Novicourt Inc.
TSX : NOV

Novicourt Inc.

July 26, 2005 10:28 ET

Novicourt Inc.: Second Quarter 2005 Press Release

TORONTO, ONTARIO--(CCNMatthews - July 26, 2005) - On July 26th 2005, Novicourt Inc. (TSX:NOV)("Novicourt") reported net earnings of $8.3 million or $0.29 per share for the second quarter of 2005, compared to net earnings of $3.1 million or $0.08 per share in the same period of 2004 as higher copper production and higher copper prices more than offset a stronger Canadian dollar.

Net earnings of $13.4 million or $0.39 per share were reported for the six month period ending June 30, 2005, compared to $9.7 million or $0.24 per share in the first six months of 2004. The $3.7 million improvement was due to higher copper prices partially offset by a stronger Canadian dollar.

As of June 30, 2005, Novicourt has $25.2 million of cash and cash equivalents.

Corporate Developments

On May 4th, 2005, Novicourt completed the plan of arrangement that had been announced on March 22, 2005. The arrangement was approved by 99.94% of the votes cast at the annual and special general meeting of shareholders held on May 3, 2005. Pursuant to the arrangement, each common share of Novicourt was exchanged for 0.5 of a new common share and received $1.30 in cash for each common share (prior to the exchange).

Novicourt's new common share (TSX:NOV) trade on the Toronto Stock Exchange.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This analysis of financial position and results of operations of Novicourt should be read in conjunction with the unaudited interim financial statements of Novicourt for the three and six months ended June 30, 2005 and with the audited financial statements of Novicourt and the notes thereto for the year ended December 31, 2004. This discussion contains certain forward-looking statements regarding Novicourt's businesses and operations. Actual results may differ materially from those contemplated by these statements. Where used, the words "anticipate", "expect", "intend", "should" and similar expressions are intended to identify forward-looking statements.

The management discussion and analysis has been prepared as of July 26, 2005. Additional information relating to Novicourt, including Novicourt's annual information form is available on SEDAR at www.sedar.com.

Louvicourt Mine Performance and Completion of Operation

On July 19, 2005, the Louvicourt mill completed the processing of the final ore produced from the Louvicourt Mine as the ore reserves were depleted.

During the quarter, the Louvicourt Mine milled a total of 386,401 tonnes of ore for an average of 4,246 tonnes per calendar day compared to 297,645 tonnes or 3,271 tonnes per day in 2004. The average copper content of ore was 2.5%, slightly above the 2.4% during the same period last year. The higher throughput and higher copper content resulted in higher accountable copper being produced (Novicourt's share - 3,953 tonnes in the second quarter of 2005, compared to 2,943 tonnes in 2004). Novicourt's accountable zinc production for the second quarter was 2,437 tonnes compared to 2,419 tonnes for the same period in 2004, as the higher throughput was offset by lower zinc content of the ore (1.8% in 2005 vs. 2.4% in 2004).

Year-to-date, the Louvicourt Mine milled a total of 768,854 tonnes of ore for an average of 4,248 tonnes per calendar day compared to 602,819 tonnes or 3,312 tonnes per day in 2004. Novicourt's accountable copper production for the six months ending June 30, 2005 was 7,274 tonnes compared to 7,373 tonnes for the same period in 2004, as the higher throughput was offset by lower copper content of the ore (2.3% in 2005 vs. 2.9% in 2004). Novicourt's accountable zinc production for the first six months of 2005 was 4,636 tonnes compared to 3,732 tonnes for the same period in 2004, as the higher throughput was partially offset by lower zinc content of the ore (1.8% in 2005 vs. 1.9% in 2004).

Exploration

Exploration activities commenced during the quarter on the Canaa dos Carajas JV (Press Release dated June 1, 2005) in Brazil. Airborne radiometric/magnetic surveys over previously three untested blocks within the JV area are 100% complete. Additional geophysical and geochemical surveys are in progress over four previously identified magnetic anomalies within the Nova Esperanca property. The helicopter VTEM geophysical survey logistics were finalized and flying will be completed by September. Following interpretation, priority drill targets will be finalized and initial drilling is planned to commence thereafter.

In the Abitibi region of Quebec, surveys and drilling continued for massive sulphides at each of the Hunter, Grevet, Val d'or and Megatem JV's. No economic mineralization was encountered but systematic follow-up of numerous priorty targets continues.

At the Louvex property, within the Louvaur JV, two deep holes encountered wide alteration and stringer zone mineralization. Although economic mineralization was not encountered, management was sufficiently encouraged to proceed with a new deep hole. JV partner Alexis Minerals commenced drilling of the hole during June. The drill hole is targeting an area of extensive stringer-sulphide mineralization, alteration and favourable stratigraphy at a vertical depth of 1,400 meters, one kilometer southwest of the Louvicourt mine. The hole is expected to be completed during August.

The company continued its review of submissions and meetings with other potential JV partners in its efforts to expand its portfolio of highly prospective properties.

Results from Operations (second quarter 2005 compared to second quarter 2004)

Sales of concentrates in the second quarter of 2005 were $23.3 million compared to $15.3 million in 2004. The $8.0 million increase was primarily the result of higher copper production and higher copper price, partially offset by a stronger Canadian dollar. For the quarter, copper averaged US$1.54 per pound, 21% over the average of US$1.27 one year ago. Charges for smelting, refining and transportation were $4.3 million for the quarter compared to $3.0 million for the same period in 2004 due to higher copper treatment and refining charges and higher copper concentrate shipments.

Production expenses of $4.2 million in this year's second quarter compared to the $5.1 million in 2004 as the Louvicourt Mine approaches the end of the mine life and less development activity is required.

Amortization expenses in 2005 were $0.9 million, down from $2.1 million incurred in 2004, as the Louvicourt Mine nears the end of the mine life. The capital assets have been amortized to their estimated salvage values.

Exploration costs, net of exploration tax credits, were $0.5 million ($1.3 million pre tax credits) in the second quarter of 2005 compared to $0.6 million ($0.9 million pre tax credits) in 2004. The increase was due to the initiation of expenditures on the Canaa JV in Brazil and the Hunter JV in Quebec.

Provision for site closure and reclamation was $0.2 million, up from $0.1 million in 2004, partially due to the increase in the employee severance provision.

Interest income for the second quarter of 2005 was $0.3 million down from $0.5 million one year ago. The decrease was due to the reduction in cash balances resulting from the plan of arrangement that was completed in May 2005.

Income and production taxes increased to $5.0 million from $1.8 million related to the increase in operating income.

Net earnings for the second quarter of 2005 was $8.3 million or $0.29 per share for the second quarter of 2005, compared to net earnings of $3.1 million or $0.08 per share in the same period of 2004 as higher copper production, higher copper prices and lower production costs more than offset a stronger Canadian dollar.

Results from Operations (six months 2005 compared to six months 2004)

Sales of concentrates in 2005 were $42.3 million compared to $37.0 million in 2004. The $5.3 million increase was primarily the result of higher copper price, partially offset by a stronger Canadian dollar. For the six months, copper averaged US$1.51 per pound, 21% above the average of US$1.25 one year ago. Charges for smelting, refining and transportation were $7.9 million for the first six months of 2005 compared to $6.5 million for the same period in 2004 due to higher copper treatment and refining charges.

Production expenses of $9.1 million in 2005 compared to the $10.6 million in 2004 as the Louvicourt Mine approaches the end of the mine life and less development activity is required.

Amortization expenses in 2005 were $2.7 million, down from $4.2 million incurred in 2004, as the Louvicourt Mine nears the end of the mine life.

Exploration costs, net of exploration tax credits, were $1.1 million ($2.3 million pre tax credits) in 2005 compared to $0.7 million ($1.2 million pre tax credits) in 2004. The increase was due to the initiation of expenditures on the Canaa JV program in Brazil and increased expenditures on the Quebec JV programs.

Provision for site closure and reclamation was $0.5 million, up from $0.2 million in 2004, partially due to the increase in the employee severance provision.

Interest income for the first six months of 2005 was $1.0 million, the same as in 2004.

Income and production taxes increased to $8.2 million from $5.9 million related to the increase in operating income.

Net earnings for the second quarter of 2005 was $13.4 million or $0.39 per share for the second quarter of 2005, compared to net earnings of $9.7 million or $0.24 per share in the same period of 2004 due to higher copper prices and lower production costs partially offset by a stronger Canadian dollar.

Financial Resources and Liquidity

As a result of the increase in net earnings, cash flow from operations before changes in operating working capital during the three months ending and six months ending June 30, 2005 was $8.9 million and $15.3 million, compared to $4.9 million and $12.6 million in 2004.

During 2005 operating working capital has increased by $10.7 million ($7.0 million for the quarter) mostly due to a decrease in taxes payable and an increase in accounts receivable related to higher copper prices.

During the second quarter of 2005, $4.0 million was paid out to shareholders as dividends and $52.3 million was paid out to shareholders as a distribution by way of a plan of arrangement.

Cash and cash equivalents on hand at June 30, 2005 was $ 25.2 million, down from $76.7 million (including short term investments) from December 31, 2004. It is composed of the following amounts:

- $15.3 million in cash and short-term investments with maturities of three months or less

- $9.9 million in Falconbridge Limited's short-term investment pool.

Outstanding Share Information (as of June 30, 2005)

Common Shares 20,123,129

During the quarter, the number of common shares outstanding was reduced from 40,246,342 shares to 20,123,129 by way of a plan of arrangement. Pursuant to the arrangement, each common share of Novicourt has been exchanged for 0.5 new common share and, the shareholders of record at the close of business on May 11, 2005, received $1.30 in cash for each common share (prior to the exchange).

Critical Accounting Estimates

Revenue Recognition

Novicourt recognizes revenue at the time of the sale, when rights and obligations of ownership pass to the buyer which generally occurs upon shipment. Final prices for revenues are determined up to three months after shipment and the effect of any changes are recorded in the period in which the change occurs. Price changes for shipments which as of June 30, 2005 are awaiting final pricing could have a material effect on future revenues.

As of June 30, 2005, three months of copper concentrate and two months of zinc concentrate shipments were provisionally priced. Changes in estimated prices will impact Novicourt's revenues in the statement of earnings and the balance of the accounts and settlements receivable on Novicourt's balance sheet. The change in the estimated prices will impact Novicourt's net cash flows when the accounts and settlement receivable are collected.

Provision for Site Closure and Reclamation

Estimated site closure and reclamation costs may vary based on changes in operations, costs of restoration and reclamation activities, and regulatory requirements.

The estimate of future site restoration and reclamation impacts upon the amount of reclamation found in the long-term liabilities and current liabilities section of the balance sheet. Actual site restoration and reclamation expenditures will impact Novicourt's cash flow from operations.

Outlook

With the closure of the Louvicourt Mine, the Company is without a source of continuing operating income. The company maintains sufficient cash and operating working capital to meet its estimated reclamation obligations. The company is well funded to maintain and expand its exploration strategy including alliances and ventures with high quality partners on prospective ground.

This press release contains forward-looking statements concerning Novicourt's business and operations. Novicourt cautions that, by their nature, forward-looking statements involve risk and uncertainty and Novicourt's actual results could differ materially from those expressed in such statements. Reference should be made to the most recent Annual Information Form for a description of the major risk factors.

Novicourt is the owner of a 45% undivided interest in the Louvicourt Mine through its participation in the Novicourt Inc./ Aur resources Inc./Teck Cominco Limited Louvicourt Joint Venture. Novicourt is a copper-based company which receives its revenues from the sale of copper as well as zinc concentrates produced by the Louvicourt Mine. Novicourt also participates in joint venture exploration activities with partners Virginia Gold Mines Inc, Alexis Minerals Inc. and Noranda Inc. in extensive exploration programs. Novicourt is seeking to create additional shareholder value through further joint ventures.



Novicourt Inc.
PRODUCTION STATISTICS - UNAUDITED
As at June 30, 2005
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Second Quarter Six Months
2005 2004 2005 2004
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Tonnes milled (100%) 386,401 297,645 768,854 602,819

Head grades - % Cu 2.5 2.4 2.3 2.9
- % Zn 1.8 2.4 1.8 1.9
- oz/t Au 0.03 0.03 0.03 0.03
- oz/t Ag 1.04 1.07 0.92 0.89

Mill recoveries - % Cu 96.0 95.7 95.5 96.3
- % Zn 92.1 87.3 88.4 84.8
- % Au 69.8 70.2 68.6 70.4
- % Ag 62.3 57.8 59.9 61.5

Tonnes of copper
concentrate (100%) 32,011 23,807 59,144 59,399
Tonnes of zinc
concentrate (100%) 11,452 11,437 21,876 17,547

Novicourt's 45% share of
net production:
Accountable tonnes of copper 3,953 2,943 7,274 7,373
Accountable tonnes of zinc 2,437 2,419 4,636 3,732
Accountable ounces of gold 2,628 2,614 5,618 4,740
Accountable ounces of
silver (000's) 99 73 165 123

Market prices and exchange:
Copper - $ U.S. per pound 1.54 1.27 1.51 1.25
Zinc - $ U.S. per pound 0.58 0.47 0.59 0.48
Gold - $ U.S. per ounce 427 393 427 401
Silver - $ U.S. per ounce 7.15 6.25 7.06 6.46
Exchange - $ Cdn. per $ U.S. 1.24 1.36 1.24 1.34


Novicourt Inc.
BALANCE SHEETS
UNAUDITED
As at June 30, 2005
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$000's
June 30 December 31
2005 2004
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ASSETS
Current:
Cash and cash equivalents 25,242 46,686
Short term investments - 30,000
Accounts and settlements receivable
Due from Falconbridge 21,742 20,669
Other 513 182
Taxes receivable 186 338
Inventories of mineral products 493 199
Materials, supplies and prepaid expenses 438 920
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48,614 98,994
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Future tax asset 3,868 3,245

Capital assets:
Property, plant and equipment, net 1,940 2,359
Other assets, net - 2,506
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1,940 4,865
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54,422 107,104
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LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued liabilities 2,677 3,382
Accounts payable to Falconbridge 351 724
Taxes payable 337 8,653
Current portion of site closure
and reclamation 3,699 3,509
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7,064 16,268

Provision for site closure and
reclamation 4,056 4,023

Future tax liability 194 488

Shareholders' equity 43,108 86,325
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54,422 107,104
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NOVICOURT INC.
FINANCIAL STATEMENTS
UNAUDITED

$000's Second Quarter Six Months
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2005 2004 2005 2004
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STATEMENTS OF EARNINGS

Sale of concentrates $ 23,339 $ 15,319 $ 42,293 $ 37,033
Less: Treatment charges and
transportation (4,270) (2,960) (7,938) (6,491)
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19,069 12,359 34,355 30,542

Expenses
Production 4,175 5,102 9,125 10,629
Amortization 890 2,056 2,694 4,161
Exploration, net of tax credits 540 565 1,067 718
Administration 237 125 355 257
Provision for site closure and
reclamation 238 106 524 223
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Total Expenses 6,080 7,954 13,765 15,988
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Operating income 12,989 4,405 20,590 14,554
Interest income, net 346 525 1,001 1,033
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Earnings before taxes 13,335 4,930 21,591 15,587
Income and production taxes 5,024 1,806 8,180 5,900
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Net earnings $ 8,311 $ 3,124 $ 13,411 $ 9,687
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Earnings per share $ 0.29 $ 0.08 $ 0.39 $ 0.24
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STATEMENTS OF RETAINED EARNINGS

$000's Second Quarter Six Months
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2005 2004 2005 2004
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Retained earnings - beginning
of period $ 26,530 $ 18,314 $ 21,430 $ 11,751
Net earnings 8,311 3,124 13,411 9,687
Dividends on common shares (4,025) (4,025) (4,025) (4,025)
Distribution by plan of
arrangement (52,320) - (52,320) -
Adjustments (283) - (283) -
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Balance, end of period $ (21,787) $ 17,413 $(21,787) $ 17,413
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NOVICOURT INC.
STATEMENT OF CASH FLOWS
UNAUDITED

$000's Second Quarter Six Months
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2005 2004 2005 2004
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Cash from operations:
Net earnings $ 8,311 $ 3,124 $ 13,411 $ 9,687
Add (deduct) non-cash items
Amortization 890 2,056 2,694 4,161
Future taxes (203) (342) (917) (1,330)
Provision for site closure and
reclamation 238 106 524 223
( Gain ) Loss on disposal of
capital assets (240) (22) (270) (22)
Reclamation expenditures (70) (72) (101) (95)
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Cash from operations before
changes in operating working
capital 8,926 4,850 15,341 12,624

Change in operating working
capital (7,029) 3,297 (10,743) 1,292
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Cash flow before investing and
financing activities 1,897 8,147 4,598 13,916

Cash provided by (used for)
investing activities:
Short term investments - - 30,000 18,000
Proceeds from capital assets 270 29 303 29
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270 29 30,303 18,029

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Cash flow before financing
activities 2,167 8,176 34,901 31,945

Cash used for financing
activities:
Dividends on common shares (4,025) (4,025) (4,025) (4,025)
Distribution by plan of
arrangement (52,320) - (52,320) -
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(56,345) (4,025) (56,345) (4,025)

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Increase (decrease) in cash (54,178) 4,151 (21,444) 27,920
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Cash and cash equivalents at
beginning of the period 79,420 32,175 46,686 8,406
Cash and cash equivalents at
end of the period $ 25,242 $ 36,326 $ 25,242 $ 36,326
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Supplemental Cash Flow
Information
Cash Taxes Paid $ 6,061 $ 1,008 $ 16,371 $ 2,339
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Cash consists of cash and cash
equivalents.





Contact Information

  • Novicourt Inc.
    Michael Boone
    Vice President, Finance and Controller
    (416) 982-7188
    or
    Novicourt Inc.
    Stephen Young
    Secretary
    (416) 982-7069
    or
    Novicourt Inc.
    David Sandison
    Vice-President
    (416) 982-7023