TVI Pacific Inc.
TSX : TVI

TVI Pacific Inc.

August 15, 2005 10:44 ET

TVI Pacific Announces Consolidated Interim Second Quarter Financial and Operating Results for 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 15, 2005) - TVI Pacific (TSX:TVI) announces financial and operating results for the first quarter ended June 30, 2005. All amounts are expressed in Canadian dollars. The highlights provided in this release should be read in conjunction with the Company's consolidated, unaudited interim financial statements and Management Discussion and Analysis for the second quarter, which are available on Sedar at www.sedar.com or at the Company's website at www.tvipacific.com.

Financial Review

First Half Highlights:

- 317% increase in total revenue from $1,539,836 for the first six months of 2004 to $6,429,586 for the same period in 2005.

- Positive cash flow of $1,537,414 on revenues of $5,116,518 from Canatuan mine operations in the first six months of 2005.

- New capital investment of $1,957,517 made to further expand Canatuan mine facilities in the first six months of 2005.

- Exploration expenses of $638,084 were incurred for the six months ending June 30, 2005 compared to $633,101 for the same period in 2004.

- 90.8% increase in Drilling Division revenues from $427,538 in Q1 2005 to $815,845 in Q2 2005. The net loss expanded to $136,835 in Q2 from $80,432 in Q1. Cash outflow from operations also increased to $65,033 in Q2 from $23,194 in Q1. The increase in net loss and cash outflow are the result of a decision made by management with rapidly improving fleet utilization to upgrade the mechanical condition of most of the drills in the fleet in order to give better on job mechanical reliability and performance, and the write off of bad debts.

- First NSR royalty payment from Rapu Rapu expected in the fourth quarter of 2005 as a result of first gold being poured in July 2005 from Rapu Rapu project on which TVI affiliate has a 2.5% NSR royalty interest.


Significant additional financial information includes:

- Cash of $576,267 as at June 30, 2005.

- Cash outflow from operations decreased from $1,217,138 in the six months of 2004 to a cash outflow of $310,715 in the same period of 2005.

- Total assets increased to $16,505,848 at June 30, 2005 compared to $15,929,233 at December 31, 2004.

- Consolidated net loss for the three months ending June 30, 2005 of $1,540,910 ($0.004 per share) compared to a net loss of $1,168,348 ($0.003 per share) in the same period in 2004. The net loss for the period ending June 30, 2005 was $2,211,667 ($0.006 per share) compared to a net loss of $1,719,783 for the same period in 2004. The net loss for the six months ending June 30, 2005 included exploration expenses (including both Philippines and China) of $638,084 ($633,101 in 2004), depreciation and accretion of $1,390,163 ($92,324 in 2004) and stock-based compensation expense of $262,730 ($413,875 in 2004).

- Administrative and general expenses increased from $1,026,723 to $1,315,454 reflecting additional costs at the Canatuan mine related to the commercial operations, increased legal and auditing fees and administrative costs for China.


Review of Operations

Canatuan Mine

Revenues from the Canatuan Mine decreased from $2,803,332 for the first quarter to $2,313,186 in the second quarter. Cash flow also decreased from $1,023,900 for the first quarter to $513,514 for the second quarter. These decreases were mainly the result of a planned decision made in early April by TVI management to lower daily throughput to ensure adequate tailings storage capacity in existing dams. This decision was made to avoid a possible, temporary shut down of operations, given the anticipated delay in the completion of the new Gossan tailings dam. Daily throughputs were lowered to approximately 350 dry metric tonnes ("DMT") per day from approximately 500 DMT per day, a 33% decrease. Daily throughput was restored to approximately 450 DMT in July and to 500 DMT in August when TVI management became confident in the dam completion date. The completion date for the dam was extended considerably more than forecast at the commencement of construction because of a delay in receiving a key construction permit and because of unusually heavy rains which slowed dam construction. Construction on the new gossan dam is now well advanced and is expected to be completed before the end of August. Lower gold and silver recoveries during the commissioning of the new expansion components, including the leach and CIP tanks, the Merrill Crowe and gravity concentrator, also contributed to the lower operating results.

Operations for the third quarter of 2005 are expected to be significantly better than those of the second quarter and are expected to show higher throughput and higher metal recoveries with resultant higher revenues and cash flow being generated.

The mine is presently undergoing progressive expansion to increase daily throughput capacity to approximately 750 DMT and at the same time increase metal recoveries. This expansion is being financed out of project cash flow and by vendor credit. During Q2 three new leach tanks and two new CIP tanks were commissioned. In addition a gravity concentrator was installed to recover free gold, a Merrill Crowe unit was installed to recover both silver and gold, additional electrowinning cells were installed and a number of other improvements were made to the mill. The last major component of the expansion, the installation of a second ball mill, was delayed awaiting the completion of the new tailings dam which is expected before the end of August. Installation is proceeding on schedule with the purchase and reconditioning of the new ball mill having been completed and the pouring of the mill foundation finished. It is expected that the new ball mill will begin operating in September with a targeted daily plant throughput of 750 DMT after commissioning.

Exploration

Exploration work is currently underway in both Philippines and China. In the Philippines tenement applications were filed by TVI's affiliate, TVI Resource Development (Phils.) Inc. on 1,257 sq kms of prospective lands located on the Zamboanga peninsula and an option agreement was signed on the advanced-stage Balabag gold exploration property. Discussions are currently underway with a major company which is primarily interested in large scale porphyry copper-gold deposits on a possible joint venture on the Zamboanga tenement application lands. Near mine exploration has commenced on lands at Canatuan and on the Balabag property. In China Hunan Pacific Geological Exploration Inc. ("HPGEI"), TVI's wholly owned Chinese subsidiary, filed seven exploration license applications for lands located within the Golden Triangle area, totaling 90.76 sq kms, which have been accepted by the Ministry of Land and Resources. Exploration activities continue in the Golden Triangle area and new activities have begun in Tibet. Discussions are ongoing with several major companies on one or more potential joint ventures on HPGEI properties in China. The Shuikoushan lease purchase agreement was successfully re-negotiated and plans are currently being made for a second phase of exploration. Preliminary exploration is underway on the Haoya property located in Inner Mongolia.

Drilling Division

Management continues to focus on improving overall performance of the Drilling Division operations, including securing new contracts to improve fleet utilization, hiring new key supervisory staff, upgrading the overall mechanical condition of the fleet, and reducing costs. Fleet utilization continued to grow in Q2 and with new contracts signed is expected to grow rapidly throughout the balance of the year. In the third quarter of 2005, the Drilling Division expects to see increased revenues with at least eight drills operating by September 2005 and more shortly after. At the end of June, four drills were operating on two contracts. Two new contracts were signed in Q2 for four more drills to be operating in August 2005. A new contract will be signed in August which will see another two drills operating in September. An additional drill is expected to commence operations in November under a contract signed earlier in the year. Prospects for the future look promising.

Rapu Rapu

TVIRD owns a 2.5% NSR royalty on the Rapu Rapu property. First gold was poured in July. Lafayette management expects production of copper and zinc concentrates in Q4, 2005. A major exploration program is underway at Rapu Rapu with the objective of finding new resources which will extend mine life. Results are expected shortly.

Outlook

The Company's cash position is expected to remain tight in the short term as a result of the continuing expansion of the Canatuan mine which is currently being financed from cash flow generated from mine operations and vendor credit. Management believes however, that its current cash position, together with the anticipated growth in cash flow from operations, cash from anticipated option and warrant exercises (from warrants that are in the money and expire in November, 2005) and short term funding, as required, should be sufficient to fund current operations and meet obligations as they become due.

The statements herein that are not historical facts are forward-looking statements. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "anticipate" or "will" and similar expressions) may include plans, expectations, opinions, or guidance that are not statements of fact. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These statements are subject to certain risks and uncertainties that could cause actual results or outcomes to differ materially from those anticipated or implied by forward looking statements. TVI Pacific Inc. does not assume responsibility for the accuracy and completeness of the forward looking statements and, subject to applicable law, does not undertake any obligation to publicly revise such forward looking statements to reflect subsequent events or circumstances. The forward looking statements of TVI Pacific Inc. contained in this News Release are expressly qualified, in their entirety, by this cautionary statement.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • TVI Pacific Inc.
    Clifford M. James
    President and CEO
    (403) 265-4356
    or
    TVI Pacific Inc.
    E. John W. Adkins
    Vice-President Finance
    (403) 265-4356
    (403) 264-7028 (FAX)
    Email: tvi-info@tvipacific.com
    Website: www.tvipacific.com