Gold Hawk Resources Inc.
TSX VENTURE : CGK

Gold Hawk Resources Inc.

May 02, 2007 13:47 ET

Gold Hawk Resources Inc.-Releases 2006 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 2, 2007) - Gold Hawk Resources Inc. ("Gold Hawk" or the "Company") (TSX VENTURE:CGK) is pleased to announce the financial results for the quarter and year ended December 31, 2006. Gold Hawk's financial statements and Management Discussion and Analysis ("MD&A") for the quarter and year ended December 31, 2006 have been approved by the Directors and can be viewed on Sedar (www.sedar.com).

During the past year and subsequent to December 31, 2006, Gold Hawk's management team completed the acquisition of the Coricancha mine in Peru, and readied it for commercial production. All significant operating permits and authorizations were obtained, the mine and mill have been refurbished, and operating of the mine commenced in February 2007 with full production at the rated capacity of 600 tonnes per day ("tpd") expected during May 2007.

Results from operations

The net loss for the year ended December 31, 2006 was $8,417,412 ($0.09 loss per share basic and diluted) as compared to a loss of $616,030 ($0.01 loss per share basic and diluted) in 2005. The variance, year over year, is primarily due to the 2006 write-offs of $4,824,743 for the Machacala property and $758,401 for the Barry-Souart property. In 2005, the total write-off for the year was $265,034 for the Cascabamba property. As well, a $608,380 stock-based compensation expense was recorded for the year 2006 as compared to $21,000 in 2005.

During the year, the Company also recorded an unrealized loss on zinc and lead derivative instruments of $573,291 as compared to none in 2005. This loss is a result of a mark to market adjustment as at December 31, 2006, as the Company's derivative undertakings do not qualify for 'hedge accounting' treatment under Canadian GAAP. The Company has entered into these derivatives with the intent of minimizing price risks associated with fluctuating base metal commodity prices.

Following the Coricancha acquisition in March of 2006, additional expenses were incurred in professional fees of $282,099 as compared to $115,167 in 2005 and in general exploration activity of $564,802 as compared to $146,946 in 2005.

General and administration expenses for the year 2006 increased to $795,397 from $44,664 in 2005 as the Company strengthened its management team during the year and incurred additional expenditures while actively pursuing its growth strategy as a precious metal producer.

Financial Position

As of December 31, 2006 the company was in good financial position with working capital of $9.1 million (including cash of $12.4 million) and long term debt of $3.1 million. The company also had additional credit of US$6.5 million available to it under its credit facility of which US$2 million is only available after the Company achieves certain levels of commercial production. With the working capital on hand as at year end and the remaining capacity under the Company's credit facility, the Company has sufficient funds to complete the development of the mine and achieve commercial production.

Hedging

Gold Hawk's management policy is not to hedge precious metals production however management has hedged approximately; 50% of the estimated 2007 zinc and lead production. As of, and subsequent to year end, the Company sold forward 2.82 million lbs. of zinc at an average price of US$1.72 per lb. and 2.67 million lbs. of lead at an average price of US$0.68 per lb. In order to protect against a speculative surge in prices the forward sales were offset by purchasing out of the money calls, resulting in guaranteed net prices of US$1.56 per lb. for zinc and US$0.64 per lb. for lead. Additional hedges were put in place that represent approximately 45% of forecast zinc and 15% of forecast lead production through the third quarter of 2008.

Outlook

The Coricancha mine is expected to attain its rated capacity of 600 tpd during the month of May 2007. In 2007, the Company expects to mill 137,000 tonnes of ore and produce approximately 15,000 ounces of payable gold, 500,000 ounces of payable silver, 6,000,000 pounds of payable zinc, and 5,800,000 pounds of payable lead. At the current zinc price of US$1.69 per lb. revenue from the zinc production will be more than sufficient to cover the expected site operating costs.

Looking beyond 2007, Gold Hawk has significant organic growth opportunities. In 2008, the Company will benefit by a full year's production as compared with eight months in 2007. Management plans to increase the mining rate from 600 tpd in 2007 to 900 tpd by 2009. Also, in view of the large resource base and excellent exploration potential, management has decided to undertake a scoping study which will examine the feasibility of doubling the processing capacity of the existing plant from 600 tpd to 1,200 tpd. In addition to organic growth, it is managements' objective to grow the company and build value for shareholders by aggressively pursuing external growth opportunities.

This press release includes "forward-looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook.

Such risks and uncertainties include, but are not limited to, risks associated with the mining industry (including operational risks in exploration development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainties involved in the discovery and delineation of mineral deposits, resources; the uncertainty of resource estimates and the ability to economically exploit resources; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of Gold Hawk to obtain all permits, consents or authorizations required for its operations and activities; and health and safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the ability of Gold Hawk to fund the capital and operating expenses necessary to achieve the business objectives of Gold Hawk, the uncertainty associated with commercial negotiations and negotiating with foreign governments and risks associated with international business activities, as well as those risks described in public disclosure documents filed by Gold Hawk. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of Gold Hawk should not place undue reliance on these forward-looking statements.

Readers are cautioned that the foregoing lists of risks, uncertainties and other factors are not exhaustive. The forward-looking statements contained in this press release are made as of the date hereof and Gold Hawk undertakes no obligation to update publicly or revise any forward-looking statements contained in this press release or in any other documents filed with Canadian securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.

Contact Information

  • Gold Hawk Resources Inc.
    Mr. Gordon F. Bub
    Chairman and C.E.O.
    (604) 689-9261
    or
    Gold Hawk Resources Inc.
    Mr. Larry Taddei, CA
    Chief Financial Officer
    (604) 689-9266
    or
    Gold Hawk Resources Inc.
    Mr. Kevin Drover
    President and Chief Operating Officer
    (604) 689 9296
    Website: www.goldhawkresources.com