GobiMin Inc.
TSX VENTURE : GMN

GobiMin Inc.

May 30, 2006 16:31 ET

GobiMin Reports Results of First Quarter of 2006

TORONTO, CANADA--(CCNMatthews - May 30, 2006) - GobiMin Inc. (the "Company" or "GobiMin") (TSX VENTURE:GMN) is pleased to report its financial and operating results for the first quarter of fiscal year 2006. The unaudited interim consolidated financial statements along with management's discussion and analysis have been filed with SEDAR (www.sedar.com).

(all figures in United States dollars)



Selected Financial Information

Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
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Revenue $2,344,135 $1,478,558
Cost of sales 885,748 357,454
Net earnings 278,183 113,934
Basic earnings per share 0.006 0.003
Net cash from (used in)
operating activities 285,424 771,291
Net Cash from (used in)
financing activities 3,715,265 (107,861)
Net cash from (used in)
investing activities (1,425,283) (1,298,491)


Results of Operations

Revenues from the Company's nickel-copper mining operations for the first quarter of 2006 totaled $2,344,135 compared to $1,478,558 for the first quarter of 2005. Revenues were $2,131,957 for nickel and $212,178 for copper in the first quarter of 2006 versus $1,420,284 for nickel and $58,274 for copper in the same corresponding period in 2005. Since the Company resumed operations at its plant facility in early March in both 2006 and 2005, revenues were all generated from the sale of concentrates in inventory of the prior year-end for both periods. The higher revenue in the first quarter of 2006 reflects a higher inventory level at the year-end of 2005.

The Company's subsidiaries suspend mining and processing operations from late November to early March each year. Therefore, the operating results for the first quarter of 2006 reflect partial operating activities. It is expected that the production and sales will be significantly higher in the second and third quarters of 2006 as a result of the Company operating at full capacity and increased development plans.

During the first quarter of 2006, the Company sold 255 tonnes of nickel and 172 tonnes of copper compared to 156 tonnes of nickel and 72 tonnes of copper in the same corresponding period in 2005. The Company mined 21,988 tonnes (First quarter of 2005: 11,714 tonnes) of ore from the Huangshan Dong and Xiangshan mines in the month of March. The plant processed 15,937 tonnes (First quarter of 2005: 12,268 tonnes) of ore with a nickel head grade of 0.60% (First quarter of 2005: 1.07%) and recoveries amounting to 89.3% (First quarter of 2005: 90.7%). The resulting nickel-copper concentrate was sold in the second quarter of 2006. The lower head grade was mainly due to the decision of lowering the cut-off grade to 0.4% nickel from 0.6% nickel as a result of stronger metal markets. In addition, the mined head grade was slightly lower in a new development area. The mined head grade is expected to ramp up in future periods with the development processing to the next phases.

Net of smelting and refining costs, average nickel price realized in the first quarter of 2006 was $3.79 per pound sold and average copper price realized was $0.56 per pound sold compared to average price realized of $4.13 per pound sold and average copper price realized of $0.37 per pound sold in the same corresponding period in 2005. The lower realized price for the period was mainly due to a lower grade concentrate sold to Jinchuan.

The following table summarizes the Company's production and revenue information for the periods below:



Mining Operations Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
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Ore (tonnes)
Mined 21,988 11,714
Processed 15,937 12,268
Sold 34,436 17,950

Nickel grade of ore processed 0.60% 1.07%
Nickel grade of ore sol 0.83% 0.96%
Metallurgical recovery 89.3% 90.7%

Metal sold (tonnes)

Nickel 255 156
Copper 172 72

Metal sold ($)

Nickel $2,131,957 $1,420,284
Copper 212,178 58,274
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Total Revenue $2,344,135 $1,478,558

Average realized nickel price
per pound sold (2) $3.79 $4.13
Average realized copper price
per pound sold (2) $0.56 $0.37

Average cash cost per pound of
nickel sold, net of copper (1) $1.37 $1.03
Average cash cost per tonne of
ore, net of copper (1) $22.30 $19.80

(1) Cash cost is a non-GAAP measure, which excludes depreciation and
asset write-off, and includes mining, milling and haulage costs,
after deducting the copper revenue.

(2) Net of smelting and refining cost .Since the revenues realized in
the first quarter of both 2005 and 2006 were from the inventory
shipped in the fourth quarter of the prior years, the average
realized price was calculated based on Jinchuan's listed prices
from October to December in the prior years.


Cost of sales amounted to $885,748 in the first quarter of 2006 compared to $357,454 for the first quarter of 2005. Cash operating cost per tonne of ore, net of copper, averaged $22.30 for the first quarter of 2006 compared to $19.80 for the first quarter of 2005. The increase in cash cost per tonne of ore in 2006 was mainly due to the increasing mining cost payable to the contractors. Cash cost figure, a non-GAAP measure, represents the total of all cash costs directly attributable to the related mining operations after the deduction of credits in respect to by-product sales. The Company produces nickel-copper concentrates. Disclosure of cash cost by the Company may not be directly comparable to other nickel producers and is only intended to provide investors with information about the cash generating capacity of the mining operations of the Company.

Liquidity and Capital resources

In the first quarter of 2006, cash provided by operating activities was $285,424 compared to $771,291 in the first quarter of 2005. Cash flows from the operations were lower in 2006 mainly because the Company received $1.6 million advance payment in 2005 for its revenue realized in the first quarter of 2006, which contributed a negative change of non-cash working capital.

Financing activities generated $3,715,265 in the first quarter of 2006. The Company raised gross proceeds of $1.1 million from the issuance of shares as a result of a private placement. The Company received $2.6 million from the exercise of warrants and stock options.

Investing activities consumed $1,188,170 of cash in the first quarter of 2006 compared to $1,298,491 in the same period of 2005. Investing activities in both quarters are in relation to property, plant and equipment. The Company also purchased an office building in the city of Hami with a payment of approximately $0.4 million in the first quarter of 2006, as the lease of the current office will be due in the second quarter of 2006.

At March 31, 2006, the Company's cash and bank balances denominated in RMB are equivalent to approximately $3,361,991. The RMB is not freely convertible into other currencies. However, management believes that under China's Foreign Exchange Control Regulations, Administration of Settlement, and Sale and Payment of Foreign Exchange Regulations, the Company will be permitted to exchange RMB for other currencies through banks that are authorized to conduct foreign exchange business (refer to "Risk Factors" in the Management Discussion and Analysis for the year ended December 31, 2005).

Management expects to generate positive cash flows from its operating mines based on current nickel prices. For 2006, the Company's cash requirements are primarily to fund the construction of the new plant facility, drilling program at Huangshan, and planned development at the mines. The Company has budgeted approximately $5.0 million for these expenses. Cash flows from the operating mines of the Company, based on the current nickel prices, should be adequate to fund these expenditures. The Company would have to raise additional funds through the capital market for cash requirements to fund new potential acquisitions, further development of the Company's mineral properties, ongoing exploration and general working capital purposes.

Outlook

The strong revenue and cash flow momentum enjoyed in 2005 is expected to continue in fiscal 2006, assuming similar market conditions in the coming year. The Company will continue to increase its production profile through additional development work at its mining operations and the completion of a new plant facility. One of the Company's priorities will be to advance its promising Huangshan exploration project located in proximity of its mining operations to pre-feasibility study stage. Historical drill results have indicated the potential for a large new nickel deposit. GobiMin's geological team with the assistance of SRK Consulting of Canada have started a 15,000 meter drilling program to bring the historical resource to NI 43-101 compliant before the end of the year. Subject to positive results, GobiMin would launch a pre-feasibility study, including mine design and cost analysis.

In May 2006, the Company acquired through its 97%-owned Chinese subsidiary a 30% equity interest in Tibet Dazi PuXiong Copper Company Limited, which owns the exploration license of the Malonglang copper-zinc project located in Dazi County, Tibet Autonomous Region of the People's Republic of China. This acquisition provides GobiMin an opportunity to expand beyond its current projects in the Hami region and meets the Company's objective of bringing value to its shareholders. GobiMin continues to assess new growth opportunities in northwestern China with the objective of bringing significant value to its shareholders in the years ahead. The Company has a successful combination of in-region experience, quality assets and an aggressive approach to project development. These important factors will play a key role in the Company's ability of becoming a key player in the base metals industry in China.

Certain statements contained in this press release constitute forward-looking information. Such statements are based on the current expectations of management of GobiMin. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking information. These risks include, but are not limited to, risks associated with fluctuations in metal prices, risks associated with mining operations including environmental hazards, GobiMin's reliance on key suppliers and on key personnel, the potential for changes in the legislative and regulatory environment in China and other risks and uncertainties detailed from time to time in GobiMin's annual report and other filings with the Canadian securities commissions. The reader should not place undue reliance on the forward-looking information included in this press release given that (i) actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and (ii) certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information could prove to be inaccurate. These statements speak only as of the date they are made, and GobiMin assumes no obligation to revise such statements as a result of any event, circumstance or otherwise, except in accordance with law. Additional information about (i) the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and (ii) the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, is contained in the GobiMin's annual report and other documents filed from time to time with the Canadian securities commissions, all of which are available at www.sedar.com.



GobiMin Inc.
Consolidated Balance Sheet (Unaudited)
As at March 31, 2006 and December 31, 2005
(Expressed in United States Dollars)

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March 31, 2006 December 31, 2005
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(Unaudited) (Audited)
$ $

ASSETS
Current
Cash and cash equivalents 10,498,318 7,894,272
Prepayments, deposits and
other receivables 206,457 329,111
Inventories 986,604 1,258,653
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Total current assets 11,691,379 9,482,036

Mineral properties 9,921,277 8,741,702
Due from related parties 181,245 186,458
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Total assets 21,793,901 18,410,196
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LIABILITIES
Current
Accounts payable 645,234 327,789
Other payables and accrued
liabilities 2,054,485 3,183,302
Promissory note payable 2,284,173 2,287,486
Income tax payable 510,182 480,186
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Total current liabilities 5,494,074 6,278,763

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Total liabilities 5,494,074 6,278,763
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Non-controlling interests 246,474 219,301
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SHAREHOLDERS' EQUITY
Share capital 5,201,375 3,834,003
Shares to be issued 2,183,967 -
Contributed surplus 3,846,687 3,592,116
Cumulative translation adjustments 77,412 20,284
Reserves 1,547,278 1,547,278
Retained earnings 3,196,634 2,918,451
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Total shareholders' equity 16,053,353 11,912,132
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Total liabilities and
shareholders' equity 21,793,901 18,410,196
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GobiMin Inc.
Consolidated Statements of Income and Retained Earnings (Unaudited)
Three Months Ended March 31, 2006
(Expressed in United States Dollars)

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Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
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(Unaudited) (Unaudited)
$ $

Revenue 2,344,135 1,478,558
Cost of sales (885,748) (357,454)
Depreciation (240,872) (216,486)
Selling and distribution cost (97,896) (55,319)
Write-off of mine construction cost - (149,481)

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Gross Profit 1,119,619 699,818

Other revenue 40,957 3,137

General and administrative expenses (612,090) (348,405)
Stock based compensation (91,626) -
Other operating expenses - (100,743)

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Operating earnings 456,860 253,807

Interest expense - (4,621)

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Earnings before tax and
non-controlling interests 456,860 249,186

Income tax (151,251) (123,970)

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Earnings before non-controlling
interests 305,609 125,216

Non-controlling interests (27,426) (11,282)

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Net earnings for the period 278,183 113,934
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Retained earnings, beginning
of period 2,918,451 1,790,608

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Retained earnings, end of
the period 3,196,634 1,904,542
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Basic earnings per share 0.006 0.003
Diluted earnings per share 0.005 0.003
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Weighted average number of
shares outstanding 53,167,080 36,532,500
Diluted weighted average number
of shares outstanding 61,401,252 36,532,500
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GobiMin Inc.
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2006
(Expressed in United States Dollars)

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Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
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(Unaudited) (Unaudited)
Cash flows from (used in) $ $
operating activities
Net earnings for the period 278,183 113,934
Adjustments for items not
involving cash:
- depreciation 240,872 216,486
- amortization in general
and administrative expenses 33,991 15,093
- stock based compensation 91,626 -
- write-off of mine construction cost - 149,481
- non-controlling interests 27,426 11,282
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672,098 506,276

Change in non-cash working
capital items:
- Prepayments, deposits and other
receivables 122,654 289,336
- Inventories 272,049 13,203
- Accounts payable 317,445 97,193
- Other payables and accrued
liabilities (1,128,818) (65,663)
- Tax payable 29,996 (69,054)
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Net cash from operating activities 285,424 771,291
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Cash flows from (used in)
financing activities
Shares issued for cash from
private placement 1,092,840 -
Shares issued for cash from
warrant and option exercise 438,458 -
Shares to be issued for cash
from warrant exercise 2,183,967 -
Repayment of bank loans - (107,861)
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Net cash from (used in)
financing activities 3,715,265 (107,861)
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Cash flows from (used in)
investing activities
Property, plant and equipment (1,425,283) (1,298,491)
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Net cash used in investing
activities (1,425,283) (1,298,491)
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Increase (Decrease) in cash
and cash equivalents 2,575,406 (635,061)
Effect on foreign exchange
rate changes on cash 28,640 (8,316)
Cash and cash equivalents at
beginning of period 7,894,272 2,774,378
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Cash and cash equivalents at
end of period 10,498,318 2,131,001
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Supplementary cash flow information:
Interest received 38,801 2,812
Interest paid - (4,621)
Income tax paid (124,368) (193,024)
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The TSX Venture Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • GobiMin Inc.
    James Xiang
    Chief Financial Officer
    (416) 915-0133
    or
    GobiMin Inc.
    Laurie Gaborit
    Investor Relations
    (416) 350-3779 extension 222
    info@gobimin.com