FNX Mining Company Inc.
TSX : FNX

FNX Mining Company Inc.

August 02, 2006 17:10 ET

FNX Mining Reports Record Quarterly Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 2, 2006) - FNX Mining Company Inc. (TSX:FNX) is pleased to report record second quarter financial results from its 100% owned Sudbury, Ontario mining operations, including quarterly revenues of $40.0 million and quarterly net earnings of $25.3 million or $0.30 per share. These outstanding financial results are driven by the Company's continuing growth, an excellent commodity price environment and a favourable tax recovery. In addition, the Company reduced its cash operating cost to sell a ton of ore to a record low $103 per ton and recorded its highest cash operating margin per ton of ore of $156 per ton. The significant increase in by-product credits from copper and precious metal production resulted in a negative cash cost of US$0.57 to produce a pound of nickel.

FNX Mining's President and Chief Executive Officer, Terry MacGibbon, said: "We are very pleased that the Company, while enjoying the current robust commodity prices, has also been able to both increase our production and lower our cash operating costs. The combination of these factors has resulted in record quarterly financial results, including a negative cash cost to produce a pound of nickel and, for the first time in the Company's history, positive retained earnings." He added: "We are looking forward to continuing outstanding financial results as we bring our Levack nickel deposits into pre-production later this year and full production in 2007 and the Podolsky footwall copper-nickel-precious metal deposits into preproduction in 2007 and full production in 2008."



UNAUDITED HIGHLIGHTS Three Months Six Months
-------------------- Ended June 30 Ended June 30
2006 2005 2006 2005
Total Revenue (C$000) 39,981 24,231 66,780 43,288
Cash Operating Costs (C$000) 15,930 12,634 31,919 23,198
Cash Operating Margin (C$000) 24,051 11,597 34,861 20,090

Revenue per Ton Sold (C$) 259 219 222 223
Cash Operating Costs per Ton
Sold (C$) 103 114 106 119
Cash Operating Margin per Ton
Sold (C$) 156 105 116 104

Cash Cost per lb of Ni Sold (US$)
(1) (0.57) 2.73 0.85 3.12

Net Earnings (C$000) 25,344 3,855 28,537 6,339
Net Earnings per Share (C$) 0.30 0.08 0.34 0.13
EBITDA (C$000) 21,268 6,477 29,272 10,670
Cash Flow from Operating
Activities (C$000) 14,801 3,561 22,310 8,911

Total Ore Sold (tons) 154,090 110,832 301,478 194,168
Nickel Ore Sold (tons) 79,018 88,762 157,792 167,677
Grade of Nickel Ore Sold (%Ni) 1.5 1.7 1.5 1.7
Payable Metal Sold -- Nickel (000
lbs) 1,965 2,271 3,859 4,069
Copper Ore Sold (tons)(2) 75,072 22,070 143,686 26,491
Grade of Copper Ore Sold (%Cu)(2) 1.8 3.6 1.7 4.6
Payable Metal Sold -- Copper (000
lbs) 2,594 1,719 4,669 2,814
Payable Metal Sold -- Total
Precious metals (oz) 7,332 2,426 14,291 2,746

Realized Nickel Prices (US$/lb) 10.37 6.83 8.82 7.11
Realized Copper Prices (US$/lb) 3.76 1.49 3.12 1.48
C$ /US$ 1.12 1.24 1.14 1.24


(1) Cash cost per pound of nickel sold is net of by-product credits.

(2) The 2006 average copper grade and increase in copper ore tons, copper and precious metals reflects commercial production from the McCreedy West lower grade PM Deposit since May 2005 combined with the higher grade 700 Deposit.

The Company reports for the first time in its history positive retained earnings, which at June 30, 2006 totaled $17.9 million. EBITDA totaled $21.3 million, or $0.25 per share, in the second quarter of 2006, compared to $6.5 million, or $0.13 per share, in 2005. Cash flow from operating activities totaled $14.8 million, or $0.18 per share, in the second quarter of 2006, compared to $3.6 million, or $0.07 per share in 2005. The higher cash flows in 2006 were due to increased metal production and higher realized metal prices. The net change in cash balances as a result of operating, financing and investing activities was a net cash outflow of $5.5 million since March 31, 2006, compared to $14.8 million in the second quarter of 2005. FNX remains debt free and the Company's cash position of $137.6 million at June 30, 2006, is sufficient to meet all planned cash expenditures in 2006.

The Company realized revenues of US$10.37 per pound of nickel sold and had cash costs, net of byproduct credits, of minus US$0.57 per pound of nickel sold. FNX realized US $1.34 per pound of nickel more than the LME average price for the second quarter of 2006 as a result of $6.2 million of additional revenue from the metal sales settlements related to metal sales that were provisionally priced in prior periods. Provisional pricing is used as the final prices are not determined until future periods. Similarly, FNX realized US $3.76 per pound of copper sold in the second quarter of 2006, which is US $0.49 per pound higher than the LME average price for the quarter. For nickel and copper, final pricing occurs two months after shipment.

Year to date revenues totaled $66.8 million, compared to $43.3 million in 2005, and net earnings totaled $28.5 million, or $0.34 per share, compared to $6.3 million, or $0.13 per share in 2005. EBITDA totaled $29.3 million, or $0.35 per share, for the 2006 year to date, compared to $10.7 million, or $0.21 per share, in 2005. Cash flow from operating activities in 2006 totaled $22.3 million, or $0.27 per share, compared to $8.9 million, or $0.17 per share in 2005. The net change in cash balances as a result of operating, financing and investing activities was a net cash outflow of $14.8 million for the 2006 year to date, compared to $7.8 million in 2005. FNX's working capital was $147.6 million at June 30, 2006.

In the second quarter of 2006, FNX reported a net recovery of income taxes of $6.5 million, compared to a provision for taxes of $2.1 million in the first quarter of 2006. Year to date, the Company has income taxes recoverable of $4.4 million, compared to an income tax provision of $2.2 million during the first six months of 2005. In June 2006, the Government of Canada enacted legislation reducing corporate tax rates over a period of several years. During the second quarter FNX recorded a future income tax recovery of $13.8 million to reflect the positive impact of these tax rate reductions on transactions in prior years for which future taxes will be paid. Quarterly pre-tax earnings attracted income and resource taxes at an effective rate of 38% or $7.3 million, and when combined with the aforementioned future income tax liability adjustment resulted in a net $6.5 million tax recovery. No cash income taxes or resource taxes were paid in either 2005 or 2006, as the Company continues to have sufficient income and resource tax deductions available to reduce cash taxes to nill.

Operations

No accidents or injuries were reported from FNX personnel during the second quarter. Unfortunately, there were two lost time accidents and one fatal injury reported by Dynatec Corporation, the Company's mine contractor.

At the McCreedy West Mine, the Company mined and shipped 154,090 tons of ore to the custom mill resulting in the sale of 2.0 million pounds of nickel, 2.6 million pounds of copper and 7,332 ounces of total precious metals during the second quarter of 2006. Nickel sales, along with significant by-product revenues from copper, platinum, palladium, gold and cobalt, resulted in operating revenues of $40.0 million. Mine cash operating costs for the quarter totaled $15.9 million, providing a cash operating margin of $24.1 million. The revenue per ton of ore sold was $259 at a cash cost of $103 per ton resulting in a cash operating margin per ton of ore sold of $156.

At the Levack Mine property, the rehabilitation of the Levack No. 2 shaft reached the 2975 Level loading pocket and underground crusher. Level rehabilitation also progressed as planned. The Levack Mine rehabilitation programs are expected to allow shipment of pre-production and development ore later in the year and to lead to full mine production in 2007.

Shaft sinking at Podolsky reached a depth of 2,570 feet and excavation of the 2450 Level station was completed by the end of period.

Investments

FNX continues to hold 3,150,230 common shares and 2,347,886 common share purchase warrants of International Nickel Ventures Corporation, 7,716,594 common shares of Dynatec Corporation, 13,300,000 common shares of Lake Shore Gold Corp. and 6,860,715 common shares of Superior Diamonds Inc., all of which are publicly traded corporations. The combined book value is $30.4 million and, as at June 30, 2006, the market value was $41.4 million.

Exploration

The main focus of exploration drilling remains the Levack Footwall Deposit and, as reported in a press release during the first quarter, results continue to expand the mineralized system, and confirm its grade and potential. Three other footwall deposits in close proximity to the Levack Footwall Deposit are also being evaluated and their relationship to the Footwall Deposit is being investigated. Substantial additional drilling is required to determine these deposits' size and economic potential. The results of the on-going drill program are expected to be released by mid September. Access options from the Company's Levack underground infrastructure to the Footwall Deposits continue to be evaluated.

Mine related exploration drilling at Levack was primarily focused on delineating the up-dip extension of the Levack #7 extension orebody from the 1200 Level. Later in the quarter Levack drilling shifted to confirmation and delineation drilling in the 10670 Cross-cut (1200 Level) and the 9300 pod of the #7 orebody from the 1850 Level. The exploration drilling at McCreedy West during the second quarter for 2006 was focused on the continued expansion of the PM Deposit from underground platforms. One borehole at Podolsky was drilled to test a surface Induced Polarization, or IP, survey anomaly near the North Zone.

Surface mapping and drilling programs are being conducted on the Company's wholly owned subsidiary, Aurora Platinum Corp.'s, Foy and Falconbridge Mine Footwall properties.

Other

As discussed in a May 2006 press release FNX delisted its shares from trading on the American Stock Exchange on June 12, 2006. The Company has filed a Form 15 with the United States Securities and Exchange Commission ("SEC") seeking the deregistration of the Company's shares. Upon acceptance of deregistration by the SEC the Company will no longer be required to file certain reports, including Form 40-F and 6-K, with the SEC. The Company anticipates receiving acceptance from the SEC and completing deregistration before the end of the third quarter of 2006.

Non-GAAP Performance Measures

This press release contains certain non-GAAP measures including cash operating margin, cash cost per pound sold, EBITDA, etc. Please see the second quarter of 2006's MD&A on SEDAR and the Company's website for the description of 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 and the SEC in the United States of America.

Conference Call

FNX will host a 2006 Second Quarter Conference Call on August 3 2006 at 10:00am EST.

Conference call numbers are:



Live in North America:
Local Access: 416-695-6622
Toll-Free Access: 1-877-888-3490
Access Code: Ask for FNX Mining Conference call

Instant Replay Access information:
Local Access: 416-695-5275
Toll-Free Access: 1-888-509-0081
Passcode: 628307
Available until August 18, 2006


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

For a complete copy of the unaudited interim consolidated financial statements and MD&A for the second quarter of 2006, please see SEDAR or the company's website.

Contact Information

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