Novicourt Inc.
TSX : NOV

Novicourt Inc.

October 27, 2005 17:23 ET

Novicourt Reports Stronger Cash Position and Promising Early Stage Geophysical Results from Brazilian Exploration Program

TORONTO, ONTARIO--(CCNMatthews - Oct. 27, 2005) - Novicourt Inc. (TSX:NOV)

Third Quarter 2005 Press Release

On October 27, 2005, Novicourt Inc. ("Novicourt" or the "Company") reported net earnings of $0.5 million or $0.02 per share for the third quarter of 2005, compared to net earnings of $4.0 million or $0.20 per share in the same period of 2004. As reported previously, the Louvicourt mill completed processing of the final ore produced from the Louvicourt Mine as ore reserves were depleted on July 19, 2005. Exploration spending in the quarter totaled US$1.0 million before tax credits with programs active on the prospective Brazil JV properties with Falconbridge Brazil and the continuing Abitibi region JV properties with Alexis Minerals Inc., Virginia Gold and Falconbridge Limited.

Net earnings of $13.9 million or $0.69 per share were reported for the nine month period ending September 30, 2005, compared to $13.7 million or $0.68 per share in the first nine months of 2004. Results in 2005 reflect higher metal prices, the closure of the mine, higher exploration spending and a stronger Canadian dollar.

The Company's cash position improved further as accounts receivables and concentrate inventories continued to be converted to cash. As of September 30, 2005, Novicourt has $36.7 million of cash and cash equivalents. In addition the company has net operating working capital totaling $7.0 million, the majority of which is anticipated to be converted to cash during the fourth quarter of 2005.

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

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, six and nine months ended September 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 October 27, 2005. Additional information relating to Novicourt, including Novicourt's annual information form is available on SEDAR at www.sedar.com.

Overview

Novicourt is a Canadian exploration and development company focused on the discovery of new mineral deposits mainly in Canada and Brazil. The Company participates in joint venture exploration activities with partners Alexis Minerals Inc., Virgina Gold Mines Inc. and Falconbridge Limited.

The Company's shares (NOV-T) are listed on the Toronto Stock Exchange

Exploration

Exploration activities on the Canaa dos JV with Falconbridge (Press Release dated June 1, 2005) in Brazil accelerated during the quarter. The Stage I helicopter TEM (VTEM) geophysical survey over the Pedra Branca showing identified the location of the known mineralization thereby validating the VTEM survey methodology which has been tested over iron-ore-copper-gold ("IOCG") deposits. Initial VTEM survey results exceeded expectations and the company has authorized an extension of the VTEM program totaling up to US$300,000 which will see additional claim blocks flown over the balance of the year. The immediate priorities are the Nova Esperanca magnetic anomaly on the west side of the of the JV area and the Sao Jorge target located 3km south of the latter. Anomalous geochemistry and two zones of intense Fe-Na-Ca alteration have been identified at the Nova Esperanca target. A broad copper-gold soil anomaly, with up to 2,240 ppm copper has been detected at Sao Jorge, coincident with a 1.8 km long magnetic feature. The expanded VTEM program will allow the company to survey larger areas within the JV more rapidly and at much reduced costs to comparable ground TEM surveying. It is anticipated that initial targets for drill testing will be reviewed and approved during the fourth quarter, proceeding simultaneously with the continuing VTEM program.

In the Abitibi region of Quebec, surveys and drilling continued for massive sulphides at each of the Hunter, Grevet, Val d'or and other Megatem JV's. No economic mineralization was encountered although anomalous intersections over narrow widths and sub-economic grades has proven the validity of the program. The future focus of the Megatem survey follow-up testing will be on the three most prospective targets. These are the Hunter JV survey area and the Puiseaux and West-Amos projects. Significantly reduced expenditures are planned for 2006 as the multi-year megatem program nears completion. The discovery of economic mineralization at any of the remaining priority targets would result in a change to the current plan.

At the Louvex property, within the Louvaur JV, the most recent deep hole was completed in September. This third deep hole was designed to test a reinterpretation of geophysical anomalies in an area above and between the first two holes. The hole intersected about 100 meters of sub-economic zinc stringer mineralization and locally intense hydrothermal chlorite alteration. The hole also intercepted the favourable interface with semi-massive pyrite over 1.2 meters. Novicourt and its 55% partner Alexis Minerals are assessing the results to determine if additional drilling is warranted.

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. The Company believes that strong metals markets have inflated values for exploration projects and it must be extra-vigilant in its property assessments during this period of strong competition and high prices for high quality exploration projects.

Results from Operations

During the quarter until closure on July 19th, the Louvicourt Mine milled a total of 51,066 tonnes of ore compared to 308,116 tonnes in 2004. The average copper content of ore was 1.0%, significantly below the 2.5% during the same period last year.

Year-to-date the Louvicourt Mine milled a total of 819,920 tonnes of ore compared to 910,935 tonnes in 2004. Novicourt's share of accountable copper production for the nine months ending September 30, 2005 was 7,485 tonnes compared to 10,535 tonnes for the same period in 2004.

Sales of concentrates in the third quarter of 2005 were $2 million resulting primarily on finalization of copper production and sale of July production to closure date.

Exploration costs, net of exploration tax credits, were $0.9 million ($1.0 million pre tax credits) in the third quarter of 2005 compared to $0.6 million ($1.3 million pre tax credits) in 2004. 2005 spending has been focused primarily in the Abitibi region and in Brazil.

Third quarter provision for site closure and reclamation was $0.5 million, up from $0.1 million in 2004, partially due to the increase in the employee severance provision.

Interest income for the third quarter of 2005 was $0.2 million down from $0.6 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.

Other income of $1.0 million reflects the gain on disposal of equipment at the Louvicourt mine site and sundry commissions.

The lower income and production taxes in the quarter reflect the lower taxable income level due to the mine site closure.

Net earnings for the third quarter of 2005 was $0.5 million or $0.02 per share, compared to net earnings of $4.0 million or $0.20 per share in the same period of 2004. For the nine month period net earnings in 2005 were $13.9 million or $0.69 per share compared to $13.7 million or $0.68 per share in 2004. Higher metal prices in 2005 were partially offset by lower sales volumes and the stronger Canadian dollar.

Financial Resources and Liquidity

At September 30, 2005 the cash and cash equivalent position of the Company was $36.7 million compared to $25.2 at June 30, 2005 and $46.7 as at December 31, 2004. Cash flow from operations before changes in operating working capital during the three months ending and nine months ending September 30, 2005 was $(1.1) million and $14.4 million, compared to $5.3 million and $18.0 million in 2004.

During the third quarter operating working capital has decreased $10.4 million due to the collection of accounts receivable.

Cash and cash equivalents on hand at September 30, 2005 was $ 36.7 million, down from $76.7 million (including short term investments) from December 31, 2004.

Outstanding Share Information (as of September 30, 2005)

During the three month period ending September 30, 2005, no new shares were issued and the issued capital of the Corporation was 20,123,129 common shares compared to 40,246,342 shares at December 31, 2004. Pursuant to a plan of 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

Provision for Site Closure and Reclamation

Estimated site closure and reclamation costs may vary based on changes in business activities, 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.

During the third quarter, $3.8 million (Novicourt's share $1.7 million) and year to date $4 (Novicourt's share $1.8 million) of closure costs were incurred at the Louvicourt mine site.

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 and closure obligations. The company is well funded to maintain and expand its exploration programs including alliances and ventures with high quality partners on prospective ground. Novicourt is taking a very thorough approach to the review of all exploration opportunities available to it during this period of intense exploration property competition and valuations. Additionally the company may examine other opportunities to create shareholder value, including but not limited to, share based transactions - if those are determined to be value creating to shareholders.

Dividend and Future Dividend Policy

Novicourt's Board of Directors has declared a dividend of $0.20 per share, payable on November 22, 2005 to shareholders of record as at the close of business on November 8, 2005.

Historically the dividend policy of the Company has been to pay semi-annual dividends of $ 0.10 per pre-consolidation common share. With the closure of the Louvicourt Mine and the Company's new strategy being exploration focused, the Board of Directors will be reviewing closely its dividend policy for the future.

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 also participates in joint venture exploration activities with partners Virginia Gold Mines Inc, Alexis Minerals Inc. and Falconbridge Limited in extensive exploration programs. Novicourt is seeking to create additional shareholder value through further joint ventures.




Novicourt Inc.
PRODUCTION STATISTICS - UNAUDITED
As at September 30, 2005
---------------------------------------------------------------------

Third Quarter Nine Months
2005 2004 2005 2004
------------------------------------

Tonnes milled (100%) 51,066 308,116 819,920 910,935

Head grades - % Cu 1.0 2.5 2.2 2.8
- % Zn 2.8 2.3 1.9 2.1
- oz/t Au 0.02 0.03 0.03 0.03
- oz/t Ag 1.41 0.84 0.95 0.87

Mill recoveries - % Cu 92.7 96.3 95.4 96.3
- % Zn 87.7 83.0 88.4 84.1
- % Au 86.8 61.0 69.5 67.6
- % Ag 49.7 55.5 59.0 59.5

Tonnes of copper concentrate (100%) 1,714 25,292 60,858 84,691
Tonnes of zinc concentrate (100%) 1,468 10,821 23,344 28,368

Novicourt's 45% share of net
production:
Accountable tonnes of copper 211 3,162 7,485 10,535
Accountable tonnes of zinc 478 2,275 5,114 6,007
Accountable ounces of gold 559 1,997 6,177 6,737
Accountable ounces of silver (000's) 14 54 179 177

Market prices and exchange:
Copper - $ U.S. per pound 1.70 1.29 1.51 1.27
Zinc - $ U.S. per pound 0.59 0.44 0.59 0.47
Gold - $ U.S. per ounce 439 401 427 401
Silver - $ U.S. per ounce 7.07 6.45 7.06 6.46
Exchange - $ Cdn. per $ U.S. 1.20 1.31 1.24 1.33



Novicourt Inc.
BALANCE SHEETS
UNAUDITED
As at September 30, 2005
---------------------------------------------------------------------
$000's
September 30 December 31
2005 2004
------------ -----------
ASSETS
Current:
Cash and cash equivalents 36,695 46,686
Short term investments - 30,000
Accounts and settlements receivable
Due from Falconbridge 8,334 20,669
Other 1,483 182
Taxes receivable 2,564 338
Inventories of mineral products - 199
Materials, supplies and prepaid
expenses 568 920
------------ -----------
49,644 98,994
------------ -----------
Future tax asset 3,462 3,245

Capital assets:
Property, plant and equipment, net 639 2,359
Other assets, net - 2,506
------------ -----------
639 4,865
------------ -----------
53,745 107,104
------------ -----------
------------ -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued
liabilities 1,828 3,382
Accounts payable to Falconbridge 785 724
Taxes payable 736 8,653
Current portion of site closure and
reclamation 2,581 3,509
------------ -----------
5,930 16,268

Provision for site closure and
reclamation 4,127 4,023

Future tax liability 64 488

Shareholders' equity 43,624 86,325
------------ -----------

53,745 107,104
------------ -----------
------------ -----------



NOVICOURT INC.
FINANCIAL STATEMENTS
UNAUDITED

$000's Third Quarter Nine Months
-------------------------------------------
2005 2004 2005 2004
-------------------------------------------

STATEMENTS OF EARNINGS

Sale of concentrates $ 2,621 $ 15,782 $ 44,914 $ 52,815
Less: Treatment charges
and transportation (577) (2,778) (8,515) (9,269)
----------- ---------- ---------- ---------
2,044 13,004 36,399 43,546

Expenses
Production 1,010 4,689 10,135 15,318
Amortization - 2,074 2,694 6,235
Exploration, net of
tax credits 860 551 1,927 1,269
Administration 284 120 639 377
Provision for site
closure and
reclamation 488 73 1,012 296
----------- ---------- ---------- ---------
Total Expenses 2,642 7,507 16,407 23,495
----------- ---------- ---------- ---------
Operating income (598) 5,497 19,992 20,051
Interest income, net 216 582 1,217 1,615
Other Income 977 - 977 -
----------- ---------- ---------- ---------
Earnings before taxes 595 6,079 22,186 21,666
Income and production
taxes 79 2,081 8,259 7,981
----------- ---------- ---------- ---------
Net earnings $ 516 $ 3,998 $ 13,927 $ 13,685
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Basic and diluted
earnings per
share (note 4(c)) $ 0.02 $ 0.20 $ 0.69 $ 0.68
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic and diluted
average number of
shares 20,123,129 20,123,129 20,123,129 20,123,129



STATEMENTS OF RETAINED EARNINGS (DEFICIT)

$000's Third Quarter Nine Months
-------------------------------------------
2005 2004 2005 2004
-------------------------------------------
Retained earnings
(deficit) - beginning
of period $ (21,787) $ 17,413 $ 21,430 $ 11,751
Net earnings 516 3,998 13,927 13,685
Dividends on common shares - - (4,025) (4,025)
Distribution by plan
of arrangement
(note 4(a)) - - (52,320) -
Adjustments (note 4(b)) - - (283) -
----------- ---------- ---------- ----------
Balance, end of period $ (21,271) $ 21,411 $ (21,271) $ 21,411
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------



NOVICOURT INC.
STATEMENT OF CASH FLOWS
UNAUDITED

$000's Third Quarter Nine Months
-------------------------------------------
2005 2004 2005 2004
-------------------------------------------
Cash from operations:
Net earnings $ 516 $ 3,998 $ 13,927 $ 13,685
Add (deduct) non-cash
items
Amortization - 2,074 2,694 6,235
Future taxes 276 (782) (481) (2,112)
Provision for site
closure and reclamation 488 73 1,012 296
(Gain ) Loss on disposal
of capital assets (622) (55) (892) (77)
Reclamation expenditures (1,735) 27 (1,836) (68)
----------- ---------- ---------- ----------
Cash from operations
before changes in
operating working
capital (1,077) 5,335 14,424 17,959

Change in operating
working capital 10,409 3,033 (36) 4,325
----------- ---------- ---------- ----------
Cash flow before
investing and
financing activities 9,332 8,368 14,388 22,284
Cash provided by (used
for) investing
activities:
Short term investments - - 30,000 18,000
Exploration joint
venture Brazil - - (247) -
Proceeds from capital
assets 2,121 63 2,424 92
----------- ---------- ---------- ----------
2,121 63 32,177 18,092
----------- ---------- ---------- ----------
Cash flow before
financing activities 11,453 8,431 46,565 40,376

Cash used for financing
activities:
Plan of arrangement - - (211) -
Dividends on common shares - - (4,025) (4,025)
Distribution by plan of
arrangement - - (52,320) -
----------- ---------- ---------- ----------
- - (56,556) (4,025)
----------- ---------- ---------- ----------
Increase (decrease)
in cash 11,453 8,431 (9,991) 36,351
----------- ---------- ---------- ----------
Cash and cash equivalents
at beginning of the
period 25,242 36,326 46,686 8,406
Cash and cash equivalents
at end of the period $ 36,695 $ 44,757 $ 36,695 $ 44,757
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Supplemental Cash Flow
Information
Cash Taxes Paid $ 1,699 $ 735 $ 18,070 $ 3,074
----------- ---------- ---------- ----------

Cash consists of cash and cash equivalents.



Contact Information

  • Novicourt Inc.
    Tom Graham
    Vice President, Finance and Controller
    416-982-7250
    or
    Novicourt Inc.
    Stephen Young
    Secretary
    416-982-7069
    or
    Novicourt Inc.
    David Sandison
    Vice-President
    416-982-7023