GobiMin Announces Results of Third Quarter of 2008
Tue Nov 25, 5:44 PM
(Expressed in United States dollars except where otherwise indicated)
TSX-V: GMN
TORONTO, Nov. 25 /CNW/ - GobiMin Inc. (the "Company" or "GobiMin") reports its financial and operating results for the third quarter of 2008. The unaudited interim consolidated financial statements along with management's discussion and analysis have been filed with SEDAR (www.sedar.com) and are also available at the website of the Company (www.gobimin.com).
Financial Highlights
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In the third quarter, total tonnage ore production continued to maintain at high level of 107,011 tonnes, with head grade improved over last quarter to partially offset impact of lower metal price. The Company sold over 946,000 pounds of contained nickel and 457,000 pounds of contained copper in this quarter. However, third quarter profit was lower reflecting a significant decline of nickel price, higher labour, energy and material costs and a stronger Renminbi ("RMB"). The average LME nickel price in Q3 2008 was $8.60 (China nickel price: $10.33), compared to $13.70 (China nickel price: $15.57) in Q3 2007. RMB which appreciated from US$ 0.1328 to US$0.1468 in the same period impacted the operation cost.
The comparative financial highlights for the third quarter of the past
three years are:
Quarter ended Quarter ended Quarter ended
September 30, September 30, September 30,
2008 2007 2006
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Revenue $7.5 million $9.9 million $6.2 million
Net earnings $1.2 million $5.6 million $2.8 million
EBITDA(1) $2.5 million $6.9 million $3.8 million
Gross Margin 36.5% 67.8% 73.5%
Basic earnings per share $0.016 $0.076 $0.045
Diluted earnings
per share $0.016 $0.075 $0.042
EBITDA per share(1) $0.035 $0.094 $0.061
Cash and cash equivalents $35 million $40 million $15 million
Cash and cash equivalents
per share(1) $0.49 $0.55 $0.23
(1) As non-GAAP measurements, EBITDA, EBITDA per share and Cash and cash
equivalents per share do not comply with GAAP and, therefore, the
amounts presented in the above table may not be comparable to similar
data presented by other companies. The data is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with GAAP.
Business Summary and Development
--------------------------------
(a) Stable Mining Production
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Quarter over quarter ore processed increased to 107,011 tonnes from 101,951 tonnes, reflecting the improved mining capacity and production rate from the implementation of the mining optimization plan. Volume of ore processed was slightly lower than the second quarter but the Nickel head grade improved to 0.47% from 0.42%. The mining production was not impacted by the management's intention to sell the nickel properties and continues to be maintained at normal production rate after the third quarter.
(b) Exploration Projects
--------------------
On October 10, 2008, the Company received for its Yanxi Copper Deposit an initial NI 43-101 compliant Mineral Resource Estimate from Scott Wilson RPA. At 0.5% copper cut-off, Indicated Mineral Resources are estimated at 15 million tonnes averaging 0.75% copper and Inferred Mineral Resources are estimated at 10 million tonnes averaging 0.71% copper (See news release on October 10, 2008). The Company is planning the development of this project, using typical low-cost Chinese mining methods.
Since 2007, GobiMin has formed four new joint ventures with subsidiaries of Xinjiang Bureau of Geology and Mineral Resources ("Xinjiang Bureau"), exploring various base metal projects in Xinjiang region. GobiMin also has set up joint venture for exploration of metal properties in Indonesia.
(c) Suspension at Yellow Mountain Project Development
-------------------------------------------------
Due to the recent dramatic decline of nickel and copper price, the Company
believes that it is a prudent course of action to preserve cash and
temporarily suspend construction work at the Yellow Mountain Project.
(d) Normal Course Issuer Bid
------------------------
On February 6, 2008, the Company began a normal course issuer bid to
repurchase some of its common shares on the TSX Venture Exchange. The Company
repurchased 1,507,100 common shares during the quarter and 3,036,100 shares
cumulatively as of November 25, 2008. All shares purchased were returned to
treasury for cancellation. GobiMin now has 70,524,402 shares outstanding.
(e) Agreement to sell Chinese nickel properties
-------------------------------------------
On November 3, 2008, the Company announced that it has entered into two revocable framework agreements ("Framework Agreement") with Xinjiang Xinxin Mining Industry Co., Ltd. ("Xinxin") to dispose of its three nickel-copper mining properties, namely Yellow Mountain East, Xiangshan and Yellow Mountain, in Hami, Xinjiang. The transaction (the "Transaction") is facilitated through the sale of its two Chinese subsidiaries, Xinjiang Yakesi Resources Co. Ltd. ("Yakesi") and Hami Jubao Resources Co. Ltd. ("Jubao"). The Company and Xinxin finalized the terms of the Transaction and entered into two irrevocable Sale and Purchase Agreements ("Definitive Agreement") on November 23, 2008 which superseded the Framework Agreement. Under the Definitive Agreement, Xinxin agrees to acquire the Company's equity interest in Yakesi and Jubao for a total cash consideration (the "Consideration") of RMB492.33 million (approximately CAD$87.9 million).
On November 24, 2008, RMB246.17 million (CAD$43.96 million) was paid to the Company as non-refundable deposit and the first non-refundable installment (a total of 30% of the Consideration). All sums paid for the Consideration will be held in China by the Company until Xinxin has obtained the necessary government approval for foreign exchange remittance which is expected by the end of February 2009.
As security for the due performance under the Definitive Agreement, the Company entered into a pledge agreement and a trust agreement in respect of the entire equity interest in Yakesi and Jubao owned by the Company in favour of Xinxin on November 23, 2008.
Pursuant to the Definitive Agreement, Yakesi and Jubao also declared a total dividend of RMB43.89 million (CAD$7.8 million) which will be payable to the Company together with the final installment of the Consideration. Xinxin will be entitled to all the earnings of Yakesi and Jubao starting from November 1, 2008 (See the Company's news release on November 24, 2008).
Outlook
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Following the conclusion of the Transaction of disposal of its three nickel-copper mining properties, namely Yellow Mountain East, Xiangshan and Yellow Mountain, in Hami of China in February 2009, GobiMin will be in a strong financial position to develop its existing projects and will take great care before making opportunistic acquisition in this environment where excellent projects abound. The whole mining sector has been devastated by the current crisis and only the cash rich companies will survive and prosper. GobiMin will strive to be among them.
In these trying times, Management will perform an overall review of the prioritization and best allocation of the Company's financial resources to the development of the Yanxi Project using typical low-cost Chinese mining methods and the other exploration projects in Xinjiang of China and in Indonesia as well as the potential acquisition of high grade base metals projects which are currently under geological assessment and negotiation.
Certain statements contained in this press release constitute forward-looking information. Such statements are based on the current expectations of management of GobiMin. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking information. These risks include, but are not limited to, risks associated with fluctuations in metal prices, risks associated with mining operations including environmental hazards, GobiMin's reliance on key suppliers and on key personnel, the potential for changes in the legislative and regulatory environment in China and other risks and uncertainties detailed from time to time in GobiMin's annual report and other filings with the Canadian securities commissions. The reader should not place undue reliance on the forward-looking information included in this press release given that (i) actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and (ii) certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information could prove to be inaccurate. These statements speak only as of the date they are made, and GobiMin assumes no obligation to revise such statements as a result of any event, circumstance or otherwise, except in accordance with law. Additional information about (i) the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and (ii) the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, is contained in the GobiMin's annual report and other documents filed from time to time with the Canadian securities commissions, all of which are available at www.sedar.com and the Company's website www.gobimin.com.
The TSX Venture Exchange has neither approved nor disapproved the
contents of this press release.
To receive GobiMin press releases by email, send a message to
info@gobimin.com and specify "GobiMin press releases"
on the subject line
ContactsJames Xiang
Chief Financial Officer
GobiMin Inc.
Tel: (416) 915-0133
Email: james@gobimin.com
www.gobimin.com
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