FNX Mining Company Inc.
TSX : FNX

FNX Mining Company Inc.

May 03, 2007 07:00 ET

FNX Mining Earns $30.2 Million in First Quarter

TORONTO, ONTARIO--(CCNMatthews - May 3, 2007) - FNX Mining Company Inc. ("FNX") (TSX:FNX) announces record net earnings of $30.2 million ($0.36 per share) for the first quarter at its Sudbury operations, including the initial contribution from the newly re-opened Levack Mine. This compares to net earnings of $3.2 million ($0.04 per share) for the first quarter of 2006. Mine operating revenues increased to $80.5 million ($391 per ton), while mine operating expenses were $24.6 million ($119 per ton) generating a cash operating margin of $55.9 million ($272 per ton). This compares to mine operating revenues of $26.8 million ($182 per ton) and mine operating expenses of $16.0 million ($108 per ton), leaving a cash operating margin of $10.8 million ($74 per ton) in the same period of 2006.

First quarter EBITDA was $53.8 million and cash flow from operating activities was $36.4 million ($0.43 per share), compared to $7.8 million and $7.4 million ($0.09 per share), respectively in the first quarter of 2006.

At the end of the first quarter, the cash position was $108.0 million and the current market value of liquid securities was $64.8 million compared to $115.1 million plus $50.5 million in liquid securities at the end of December 2006. Capital expenditures in the first quarter were $44.7 million compared to $15.9 million during the first quarter of 2006. Net changes in the cash balance as a result of operating, financing and investing activities was a net cash outflow of $7.1 million since December 31, 2006, compared to a net cash outflow of $9.4 million in the same period last year. Working capital in this quarter was $130.7 million compared to $131.6 million at December 2006. The Company remains debt free.

The Company's first quarter 2007 average realized price per pound of nickel and copper was US$21.65 and US$2.67, respectively, compared to US$7.22 and US$2.32, respectively, in 2006 first quarter. Prices received for precious metals per ounce during the reporting quarter were US$771 for gold, US$1,530 for platinum and US$395 for palladium, compared to US$560, US$1,126 and US$355 respectively in the first quarter of 2006. The average cobalt price received during this quarter was US$31.34, compared to US$12.70 in the same period of 2006. The cash cost to produce a pound of nickel, net of by-product credits, was a US$3.46 per pound compared to US$2.28 in the same period in 2006. This increase in cash cost to produce a pound of nickel is due to a lower relative contribution from by-products this quarter (9% of revenue compared to 20% in the first quarter of 2006) and higher per ton costs as a results of the commencement of production from the Levack No. 7 Orebody.

Terry MacGibbon, FNX's president and CEO, observed "FNX's first quarter results benefited from record nickel prices, continued efficient operations and the initial contributions from the commencement of production at the Levack Mine. Levack nickel production will continue to grow during 2007, as production at Levack Mine increases toward its target of 1,500 tons per day later in the year. FNX continued to develop the Podolsky Mine and accelerate the advanced exploration activities at the Levack Footwall Deposit. Our recently announced plans to acquire Dynatec's Mining Services Division will ensure that we will have the in-house capability to achieve our aggressive Sudbury Basin growth plans, provide FNX with an opportunity to expand the mining contracting business during the current robust mining environment and, potentially, to acquire equity positions in select mining projects."



UNAUDITED OPERATING HIGHLIGHTS Q1 2007 Q1 2006
------------------------------

Total Revenue ($000) 80,473 26,799
Cash Operating Costs ($000) 24,555 15,988
Cash Operating Margin (C$000) 55,918 10,811

Revenue per Ton Sold ($) 391 182
Cash Operating Costs per Ton Sold ($) 119 108
Cash Operating Margin per Ton Sold ($) 272 74

Cash Cost per lb of Ni (US$)
(net of by-product credits) 3.46 2.28

Net Earnings ($000) 30,191 3,193
Net Earnings per Share ($) 0.36 0.04
EBITDA ($000) 53,760 7,789

Cash Flow from Operating Activities (C$000) 36,426 7,388
Cash Flow per Share 0.43 0.09
Debt ($000) Nil Nil

Total Ore Sold (tons) 205,854 147,388
Nickel Ore Sold (tons) 133,630 78,774
Grade of Nickel Ore Sold (%Ni) 1.2 1.6
Payable Metal Sold -- Nickel (000 lbs) 2,628 1,894
Copper Ore Sold (tons)(2) 72,224 68,614
Grade of Copper Ore Sold (%Cu) 1.3 1.6
Payable Metal Sold -- Copper (000 lbs) 2,261 2,075
Payable Metal Sold -- Total Precious Metals (oz) 5,961 6,960

Realized Nickel Prices (US$/lb) 21.65 7.22
Realized Copper Prices (US$/lb) 2.67 2.32
$ /US$ 1.17 1.15


Operations

FNX employees in Sudbury Operations incurred a total medical incident frequency of zero in this quarter and 8.0 when combined with contractors or 15 medical and two time lost incidents. There were no reportable environmental incidents in this quarter.

FNX sold 205,854 tons of ore during this quarter, composed of 133,630 tons of nickel ore and 72,224 tons of copper ore, compared to 147,388 tons, 78,774 tons and 68,614 tons, respectively, in the quarter ended March 31, 2006. Payable nickel and copper for this reporting quarter were 2.63 million and 2.26 million pounds, respectively, compared to 1.89 million and 2.08 million pounds, respectively in the same period in 2006. Precious metal production for first quarter totaled 5,961 ounces, compared to 6,960 ounces in the first quarter last year. Nickel and copper grades declined from plan due to extensive mining of lower grade incremental ore to take advantage of high nickel prices by maximizing nickel metal production.

Capital expenditures totaled $44.7 million during the quarter, which included advancing access to the Levack Footwall Deposit from both the Levack Mine and Xstrata Nickel's Craig Mine and driving the 1750 and 2450 access levels at the Podolsky Mine. In addition, development continued at the No. 7 Orebody in the Levack Mine, where all of Levack's initial ore production occurred during the first quarter. Additional development is also underway on the No.1, No. 2, and 1300 Orebody to support future production increase to the planned daily production rate of 1,500 tons. Production in the first quarter averaged 450 tons per day.

The track reconstruction on the 1600 Level from the McCreedy West Mine to Levack's No. 2 Shaft is 80% complete and a new loading chute is being installed at McCreedy West. When rehabilitation of the 1600 Level drift is completed in the second quarter, nickel ore will start to be trammed from the McCreedy West Mine and hoisted to surface through the Levack No. 2 Shaft, thereby permitting an increase in production from the PM Orebody up the McCreedy West ramp.

Construction of a new Levack Mine Services Building on site is 40% complete and two more compressor units were installed in the surface compressor plant. Construction of the surface ore pad at the Levack Mine is complete.

Development and Advanced Exploration

During this reporting quarter, Xstrata Nickel completed preparations on the Craig Mine 4025 Level for development of the Levack Footwall Deposit ("LFD") access drift, collared the drift and drove it approximately 460 ft. To the end of April, a total of 600 ft has now been completed. It is scheduled to reach the footwall mineralization early in the fourth quarter of 2007. On the Levack Mine side, the production access ramp from the 2650 Level to Rob's Footwall Deposit was collared in the quarter and a total of 380 ft was completed, including rock work for a rock breaker/grizzly for waste handling. To the end of April, a total of 785 ft has now been completed from 2650 level. This ramp development is scheduled to take nearly all of 2007 to complete. Access to the LFD will provide important opportunities for the Company to initiate geological mapping, detailed diamond drilling, resource estimation, metallurgical testing and mine planning on a portion of the LFD.

Lateral access development of the Podolsky 2000 Deposit from both the 1750 and 2450 Levels continued on schedule in this reporting quarter. Access into the 2000 Deposit on the 2450 Level and the start of detailed drilling from both access levels is scheduled for late in the second quarter of 2007.

Exploration

FNX's exploration activities for the first quarter of 2007 were focused on the Levack Complex in order to expand the existing resource base and discover new deposits. In the first quarter, the Company announced the discovery of the Main Depths Deposit, a contact nickel deposit located down-dip of the previously-mined Levack Main Orebody (FNX news release February 21, 2007).

Exploration drilling continued on the LFD during this quarter, particularly focused on targets designed to expand the down-dip extension of the LFD, where the deepest borehole below the current LFD envelope (FNX7057) indicated a favorable geologic and geophysical setting for continuation of the Deposit to depth. The borehole electromagnetic (UTEM) geophysical survey of FNX7057 indicated a significant off-hole conductive anomaly, both below and to the west of the hole. Current drilling designed to test the down-dip extents of the LFD will continue. Drilling is also continuing on exploration of the up-dip extents of the LFD and Rob's Deposit, both of which are still open in several directions.

Exploration drilling during the quarter at the McCreedy West Mine property was focused on the PM Deposit and contact nickel target environments. An exploration program of short drill holes on the coincidence Quartz Diorite and contact embayment structure at the Kirkwood property began during this quarter to search for sulphide mineralization and will continue at least until the end of May.

On February 16, 2007, The Company entered into an agreement with Fieldex Exploration Inc. ("Fieldex") whereby Fieldex agreed to issue 6.5 million common shares to the Company (subject to the condition that if the market value of the 6.5 million common shares at the time of closing is less than $2.2 million then additional shares will be issued to bring the market value to $2.2 million at closing) in exchange for 100% of FNX's interest in Aurora properties located in the Temiscamingue region of northwest Quebec. The transaction closed on April 30, 2007.

Investments

FNX continues to hold 7,716,594 common shares of Dynatec, 13,300,000 common shares of Lake Shore Gold Corp, 6,860,715 common shares of Superior Diamonds Inc., and 3,150,230 common shares and 2,347,886 share purchase warrants of International Nickel Ventures Corporation.

Effective January 1, 2007, the Company prospectively adopted CICA recommendations pertaining to financial instruments, which establish standards for the recognition, measurement, disclosure and presentation of financial assets, financial liabilities and non-financial derivatives. These recommendations require that fair value be used to measure financial assets that are held for trading or available for sale. In accordance with the new standards, as of January 1, 2007, the Company has classified its investments as available for sale. Accordingly, investments with a book value of $30.4 million were classified as available for sale and measured as of January 1, 2007, at a fair value of $50.5 million which resulted in a revaluation gain of $16.5 million, net of tax. As of March 31, 2007 the investments were measured at a fair value of $64.8 million, which resulted in a revaluation of $11.6 million, net of tax. The revaluation gains have been recognized in Accumulated Other Comprehensive Income.

Provisions for Income and Resource Taxes

Record metal prices and production resulted in record operating results, therefore the first quarter of 2007 included a provision for income taxes of $18.4 million, compared to $2.1 million in the first quarter of 2006. While FNX's significant capital expenditures program in 2007 continues to add to the total amount of tax deductions available to the Company, Canadian income tax rules restrict the amount of such deductions permitted in any particular taxation year. Accordingly, the Company has included in the $18.4 provision for taxes, a $11.8 million accrual for the estimated amount of current income taxes due for 2007 to date. The Company's income tax rate should continue to be approximately 37% in 2007.

FORWARD LOOKING STATEMENT

This news release contains certain forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties beyond the company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. In this news release, terms, conditions and the ultimate closing of the purchase and future plans for the Mining Services Division are examples of forward-looking statements. There is no guarantee FNX will be able to complete all aspects of the purchase. Accordingly, readers should not place undue reliance on forward-looking statements.

CONFERENCE CALL

FNX will be hosting a First Quarter-2007 Conference Call on May 3, 2007 at 10:00am EST.



CONFERENCE CALL numbers are:

Live in North America:
Toll-Free Access: 1-866-696-5896 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: 3221735#
Available until June 4, 2007 at Midnight


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. While the full financials and MD&A are filed on SEDAR or on our web site at www.fnxmining.com.



As at
Consolidated Balance Sheets March 31 December 31
(in thousands of Canadian dollars) 2007 2006
---------------------------------------------------------------------
---------------------------------------------------------------------
(Unaudited)
$ $
Assets
Current
Cash and cash equivalents 108,039 115,117
Accounts receivable 77,873 52,082
In-process inventory 395 960
Prepaid and other assets 849 259
---------------------------------------------------------------------
187,156 168,418
Investments 64,755 30,380
Property, plant and equipment 664,738 625,683
Reclamation and other deposits 6,099 6,099
---------------------------------------------------------------------
922,748 830,580
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities
Current
Accounts payable and accrued liabilities 49,181 29,580
Deferred payment obligation 7,307 7,244
---------------------------------------------------------------------
56,488 36,824
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Mine closure and site restoration 2,670 2,631

Future income and resource taxes 177,479 165,136
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180,149 167,767
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236,637 204,591
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Shareholders' equity
Share capital 561,891 560,266
Contributed surplus - stock-based compensation 7,863 7,710
Retained earnings 88,204 58,013
Accumulated other comprehensive income 28,153 -
---------------------------------------------------------------------
686,111 625,989
---------------------------------------------------------------------
922,748 830,580
---------------------------------------------------------------------
---------------------------------------------------------------------


Consolidated Statements of Operations

(in thousands of Canadian dollars Three months ended
except earnings per share) March 31
(Unaudited) 2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------

$ $

Mine operating revenues 80,473 26,799
----------------------------------------------------------------------

Mine operating expenses
Mining, excluding depreciation and
amortization 24,555 15,988
Depreciation and amortization 4,879 3,149
----------------------------------------------------------------------
29,434 19,137
----------------------------------------------------------------------
51,039 7,662
----------------------------------------------------------------------

Expenses

Administration 2,293 2,914
Capital taxes 450 322
Depreciation 97 12
Stock-based compensation 888 602
Other expenses (income) (1,267) (1,437)
----------------------------------------------------------------------
2,461 2,413
----------------------------------------------------------------------

Earnings before taxes and non-controlling
interest 48,578 5,249

Income and resource taxes (18,387) (2,056)
----------------------------------------------------------------------
Net earnings for the period 30,191 3,193
----------------------------------------------------------------------
----------------------------------------------------------------------

Basic earnings per share 0.36 0.04
----------------------------------------------------------------------
----------------------------------------------------------------------
Diluted earnings per share 0.36 0.04
----------------------------------------------------------------------
----------------------------------------------------------------------



Consolidated Statement of Comprehensive Income
(in thousands of Canadian dollars
except earnings per share)
(Unaudited) Three months ended
March 31, 2007
----------------------------------------------------------------------
----------------------------------------------------------------------

$

Net earnings 30,191

Other comprehensive income, net of tax
Unrealized gains on available for sale investments 11,646
----------------------------------------------------------------------
Comprehensive income 41,837
----------------------------------------------------------------------
----------------------------------------------------------------------



Consolidated Statements of Retained
Earnings (Deficit) Three months ended
(in thousands of Canadian dollars) March 31
(Unaudited) 2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------

$ $

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

Net earnings for the period 30,191 3,193
----------------------------------------------------------------------
Retained earnings (deficit) - end of period 88,204 (7,474)
----------------------------------------------------------------------
----------------------------------------------------------------------



Consolidated Statements of Cash Flow Three months ended
(in thousands of Canadian dollars) March 31
(Unaudited) 2007 2006
----------------------------------------------------------------------
----------------------------------------------------------------------

$ $

Operating activities
Net earnings for the period 30,191 3,193
Non-cash items
Mine depreciation and amortization 4,840 3,149
Depreciation 97 12
Stock-based compensation 888 602
Mine closure and site restoration 39 17
Future income and resource taxes 6,515 2,056
Interest on deferred payment obligation 63 126
Other - 27
----------------------------------------------------------------------
42,633 9,182
Net change in non-cash working capital (6,207) (1,794)
----------------------------------------------------------------------
36,426 7,388
----------------------------------------------------------------------

Financing activities
Common shares issued 1,189 592
----------------------------------------------------------------------

Investing activities
Investments - (996)
Property, plant and equipment (44,693) (15,931)
Reclamation deposits - (410)
----------------------------------------------------------------------
(44,693) (17,337)
----------------------------------------------------------------------

Change in cash and cash equivalents
for the period (7,078) (9,357)

Cash and cash equivalents - beginning
of period 115,117 152,460
----------------------------------------------------------------------
Cash and cash equivalents - end of period 108,039 143,103
----------------------------------------------------------------------
----------------------------------------------------------------------

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