SOURCE: LeadFX

LeadFX

March 08, 2016 20:29 ET

LeadFX Reports Fourth Quarter and Year-End 2015 Results

(All dollar amounts are in U.S. dollars unless otherwise indicated. This release should be read in conjunction with the Company's audited Financial Statements for the year ended December 31, 2015 and the Management's Discussion and Analysis report found on the Company's website or on SEDAR).

TORONTO, ON--(Marketwired - March 08, 2016) - LeadFX Inc. (the "Company" or "LeadFX") (TSX: LFX) today reported its fourth quarter 2015 and year ended December 31, 2015 financial results. In the fourth quarter, we realized a net loss of $1.7 million or $0.07 per share compared to a net loss of $101.2 million or $9.62 per share for the fourth quarter of 2014. The net loss for the quarter was primarily due to $2.0 million of net care and maintenance costs and finance expenses of $0.2 million.

The net loss was $12.9 million (2014: $105.7 million) or $0.90 per share (2014: $10.05 per share) for the year ended December 31, 2015. The net loss for the year ended December 31, 2015 was due to the fact that the Paroo Station mine was on full care and maintenance for the past three quarters.

FOURTH QUARTER AND YEAR-END 2015 HIGHLIGHTS

Operational

  • The Paroo Station mine is on care and maintenance due to sustained depressed LME lead prices, an unfavourable AUD:USD exchange rate and higher treatment charges. Mining operations ceased in January and milling ceased in early February. The final shipments of lead concentrate left the Fremantle port in March.
  • A minimum complement of care and maintenance staff is at the Paroo Station mine site full-time to maintain the site in a restart ready state.
  • We sold 15,700 tonnes of lead metal contained in concentrate in the first quarter and produced 9,900 tonnes of lead metal contained in concentrate before ceasing milling operations.
  • On March 10, 2015, following completion of work supporting a new independent NI 43-101 technical report effective as at December 31, 2014, we reported an approximate 18% and 54% decrease in contained metal in estimated total Measured and Indicated Mineral Resources and total Proven and Probable Mineral Reserves, respectively, with a mine life of approximately 4 years.

Financial

  • Gross loss of $7.5 million for the year and $1.3 million for the fourth quarter.
  • Net loss of $12.9 million for the year and $1.7 million for the fourth quarter.
  • Cash used in operations of $4.4 million for the year and $2.0 million for the fourth quarter.
  • On November 13, 2015, the Company merged with Geo Zone Exploration Limited ("Geo Zone") and acquired 100% of the outstanding common shares of Geo Zone by issuing 20.9 million LeadFX common shares to the former shareholders of Geo Zone (the "Merger"). The net assets of Geo Zone were valued at $30 million based on an independent valuation of Geo Zone carried out by Roscoe Postle Associates Inc. ("RPA").
  • In connection with the Merger, Enirgi Group Corporation ("Enirgi Group") converted approximately C$12.464 million ($9.4 million) of outstanding debt owed by the Company to Enirgi Group into LeadFX common shares, which together with the Merger are collectively referred to herein as the "Transaction".
  • Following the completion of the Transaction, the Company changed its name to "LeadFX Inc." and effected a share consolidation of the issued and outstanding common shares of LeadFX at ratio of 75:1.
  • On December 18, 2015, the Company refinanced the debt owed to Sprott Resource Lending Partnership ("Sprott") through the assignment of the debt to Enirgi Group and amendment of certain terms of the debt agreement eliminating the Company's obligations to Sprott. Under the Enirgi Group Bridging Facility (see MD&A), the maturity of the debt was extended to March 31, 2016, the interest rate was reduced from 12% to 10% and monthly interest payments were deferred until the maturity date. In addition, Enirgi Group has agreed to forbear from enforcing its rights under the Enirgi Group Bridging Facility until March 31, 2016 providing the Company time to arrange alternative financing arrangements.

Outlook

We are currently in discussions with a number of interested parties regarding potential financing options for the Company including funding for a potential restart of the Paroo Station mine. The Paroo Station mine is on full care and maintenance and as a result additional financing will be required to meet our commitments to our lenders, meet the ongoing costs of care and maintenance, meet the costs of any potential future restart of the Paroo Station mine and meet the costs of any potential development of the Chief Consolidated Mining Company ("Chief") properties and North 67 Inc. ("North 67") properties. For further information on Chief and North 67, see the 2015 AIF.

In addition, we continue to investigate opportunities to save on treatment charges and other costs in order to allow us to identify the appropriate set of economic conditions that would support a restart of operations at the Paroo Station mine. The reduction in demand for commodities has led to a reduction in mining activity within Western Australia which has in turn lowered demand for skilled labour and mining contractor services, reducing the cost of operating a mine in Western Australia. We continue to monitor economic activity within the State and are assessing the impact of lower costs on the Paroo Station mine and whether the right conditions exist that would lead us to restart the Paroo Station mine in light of the current LME lead prices, subject to the availability of financing.

FINANCIAL AND OPERATING HIGHLIGHTS

Summary financial and operating highlights:

         
    Three months ended December 31    Year ended December 31
    2015   2014   2015   2014
(in thousands of United States dollars, except per share amounts)   $   $   $   $
Financial Highlights                
Revenue(1)   -   39,921   27,163   151,103
Gross (loss) profit   (1,281)   503   (7,523)   3,446
Net loss and comprehensive loss   (1,726)   (101,215)   (12,924)   (105,683)
Basic and diluted loss per share   (0.07)   (9.62)   (0.90)   (10.05)
Cash flow (used in) provided by operating activities   (1,957)   3,870   (4,381)   (87)
                 
            December 31, 2015   December 31, 2014
Total assets           71,737   92,184
                 
    Three months ended December 31    Year ended December 31
    2015   2014   2015   2014
Operating Highlights                
Ore milled - (000s tonnes)   -   429.4   171.2   1,438.0
Average head grade   -   6.7%   7.4%   7.0%
Recovery   -   75.5%   77.3%   79.0%
Concentrate produced - (000s tonnes)   -   31.8   14.0   120.0
Concentrate sold - (000s tonnes)   -   31.4   22.4   115.3
Lead metal in concentrate produced - (000s tonnes)   -   21.8   9.9   80.9
Lead metal in concentrate sold - (000s tonnes)   -   21.5   15.7   77.6
Concentrate inventory - (000s of tonnes)   -   8.6   -   8.6
LeadFX's realized average lead sale price - ($ per tonne)   -   1,826   1,819   2,071
Average lead price - LME cash settlement - ($ per tonne)   1,681   1,999   1,783   2,095
                 
(1)   During the first quarter of 2015, the Paroo Station mine transitioned to care and maintenance due to depressed London Metal Exchange ("LME") lead prices and increased treatment charges. Mining operations ceased in January and milling operations ceased in early February. Final shipments of lead concentrate left the Fremantle port in March 2015.
     

LIQUIDITY AND FINANCIAL CONDITION

The following is a summary of the Company's selected annual information for the past three financial years prepared in accordance with IFRS and quarterly results for the past eight completed financial quarters.

             
    2015   2014   2013
At December 31   $   $   $
Revenue   27,163   151,103   95,425
Net loss and comprehensive loss   (12,924)   (105,683)   (51,384)
Basic and diluted loss per share   (0.90)   (10.05)   (5.25)
Total assets   71,737   92,184   196,866
Total non-current financial liabilities   2,222   11,353   11,654
             

During the first quarter of 2015, we placed the Paroo Station mine on care and maintenance which subsequently lead to a decrease in revenue in 2015. In addition, total assets decreased as remaining inventory was sold, receivables were collected and as the Paroo Station mine transition to full care and maintenance. The decrease in total assets was in part offset by the acquisition of Chief and North 67 which increased assets by $11.3 million. LeadFX, Chief and North 67 are commonly controlled by Enirgi Group with the acquisition of Chief and North 67 accounted for under the book value method of accounting whereby the Company adopts the same carrying value for assets and liabilities as previously recorded by Enirgi Group and its subsidiaries. In addition, the acquisition of Chief and North 67 led to an increase in trade payables and accrued liabilities of $1.9 million when compared to September 30, 2015. The decision to place the Paroo Station mine on care and maintenance resulted in a default on the Sprott Facility and Enirgi Facility resulting in the classification of these balances as current liabilities leading to a reduction in non-current liabilities.

Statement of Cash Flows

         
    Three months ended December 31   Year ended December 31
    2015   2014   2015   2014
Cash (used in) provided by operating activities   (1,957)   3,870   (4,381)   (87)
Cash provided by (used in) investing activities   8   977   3,533   (653)
Cash provided (used in) by financing activities   1,499   (2,241)   (3,104)   (891)
Effect of exchange rate changes on cash and cash equivalents   (50)   (105)   (405)   (8)
Net change in cash and cash equivalents   (500)   2,501   (4,357)   (1,639)
                 

Working Capital and Liquidity

As at December 31, 2015, the Company has a working capital deficit of $10.5 million which includes $7.0 million (C$9.7 million) owing to Enirgi Group under the Enirgi Group Bridging Facility which has a maturity date of March 31, 2016. Neither the Paroo Station mine, the Chief Properties nor the North 67 Properties are operational or generating revenue.

The Company's ability to continue as a going concern is dependent on a number of factors including but not limited to the Company's ability to either (i) refinance the Enirgi Group Bridging Facility, (ii) raise additional funds to meet its debts and obligations as they fall due, or (iii) undertake further transactions which may realize the value of the Company and its assets. The Company will need to undertake at least one of these aforementioned actions in order to service its working capital deficiency, meet its commitments to lenders, meet the costs of care and maintenance, meet the costs of any potential future restart of the Paroo Station mine and meet the costs of bringing the Company's mineral projects into production. The amount of any funding requirement will be contingent on several factors including, but not limited to, the nature of any refinancing of the Enirgi Group Bridging Facility, the nature of any additional transactions undertaken by the Company, the outcome of further negotiations with the Company's lenders, the costs and duration of care and maintenance, the timing and cost of any potential future restart of operations at Paroo Station mine and the cost of bringing the Company's mineral projects into production.

Shares issued and outstanding

As of the date hereof, there were 38.3 million common shares of LeadFX issued and outstanding. In addition, options exercisable for a maximum aggregate of 0.2 million common shares were outstanding.

Management's Discussion and Analysis and Consolidated Financial Statements

LeadFX's audited financial statements and MD&A for the fourth quarter 2015 and year ended December 31, 2015 will be filed today and will be available on SEDAR at www.sedar.com and on the Company's website at www.leadfxinc.com.

LeadFX is a Canadian-based mining company focused on the development of lead-silver projects located in stable jurisdictions. Our current portfolio includes a restart-ready lead operation in Western Australia and a development project in Utah, USA. The Company is developing opportunities at its new properties in North America to underpin future cash flow and growth. LeadFX trades under the symbol "LFX" on the Toronto Stock Exchange.

Forward-Looking Statements

Certain statements contained in this news release are forward-looking information within the meaning of applicable securities laws. All statements included herein (other than statements of historical facts) which address activities, events or developments that management anticipates will or may occur in the future are forward-looking statements, including statements as to the following: the timing and length of care and maintenance at the Paroo Station mine and future sales, future targets and estimates for production and sales, the receipt of required additional financing to restart and operate the Paroo Station mine, statements relating to the business and future activities of, and developments related to LeadFX and its subsidiaries, including the development of water, lead, silver, industrial minerals and aggregates assets, future business acquisitions, future lead production, the Company's ability to meet its working capital needs and debt repayments in the near term, the circumstances or timing and costs surrounding a restart of the Paroo Station mine, forbearance by Enirgi Group pursuant to the Enirgi Group Bridging Facility, projections with respect to cash flows and working capital, the cost and timing for completion of capital projects necessary for any future operations, the Company's ability to comply with the transportation and operating conditions for the Paroo Station mine, capital expenditures, operating costs, cash costs, Mineral Resources, Mineral Reserves, life of mine, recovery rates, grades and prices, business strategies and measures to implement such strategies, competitive strengths, estimated goals and plans for LeadFX's future business operations, commodity prices outlook and other such matters. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "contemplate", "target", "believe", "plan", "estimate", "expect", and "intend" and statements that an event or result "may", "will", "can", "should", "could" or "might" occur or be achieved and other similar expressions. These statements are based upon certain reasonable factors, assumptions and analyses made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. However, whether actual results and developments will conform with management's expectations is subject to a number of risks and uncertainties, including factors underlying management's assumptions, such as, expected concentrate sales when in operations, the costs and other capital expenditures required to maintain operations and transportation, the timing, need and ability to raise any additional financing and the risks relating to ramping up mining and milling throughput and operations, funding requirements, operations being placed on care and maintenance, the restart of mining and milling operations, matters relating to regulatory compliance and approvals, shareholder dilution, matters relating to public opinion, presence of a majority shareholder and management services agreements with Enirgi Group , matters related to the Esperance settlement and shipments through the Port of Fremantle, regulatory proceedings and litigation and general operating risks such as metal price volatility, lead carbonate concentrate treatment charges, exchange rates, the fact that the Company has a single producing mineral property, health and safety, environmental factors, mining risks, metallurgy, labour and employment regulations, government regulations, insurance, dependence on key personnel, constraints on cash distribution from the Paroo Station mine, the nature of mineral exploration and development and common share price volatility.

Additional factors and considerations are discussed in the Company's 2015 AIF and elsewhere in other documents filed from time to time by LeadFX with Canadian securities regulatory authorities and available on SEDAR at www.sedar.com. While LeadFX considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. While LeadFX considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. These factors may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and there can be no assurance that the actual results or developments anticipated by management will be realized or, even if substantially realized, that they will have the expected results on the Company. Undue importance should not be placed on forward-looking information nor should reliance be placed upon this information as of any other date. Except as required by law, while it may elect to, LeadFX is under no obligation and does not undertake to update this information at any particular time.

Contact Information

  • For further information please contact:
    LeadFX Inc.
    Jessica Helm
    VP, Corporate Communications and Investor Relations
    Suite 3001, 1 Adelaide Street East
    Toronto, Ontario M5C 2V9
    (416) 867 9298
    Email: info@leadfxinc.com