PhosCan Chemical Corp.
TSX : FOS

PhosCan Chemical Corp.

May 22, 2009 13:23 ET

PhosCan Chemical Announces Results for Quarter and Year Ended January 31, 2009

TORONTO, ONTARIO--(Marketwire - May 22, 2009) -

(All dollar amounts are expressed in Canadian currency unless otherwise noted.)

PhosCan Chemical Corp. (TSX:FOS) announces its financial and operating results for the quarter and year ended January 31, 2009.

Highlights for the year include:

- Martison Phosphate Project now wholly-owned following the acquisition of Baltic Resources Inc.

- Preliminary feasibility study on the Martison Project completed and an N.I. 43-101 compliant technical report filed

- Private placement of 29 million common shares at $1.90 per share completed to raise gross proceeds of $55.1 million

- Continued advancement of the Martison Project with ongoing work on a feasibility study, environmental permitting, stakeholder agreements and land purchase; several tasks deferred in order to conserve cash

Subsequent to January 31, 2009, PhosCan announced the following developments:

- Shareholders' rights plan approved by shareholders

- Reduction in stated capital, which is required to enable PhosCan to undertake a normal course issuer bid, approved by shareholders; amount of reduction and effective date to be determined by the Board of Directors

- Listing of the Company's common shares on the Toronto Stock Exchange

- Agreement signed with IAMGOLD Corp. for the evaluation of the niobium at the Martison Project

Financial Results

PhosCan reported a net loss for the year ended January 31, 2009 of $4,289,353 compared to a net loss for the year ended January 31, 2008 of $651,168, respectively. The increase in net loss of $3,638,185 was primarily due to: an increase in stock option compensation and general and administrative expenses; the write-off of forfeited advances; and the capitalization of interest income to the Martison Project.

Stock option compensation expense during the year ended January 31, 2009 was $2,465,524 (2008 - $120,656). The increase of $2,344,868 was due primarily to the grant of 3,290,000 stock options to new and existing directors, new officers, employees and a consultant of the Company during the year ended January 31, 2009. The stock option compensation expense recorded during the year ended January 31, 2008 arose from the grant of 300,000 stock options to a new officer of the Company on May 25, 2007.

General and administrative expense during the year ended January 31, 2009 was $1,173,874 (2008 - $411,783). The increase of $762,091 was due to higher levels of corporate and Martison Project development activities as well as the leasing of new office space and additions to head office staff.

Following the announcement by PhosCan on December 8, 2008 that it was deferring several tasks related to the Martison Project, the Company terminated certain contracts. As a result, PhosCan forfeited $272,180 of advances previously made under the contracts. The Company has written off these amounts.

Net losses also increased during the year ended January 31, 2009 due to a reduction in reported interest income of $299,623. The Company earned $1,361,202 in interest income during the year ended January 31, 2009; however, this interest income was capitalized to the Martison Project.

Cash and cash equivalents plus short-term investments increased by $41,411,055 during the year ended January 31, 2009 to $72,761,437 while working capital increased by $40,309,981 to $71,952,612. The significant increases arose from the completion of a private placement of 29 million common shares at $1.90 per share to raise gross proceeds of $55,100,000, which was offset by cash flow used in operating activities of $3,431,923 and cash flow used in investing activities of $7,632,127.

At January 31, 2009, cash, cash equivalents and short-term investments of $72,761,437 consisted of: $953,457 of cash held in accounts with the Company's banking institution, $820,000 of investment-grade short-term guaranteed investment certificates issued by the Company's banking institution, $70,986,000 of interest-bearing notes issued by the Company's banking institution and $1,980 of accrued interest.

Capitalized expenditures on the Martison Project were $84,657,988 at January 31, 2009, an increase of $79,927,667 from January 31, 2008. The increase is primarily due to the acquisition by PhosCan of the remaining 50% interest in the Martison Project, the pre-tax fair value of which was $70,378,177.

A future income tax liability of $18,605,698 was recorded on the acquisition of the remaining 50% interest in the Martison Project as a result of the fair value of Baltic's 50% interest in the Martison Project being greater than the carry-forward tax value. This has been recorded as a non-current liability on the Company's balance sheet as at January 31, 2009. The Company will not be required to pay the liability unless it sells the 50% interest for the fair value at which it was acquired from Baltic.

PhosCan had no long-term debt at January 31, 2009 and has met all of its financial obligations. The Company expects that existing working capital will be sufficient to complete the activities under the reduced development program announced on December 8, 2008 and detailed further below. PhosCan will be required to raise a significant amount of additional funds should it elect in the future to proceed with full-scale development of the Martison Project.

For the quarter ended January 31, 2009, PhosCan reported a net loss of $1,169,724 compared to a net loss for the quarter ended January 31, 2008 of $96,235, respectively. The increase in net loss of $1,073,489 was primarily due to: a $415,548 increase in stock option compensation expense; the $272,180 write-off of forfeited advances; and the capitalization of interest income to the Martison Project.

Operating Results

On December 8, 2008, PhosCan announced that, given current financial market and fertilizer industry conditions, it is deferring several tasks related to the development of the Martison Project. These include definition drilling to move resource category material into the reserve category, construction of the balance of the permanent road to access the proposed mine site and detailed project engineering. As a result, the Company no longer expects production to begin at the Martison Project in 2012 as previously announced.

During the fiscal year leading up to the December 8th announcement, management and the Board of PhosCan had worked to strengthen the Company and advance the development of the Martison Project.

- Baltic Resources acquired such that the Martison Project is now wholly-owned

- Preliminary Feasibility Study on the Martison Phosphate Project completed and an N.I. 43-101 compliant technical report filed

- Private placement of 29 million common shares at $1.90 per share completed to raise gross proceeds of $55.1 million

- Existing portion of the permanent access road upgraded; this work was completed by a construction company in a joint venture with a local First Nation

- Archaeological, traditional native land use and occupancy, and biological studies completed

- Land required for the proposed mono-ammonium phosphate (MAP) fertilizer production facility in Brandon, Manitoba purchased

- Preliminary site layout and process flow diagrams and design criteria for the proposed MAP fertilizer production facility and a portion of the proposed conversion complex completed

Subsequent to the December 8th announcement, management and the Board of PhosCan have continued to be prudent and disciplined and have worked to find the right balance between advancing the Martison Project and preserving the Company's cash. In that regard, under a reduced development program, PhosCan has or is in the process of completing:

- A Class C - Environmental Assessment of the permanent access road extension

- Geophysics at the proposed mine site

- Additional biological studies

- Taking the Martison Project mine claims to lease

- Bench and pilot plant beneficiation testing of phosphate ore from the Martison Project

- Phosphoric acid pilot plant testing of flotation concentrate produced from the pilot plant beneficiation test program to collect critical data for engineering design

- An investigation into the opportunity to purchase from the Crown land required for the conversion complex

Subsequent to the December 8th announcement, the following corporate developments were completed:

- Shareholders' rights plan approved by shareholders

- Reduction in stated capital, in order to enable PhosCan to undertake a normal course issuer bid, approved by shareholders; amount of reduction and effective date to be determined by the Board of Directors

- Listing of the Company's common shares on the Toronto Stock Exchange

- Agreement signed with IAMGOLD Corp. for the evaluation of the niobium at the Martison Project

Outlook

PhosCan believes it has sufficient funds to complete the activities under the reduced development program. The Company will be required to raise a significant amount of additional funds should it elect in the future to proceed with full-scale development of the Martison Project.

Upon completion of the reduced development program, PhosCan expects to have approximately $70 million of uncommitted cash on hand. In light of the recent unprecedented changes in the world economy and financial markets, the Company believes that with this cash it is well positioned to review a broad range of opportunities that have the potential to enhance shareholder value.

About PhosCan

PhosCan is engaged in the development of the Martison Phosphate Project, which consists of the Martison Phosphate Deposit and a planned phosphate mine, beneficiation plant, conversion complex and solid fertilizer production facility. The Martison Deposit is located 70 kilometres north of Hearst, Ontario. The Company's proposed operations will be strategically located in proximity to the fertilizer markets in the agricultural regions of western Canada and mid-western United States with ready access to excellent infrastructure including rail, power and labour.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements with respect to the Martison Phosphate Project, and matters concerning the business, operations, strategy, and financial performance of PhosCan. These statements generally can be identified by use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the estimates and projections regarding the Martison Project are realized. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Unless otherwise stated, all forward looking statements speak only as of the date of this press release and PhosCan does not undertake any obligation to update such statements except as required by law.

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

Contact Information

  • PhosCan Chemical Corp.
    Stephen Case
    President & CEO
    (416) 972-9222
    or
    PhosCan Chemical Corp.
    James Pringle
    Vice President Finance & CFO
    (416) 972-9222