FNX Mining Company Inc.
TSX : FNX

FNX Mining Company Inc.

February 23, 2007 06:30 ET

FNX Earns Record $68.7 Million in 2006

TORONTO, ONTARIO--(CCNMatthews - Feb. 23, 2007) - FNX Mining Company Inc. (TSX:FNX) is pleased to report record unaudited financial and operating results for the fourth quarter and fiscal 2006. Production from its 100% owned Sudbury operations generated record revenues of $170.0 million for the year and $50.2 million for the fourth quarter. Net earnings for 2006 were $68.7 million or $0.82 per share, while fourth quarter net earnings were $19.7 million or $0.23 per share. Cash flow from operating activities for the fourth quarter and full year were $32.2 million and $81.8 million or $0.38 and $0.97 per share, respectively. The Company set records during 2006 for revenues, ore production, net earnings, cash flow, EBITDA, cash operating margins, price received for nickel and copper and lowest average cost to produce a pound of nickel, among others.

Terry MacGibbon, President and CEO of FNX stated that, "Our fourth quarter and full year results were very strong, driven by robust commodity prices and efficient operations at our McCreedy West Mine. The start up of the Levack Mine late in the year was the next important step in our growth strategy. Our recent new nickel discovery down-dip at Levack is a tangible return on our exploration investment and demonstrates the excellent exploration potential and long term upside at Levack."

Unaudited Operating Highlights



Q4 2006 Q4 2005 2006 2005

Total Revenue (C$000) 50,202 22,726 169,945 84,602
Cash Operating Costs (C$000) 17,131 16,032 65,569 51,484
Cash Operating Margin (C$000) 33,071 6,694 104,376 33,118
Depreciation and Amortization (C$000) 3,556 3,205 12,921 8,768
Operating Margin (C$000) 29,515 3,489 91,455 24,350

Revenue per Ton Sold (C$) 318 173 272 193
Cash Operating Costs per Ton Sold (C$) 109 122 105 118
Cash Operating Margin per Ton Sold (C$) 209 51 167 75
Cash Cost per lb of Ni (US$) (net of
by-product credits) 1.58 3.11 0.77 3.17

EBITDA (C$000) 33,367 4,913 97,078 17,692
Net Earnings (Loss) (C$000) 19,667 477 68,680 4,597
Net Earnings per Share (C$) 0.23 0.01 0.82 0.08
Cash Flow From Operating Activities
(C$000) 32,189 14,209 81,815 27,171
Cash Flow Per Share (C$) 0.38 0.19 0.98 0.47
Debt (C$000) Nil Nil Nil Nil

Total Ore Sold (tons) 157,741 131,404 624,525 437,367
Nickel Ore Sold (tons) 76,736 84,358 309,776 326,651
Grade of Nickel Ore Sold (%Ni) 1.7 1.6 1.6 1.7
Payable Metal Sold - Nickel (000 lbs) 1,966 2,151 8,105 8,018

Copper Ore Sold (tons) 81,005 47,046 314,749 110,716
Grade of Copper Ore Sold (%Cu) 1.5 2.1 1.6 2.6
Payable Metal Sold - Copper (000 lbs) 2,272 2,053 9,581 6,211

Payable Metal Sold - Total Precious
Metals (oz) 8,007 4,130 30,232 10,041

Realized Nickel Prices (US$/lb) 16.32 5.77 12.16 6.56
Realized Copper Prices (US$/lb) 2.81 2.07 3.18 1.73
Realized Exchange Rate (C$ /US$) 1.14 1.17 1.13 1.21

Certain of the above items are considered to be non-GAAP performance
measures (see below).


Operations

The McCreedy West mine sold 157,741 tons of ore in the last quarter of 2006, bringing the total ore shipped and sold for the full year to 624,525 tons. Nickel ore sold totaled 309,776 tons for the year and copper ore sold was 314,749 tons. Fourth quarter and full year payable metal production was 1.97 million and 8.11 million pounds of nickel, and 2.27 million and 9.58 million pounds of copper, respectively. The average realized prices for nickel for the quarter and full year were US$16.32 and US$12.16 per pound, while copper prices received were US$2.81 and US$3.18, respectively per pound. Precious metal production was also a record at 8,007 ounces for the quarter and 30,232 ounces for 2006.

During the fourth quarter, the average revenue per ton of ore was $318 and the average cash operating cost per ton was $109, yielding a strong cash operating margin of $209 per ton. For the full year, the average revenue per ton was $272 minus the average cash operating cost per ton of $105, producing a cash operating margin of $167 per ton. The costs to produce a pound of nickel, net of by-product credits, for the last quarter and full year are US$1.58 and US$0.77.

FNX plans to spend $173.0 million on capital projects and exploration in 2007, including $31.0 million in advanced and general exploration expenditures. Key expenditures include, $46.1 million ramping up Levack Mine, $34.3 million for advanced exploration on the Levack Footwall, $44.8 million developing the Podolsky Mine and $16.8 million for the McCreedy West Mine.

In December 2006, the Levack Mine hoisted its first nickel ore to surface since the closing of the mine by CVRD Inco in the late 1990's. Levack produced 6,978 tons of ore, of which 3,307 tons were shipped by year end to CVRD Inco's Clarabelle mille for processing with the balance shipped in January 2007. Approximately $1.2 million of pre-production revenue (on a net realizable value basis) were credited to the Levack development cost at December 31, 2006. Levack nickel is expected to achieve commercial production in early 2007.

At the Levack Mine, FNX will be expanding production in the first half of the year to reach the planned rate of 1,500 tons per day in the second half of 2007. Additional underground drilling at Levack in 2007 will focus on confirming existing resources and testing a portion of the larger, historic resources to assess their viability. A production crosscut will also be driven during 2007 from the Levack 2650 Level to the top of the Levack Footwall Deposit. Simultaneously, Xstrata Nickel will be driving an advanced exploration crosscut from the 4000 Level of their Craig Mine into the Levack Footwall Deposit to facilitate collection of a bulk sample for metallurgical testing and to provide underground drill platforms for detailed drilling of a portion of the Deposit for mine planning and resource estimation.

At the Podolsky Mine, expenditures for 2007 include completion of the 2450 and 1750 crosscuts, vent raises, bulk sampling, detailed drilling and pre-production in the fourth quarter leading to a decision to commence commercial production.

Expenditures at McCreedy West will purchase new equipment, support additional mine development, drill to replace reserves and evaluate the feasibility of rehabilitating the 1600 Level from McCreedy West for 8,000 ft to Levack to allow transport of McCreedy West nickel ore to the Levack Mine for crushing and hoisting up the No. 2 shaft. This would free up ramp capacity to increase PM production at the McCreedy West Mine.

Production plans call for a 42% increase in ore production in 2007 to 900,000 tons producing 12.7 million pounds of payable nickel, 10.9 million pounds of payable copper and 29,500 ounces of payable precious metals. Most of the increase in 2007 production comes from the growing contributions from the nickel-rich ore at the Levack Mine. The Company expects that its cash on hand and expected 2007 cash flow, will be sufficient to self-fund the 2007 planned expenditures without the need for equity or debt financing.

Investments

FNX holds 3,150,230 common shares and 2,347,886 common share purchase warrants of International Nickel Ventures Corporation (TSX:INV), 7,716,594 million common shares of Dynatec Corporation (TSX:DY), 13,300,000 million common shares of Lake Shore Gold Corp. (TSX:LSG) and 6,860,715 common shares of Superior Diamonds Inc.(TSX VENTURE:SUP), all of which are publicly traded corporations. The combined book value is $30.4 million and, as at February 19, 2007, the market value was $58.8 million.

Exploration

Exploration expenditures in 2006 were $19.8 million, divided between definition drilling of the Levack Footwall Deposit, drilling for additional mineral resources to support future mining at the PM and Inter Main Deposits at McCreedy West Mine and exploring Aurora Platinum's Falconbridge Joint Venture and Foy Properties.

The 2007 exploration budget of $31.0 million includes $14.3 million for advanced exploration activities at McCreedy West ($4.2 million), Levack ($4.6 million) and Levack Footwall ($5.5 million). The general exploration budget of $16.3 million focuses on McCreedy West ($5.0 million), Levack ($7.0 million), Aurora Sudbury properties ($4.0 million) and Aurora non-Sudbury properties ($0.4 million).

The 2006 Levack Footwall drilling involved both definition and expansion drilling. Underground drilling took place during the year from Xstrata Nickel's Craig Mine 3000 and 4000 Levels, from the 2650 Level at the Levack Mine and from up to three surface drills. It became clear from the 2006 drill results that the Levack Footwall, Rob's Transition and the Lower Levack Footwall mineralization represent a single polymetallic ore system, which is currently 2,300 ft along plunge and open at depth. Drilling on the Levack Footwall Deposit will continue throughout 2007. Late in 2006, an agreement was announced with Xstrata Nickel whereby they would drive a crosscut 1,675 ft laterally from the Craig Mine into the Levack Footwall mineralization. In addition, Xstrata Nickel will drift 410 ft to install drill stations for detailed drilling of the Deposit and complete another 560 ft of development work within the footwall mineralization to provide access for geologic and resource modeling and for collection of a bulk sample for metallurgical testing. Simultaneously, a production crosscut will be driven from the 2650 Level of the Levack Mine to the top of the Levack Footwall/Rob's Transition Deposits. This is expected to take all of 2007. Plans also call for rehabilitation of the Levack No. 2 Shaft to the 3600 Level in 2007 to prepare for driving a second production crosscut on the 3600 Level to the Levack Footwall Deposit during 2008. Simultaneous advanced exploration development from the Craig and Levack Mines will facilitate the collection of data necessary to support a future production decision.

Surface drilling late in 2006 to test for nickel-rich contact deposits down-dip from the historic Main Deposit and east of the No. 7 Extension Deposit at at the Levack Mine was successful in discovering a new mineralized zone in all nine of the initial drill holes. The holes intersected nickel-rich sulphide including 45.7 ft grading 1.99 % Ni and 0.62% Cu, 63.6 ft grading 1.15% NI and 0.34% Cu, 32.4 ft grading 1.65% Ni and 0.92% Cu and 16.5 ft at 2.43% NI and 0.52% Cu. Downhole electromagnetic geophysical surveys indicate that the intersections all occur within a continuous conductive plate. Extensive additional drilling will be required to completely define the target and this will be a priority in 2007.

Non-GAAP Performance Measures

This press release contains certain non-GAAP measures like cash operating margin, EBITDA, etc. Please see the Company's MD&A on SEDAR for discussion on non-GAAP performance measures.

Forward-Looking Statement

Certain information included in this press release, including information relating to future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements." Such forward-looking statements include, without limitation, (i) estimates of future capital expenditures; (ii) estimates regarding timing of future development and production; and (iii) estimates of future costs towards profitable commercial operations. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, interpretation and implications of drilling and geophysical results; estimates regarding timing of future capital expenditures and costs towards profitable commercial operations. Other factors that could cause actual results, developments or events to differ materially from those anticipated include, among others, increases/decreases in production; volatility in metals prices and demand; currency fluctuations; cash operating margins; cash operating cost per pound sold; costs per ton of ore; variances in ore grade or recovery rates from those assumed in mining plans; reserves and/or resources; the ability to successfully integrate acquired assets; operational risks inherent in mining or development activities, and legislative factors relating to prices, taxes, royalties, land use, title and permits, importing and exporting of minerals and environmental protection. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as may be required under applicable securities law. For a more detailed discussion of such risks and other factors, see the Company's latest filings with Canadian securities regulators.

CONFERENCE CALL

FNX will be hosting a Fourth Quarter and Full Year 2006 Conference Call on February 23, 2007 at 10:00am EST.



CONFERENCE CALL numbers are:

Live in North America:
Toll-Free Access: 1-866-542-4239 or 416-641-6105
-------------------------------- ------------
Access Code: Ask for FNX Mining Conference call

Replay Access information:
Toll-Free Access: 1-800-408-3053 or 416-695-5800
-------------------------------- ------------
Passcode: 3214625#
Available until Midnight, March 9, 2007


Slides for the conference call may be accessed on the Company's website www.fnxmining.com

Note : The unaudited balance sheet, statement of operations and statement of cash flow are appended to this news release.



Consolidated Balance Sheets
As at December 31
(in thousands of Canadian dollars) (Unaudited) 2006 2005
$ $
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Assets
Current
Cash and cash equivalents 115,117 152,460
Accounts receivable 52,082 18,562
In-process inventory 960 867
Prepaid and other assets 259 215
-----------------------------------------------------------------------
168,418 172,104
Investments 30,380 29,384

Property, plant and equipment 625,683 531,266

Reclamation and other deposits 6,099 3,630
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830,580 736,384
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-----------------------------------------------------------------------

Liabilities

Current
Accounts payable and accrued liabilities 29,580 11,631
Current portion of deferred payment obligation 7,244 7,230
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36,824 18,861
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Deferred payment obligation - 7,000

Mine closure and site restoration 2,631 1,162

Future income and resource taxes 165,136 155,404
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167,767 163,566
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204,591 182,427
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Shareholders' equity
Share capital 560,266 558,947
Contributed surplus - stock-based compensation 7,710 5,677
Retained earnings (deficit) 58,013 (10,667)
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625,989 553,957
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830,580 736,384
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Consolidated Statements of
Operations
(in thousands of Canadian
dollars except earnings Three months ended Year ended
per share) December 31 December 31
(Unaudited) 2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
$ $ $ $

Mine operating revenues 50,202 22,726 169,945 84,602
------------------------------------------------------------------------

Mine operating expenses
Mining, excluding
depreciation and
amortization 17,131 16,032 65,569 51,484
Depreciation and
amortization 3,556 3,205 12,921 8,768
------------------------------------------------------------------------

20,687 19,237 78,490 60,252
------------------------------------------------------------------------

29,515 3,489 91,455 24,350
------------------------------------------------------------------------

Expenses
Administration 1,994 2,600 9,119 8,141
Capital taxes 300 1,135 1,673 1,135
Depreciation 78 31 182 89
Stock-based compensation 804 342 2,525 1,068
Loss on disposition of
Aurora - - - 2,600
Other expenses (income) (3,566) (2,410) (7,042) (2,739)
------------------------------------------------------------------------

(390) 1,698 6,457 10,294
------------------------------------------------------------------------

Earnings before taxes and
non-controlling interest 29,905 1,791 84,998 14,056

Income and resource taxes 10,238 1,314 16,318 4,721
------------------------------------------------------------------------

Earnings before
non-controlling interest 19,667 477 68,680 9,335

Non-controlling interest - - - 4,738
------------------------------------------------------------------------
Net earnings for the
period 19,667 477 68,680 4,597
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic earnings per share $ 0.23 $ 0.01 0.82 $ 0.08

Diluted earnings per
share $ 0.23 $ 0.01 0.81 $ 0.08
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements
of Retained Earnings
(Deficit)
(in thousands of Canadian Three months ended Year ended
dollars) December 31 December 31
(Unaudited) 2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
$ $ $ $
Retained earnings
(deficit) - beginning of
period 38,346 (11,144) (10,667) (15,264)

Net earnings for the
period 19,667 477 68,680 4,597
------------------------------------------------------------------------

Retained earnings
(deficit) - end of
period 58,013 (10,667) 58,013 (10,667)
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements
of Cash Flow
(in thousands of Canadian Three months ended Year ended
dollars) December 31 December 31
(Unaudited) 2006 2005 2006 2005
----------------------------------------------------------------------
----------------------------------------------------------------------
$ $ $ $

Operating activities
Net earnings for the
period 19,667 477 68,680 4,597
Non-cash items
Mine depreciation and
amortization 3,465 3,205 12,787 8,768
Depreciation 78 31 182 89
Mine closure and site
restoration 48 33 134 62
Stock-based compensation 804 342 2,525 1,068
Future income and
resource taxes 9,266 535 12,602 3,941
Interest on deferred
payment obligation 131 - 514 -
Loss on disposition of
Aurora - - - 2,600
Non-controlling interest - - - 4,738
Other 43 (1,313) 99 (1,342)
----------------------------------------------------------------------
33,502 3,310 97,523 24,521
Net change in non-cash
working capital (1,313) 10,899 (15,708) 2,650
----------------------------------------------------------------------
32,189 14,209 81,815 27,171
----------------------------------------------------------------------

Financing activities
Common shares issued 107 97,818 915 101,859
Non-controlling interest,
net - (3,267) - 1,972
----------------------------------------------------------------------
107 94,551 915 103,831
----------------------------------------------------------------------

Investing activities
Investments - (310) (996) (310)
Property, plant and
equipment (40,547) (11,464) (109,108) (46,459)
Reclamation term deposits (1,996) - (2,469) -
Deferred payment
obligation (7,500) - (7,500) -
Deposit with mine
contractor - (2,400) - (2,400)
Acquired on acquisition
of Aurora - - - 2,438
Proceeds on disposition
of Aurora - - - 11,005
Acquired on acquisition
of SJV, net - 410 - 410
----------------------------------------------------------------------
(50,043) (13,764) (120,073) (35,316)
----------------------------------------------------------------------

Change in cash and cash
equivalents for the
period (17,747) 94,996 (37,343) 95,686

Cash and cash equivalents
- beginning of period 132,864 57,464 152,460 56,774
----------------------------------------------------------------------
Cash and cash equivalents
- end of period 115,117 152,460 115,117 152,460
----------------------------------------------------------------------
----------------------------------------------------------------------


Contact Information

  • FNX Mining Company Inc.
    Terry MacGibbon
    President and Chief Executive Officer
    (416) 628-5929
    or
    FNX Mining Company Inc.
    Ronald P. Gagel
    Senior Vice President and Chief Financial Officer
    (416) 628-5929
    or
    FNX Mining Company Inc.
    David Constable
    Vice President Investors Relations and Corporate Secretary
    (416) 628-5929
    Email: info@fnxmining.com
    Website: www.fnxmining.com