotiations to have terminated.

  • On October 29, 2010, Crowflight announced the appointment of Rick Sproule to Vice President of Geology for Crowflight. Rick has served as the Company's Chief Geologist for the Bucko Lake Nickel Mine since 2009.

  • On November 2, 2010, the company sadly announced the passing of Steve Davies, Crowflight's Chief Operating Officer. Steve had joined the company earlier in the year. Steve was 47 years old. Steve was well known for his achievements in the Manitoba mining camp; he was also, at the time, Chief Operating Officer of Kria Resources, a company with zinc development properties in New Brunswick.

Outlook

On October 1, 2010, Crowflight announced that it was temporarily suspending operations at the Bucko Lake Mine. The Company is seeking to hire its own mining team and purchase its own underground mobile mining equipment fleet. Crowflight is also seeking to make improvements to its reclaim water quality, backfill systems and crushing and milling facilities. Crowflight does not expect to be operating its Bucko Lake operation before the end of 2010. Crowflight has been working with King Place (its majority shareholder) to arrange a debt facility to support the above improvement initiatives.

Non-GAAP Measures

This press release refers to net working capital and cash cost per pound, which are not recognized measures under Canadian GAAP. These non-GAAP performance measures does not have any standardized meaning prescribed by Canadian GAAP and is therefore unlikely to be comparable to similar measure presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors and others who follow the Company's performance assess performance in this way. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP.

  Three Months Ended     Nine Months Ended  
  September 30, 2010     September 30, 2010  
     
Bucko Lake Mine operating expenses, excluding depreciation, depletion and amortization   19,827,018       26,976,310  
Less by-product credit   (451,910 )     (1,038,101 )
Cash cost net of by-products   19,375,108       25,938,209  
Exchange rate (US$1 to C$)   1.04       1.04  
Cash cost net of by-products USD USD 18,639,755     USD 25,031,661  
Nickel payable sold (lb)   911,092       1,946,668  
Cash cost per pound of nickel payable sold, net of by-product credits in USD/lb USD 20.46     USD 12.86  

Qualified Person/Quality Control Procedures

This press release has been reviewed by Greg Collins, P. Geo and Mark Trevisiol, P. Eng., both are Qualified Persons under the National Instrument 43-101 guidelines. Mr. Trevisiol is the President and CEO of the Company.

About Crowflight Minerals

Crowflight Minerals Inc. (TSX:CML) is a Canadian junior mining company that owns the Bucko Lake Nickel Mine near Wabowden, Manitoba that resumed production in March 2010. The Company also holds nickel, copper and Platinum Group Mineral (PGM) projects in the Thompson Nickel Belt and Sudbury Basin.

Cautionary Note on Forward-Looking Information

This press release contains forward-looking statements under Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the Company's development potential and timetable of the Company's properties, including the Bucko Lake Project; the future price of nickel and other minerals; foreign exchange rates; the estimation of mineral reserves and mineral resources; conclusions of economic evaluations; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; capital expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Estimates regarding the anticipated timing, amount and cost of mining at the Bucko Lake Project are based on assumptions underlying mineral reserve and mineral resource estimates and the probability of realizing such estimates that are set out herein. Capital and operating cost estimates are based on extensive research of the Company, purchase orders placed by the Company to date, recent estimates of construction and mining costs and other factors that are set out herein. Production estimates are based on mine plans and production schedules, which have been developed by the Company's personnel and independent consultants. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks of the Company described in its annual information form that is available under its profile on SEDAR at www.sedar.com. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.

Further information is available on the Company's website at www.crowflight.com.

INTERIM CONSOLIDATED BALANCE SHEETS  
(unaudited)  
As at  
   
    September 30,     December 31,  
    2010     2009  
ASSETS            
Current            
  Cash and cash equivalents $ 1,648,877   $ 10,040,475  
  Amounts receivable   5,486,005     1,291,687  
  Inventory   3,582,399     1,031,734  
  Prepaid expenses and deposits   418,810     135,290  
    11,136,091     12,499,186  
Deposits and advances   534,709     534,709  
Property, plant and equipment   144,042,650     138,568,967  
Exploration and development property and deferred expenditures   14,970,550     14,704,437  
  $ 170,684,000   $ 166,307,299  
   
LIABILITIES            
Current            
  Accounts payable and accrued liabilities $ 15,268,927   $ 9,282,060  
  Loans   12,672,971     -  
  Equipment leases   48,598     45,371  
  Derivative liability   191,149     -  
    28,181,645     9,327,431  
Equipment leases   23,942     61,281  
Asset retirement obligations   977,864     918,387  
Future income tax liability   2,127,000     6,000,200  
    31,310,451     16,307,299  
SHAREHOLDERS' EQUITY            
Common shares   150,684,828     138,758,903  
Warrants   9,855,793     10,195,919  
Contributed surplus   17,268,440     15,698,606  
Equity component of convertible debentures   1,531,857     -  
(Deficit)   (39,967,369 )   (14,653,428 )
    139,373,549     150,000,000  
  $ 170,684,000   $ 166,307,299  
These financials should be read in conjunction with the Notes and Management's Discussion and Analysis available online at www.sedar.com and on the Company's website at www.crowflight.com.

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)

  Common Shares   Warrants   Contributed Surplus   Equity component of convertible debentures Accumulated Deficit   Shareholders' Equity  
  No. $   $   $     $   $  
   
Balance, December 31, 2008 293,304,323 99,289,864   4,944,374   13,485,751   - 12,327,459   130,047,448  
   
  Private placement 215,411,765 47,820,000   -   -   - -   47,820,000  
  Value of warrants granted - (4,842,336 ) 4,842,336   -   - -   -  
  Value of warrants granted related to debt facility - -   107,597   -   - -   107,597  
  Exercise of stock options 245,000 49,000   -   -   - -   49,000  
  Valuation allocation on exercise of stock options - 18,586   -   (18,586 ) - -   -  
  Stock based compensation - shares 562,464 113,130   -   -   - -   113,130  
  Stock based compensation - options - -   -   2,231,441   - -   2,231,441  
  Flow through share tax effect - (2,982,000 ) -   -   - -   (2,982,000 )
  Value of broker warrants - (301,612 ) 301,612   -   - -   -  
  Share issue costs - (523,400 ) -   -   - -   (523,400 )
  Tax effect of cost of issue - 117,671   -   -   - -   117,671  
  Loss for the period -     -   -   - (26,980,887 ) (26,980,887 )
   
Balance, December 31, 2009 509,523,552 138,758,903   10,195,919   15,698,606   - (14,653,428 ) 150,000,000  
   
  Private placement 72,200,000 11,552,000   -   -   - -   11,552,000  
  Stock based compensation - shares 319,980 48,353   -   -   - -   48,353  
  Stock based compensation - options - -   -   1,325,003   - -   1,325,003  
  Share issue costs - (125,000 ) -   -   - -   (125,000 )
  Exercise of warrants 1,588,259 317,652   -   -   - -   317,652  
  Valuation allocation on exercise of warrants - 95,295   (95,295 ) -   - -   -  
  Valuation allocation on expiry of warrants - -   (244,831 ) 244,831   - -   -  
  Tax effect of cost of issue - 37,625   -   -   - -   37,625  
  Equity component of convertible debentures - -   -   -   1,531,857 -   1,531,857  
  Loss for the period - -   -   -   - (25,313,941 ) (25,313,941 )
Balance, September 30, 2010 583,631,791 150,684,828   9,855,793   17,268,440   1,531,857 (39,967,369 ) 139,373,549  
These financials should be read in conjunction with the Notes and Management's Discussion and Analysis available online at www.sedar.com and on the Company's website at www.crowflight.com.
   
   
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT  
(unaudited)  
For the three and nine months ended September 30,  
               
    Three months ended       Nine months ended  
    September 30,       September 30,  
    2010       2009       2010       2009  
   
Revenue                              
Nickel sales $ 9,322,945     $ 2,231,683     $ 19,810,677     $ 4,239,133  
Pricing adjustments   (826,027 )     52,810       (440,369 )     52,810  
Revenue - after pricing adjustments $ 8,496,918     $ 2,284,493       19,370,308     $ 4,291,943  
   
Cost of sales (excludes accretion, depreciation, depletion and amortization)   19,432,607       2,546,116       35,550,962       4,991,329  
Depreciation, depletion and amortization   1,416,476       605,141       3,033,584       941,234  
Gross margin - mining operations   (12,352,165 )     (866,764 )     (19,214,238 )     (1,640,620 )
   
Temporary shutdown costs   -       2,381,083       4,480,891       2,381,083  
Loss from mining operations   (12,352,165 )     (3,247,847 )     (23,695,129 )     (4,021,703 )
   
Other expenses                              
Professional, consulting and management fees   1,143,380       1,036,527       3,771,862       2,327,994  
General and office   182,527       372,310       668,155       1,199,837  
Shareholder communications and investor relations   75,389       127,433       277,895       331,859  
Travel   25,082       42,214       67,853       160,900  
Interest expenses and bank charges   368,669       51,773       429,634       128,621  
Amortization   201       201       603       1,355  
    1,795,248       1,630,458       5,216,002       4,150,566  
   
(Loss) before the undernoted   (14,147,413 )     (4,878,305 )     (28,911,131 )     (8,172,269 )
   
Interest income   488       3,161       13,889       26,672  
Interest on long term debt   -       -       -       (48,673 )
General exploration   -       -       -       (50,000 )
Debt facility transaction costs   -       (322 )     -       (383,464 )
Write down of exploration property and deferred expenditures   -       -       (101,771 )     (50,000 )
Accretion   (19,826 )     -       (59,477 )     57,416  
Recovery of expenditures   -       -       -       66,958  
Unrealized loss on derivative instruments   (826,204 )     (339,371 )     (139,950 )     1,402,100  
Foreign exchange gain/(loss)   (79,002 )     -       48,924       -  
   
(loss) before income taxes   (15,071,957 )     (5,214,837 )     (29,149,516 )     (7,151,260 )
   
Future income taxes   1,095,000       2,308,970       3,835,575       2,503,070  
   
(loss) for the period   (13,976,957 )     (2,905,867 )     (25,313,941 )     (4,648,190 )
   
RETAINED EARNINGS/(DEFICIT), beginning of period   (25,990,412 )     10,585,136       (14,653,428 )     12,327,459  
   
RETAINED EARNINGS/(DEFICIT), end of period $ (39,967,369 )   $ 7,679,269     $ (39,967,369 )   $ 7,679,269  
   
   
Loss per share - basic & diluted $ (0.02 )   $ (0.01 )   $ (0.04 )   $ (0.01 )
Weighted average number of shares - basic & diluted   583,563,106       415,524,927       570,426,682       351,897,975  
These financials should be read in conjunction with the Notes and Management's Discussion and Analysis available online at www.sedar.com and on the Company's website at www.crowflight.com.
                         
                         
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS  
unaudited  
For the three and nine months months ended September 30,  
    Three months ended     Nine months ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
OPERATING ACTIVITIES:                        
Net loss for the period $ (13,976,957 ) $ (2,905,867 ) $ (25,313,941 ) $ (4,648,190 )
Charges not affecting cash:                        
  Depreciation, depletion and amortization   1,416,676     603,321     3,034,187     940,568  
  Stock-based compensation expense   307,491     334,705     1,373,356     1,052,626  
  Warrants issued on In-process working capital facility   -     -     -     107,597  
  Accretion   19,826     -     59,477     (57,416 )
  Change in value of derivative instruments   877,403     (131,737 )   191,149     8,261,517  
  Future income tax (recovery)   (1,095,000 )   (2,308,970 )   (3,835,575 )   (2,503,070 )
Net change in non-cash working capital   (10,900 )   4,797,759     (5,683,721 )   7,236,213  
    (12,461,461 )   389,211     (30,175,068 )   10,389,845  
FINANCING ACTIVITIES:                        
Debt facility, net of transaction costs   -     -     -     (7,600,000 )
Private placements                        
  Common shares issued   -     21,129,366     11,552,000     28,949,366  
  Issue costs   -     3,180     (125,000 )   (523,400 )
Shares issued from exercise of warrants and options   -     -     317,652     -  
Proceeds from convertible debentures financing:                        
  Liability Portion   11,518,143     -     11,518,143     -  
  Equity Portion   1,531,857     -     1,531,857     -  
  Issue costs   (50,000 )   -     (50,000 )   -  
Payments on equipment leases   (11,628 )   (10,624 )   (34,112 )   (37,897 )
    12,988,372     21,121,922     24,710,540     20,788,069  
INVESTING ACTIVITIES:                        
Exploration and development property, plant and equipment, and deferred expenditures   (446,436 )   (6,761,989 )   (8,436,529 )   (27,070,312 )
(Decrease)/increase in accounts payable attributable to property development and exploration   (222,156 )   (2,732,055 )   5,509,459     (4,039,309 )
Change in restricted cash   -     -     -     2,999,998  
    (668,592 )   (9,494,044 )   (2,927,070 )   (28,109,623 )
CHANGE IN CASH AND CASH EQUIVALENTS   (141,681 )   12,017,089     (8,391,598 )   3,068,291  
CASH AND CASH EQUIVALENTS, beginning of period $ 1,790,558   $ 1,658,745     10,040,475     10,607,543  
CASH AND CASH EQUIVALENTS, end of period $ 1,648,877   $ 13,675,834   $ 1,648,877   $ 13,675,834  
   
Cash and cash equivalents consist of:                        
  Cash   1,574,119     5,509,476     1,574,119     5,509,476  
  Cash equivalents   74,758     8,166,358     74,758     8,166,358  
  $ 1,648,877   $ 13,675,834   $ 1,648,877   $ 13,675,834  
SUPPLEMENTAL INFORMATION:                        
Stock based compensation charged to exploration properties   -     -     -     14,250  
Amortization of assets deferred to exploration properties   604     604     1,812     9,437  
Interest received   488     3161     13,889     28,672  
Interest paid   368,669     8885     466,016     69,405  
 
These financials should be read in conjunction with the Notes and Management's Discussion and Analysis available online at www.sedar.com and on the Company's website at www.crowflight.com.

Contact Information

  • Crowflight Minerals
    David Hunter
    Chief Financial Officer
    (416) 861-5885
    www.crowflight.com