Blue Pearl Reports Cash Flow From Operating Activities of US$75.4 Million in 2006
TORONTO, ONTARIO--(CCNMatthews - March 26, 2007) - Blue Pearl Mining Ltd. (TSX:BLE)(TSX:BLE.WT.A)(FRANKFURT:A6R) -
Highlights of 2006 reflecting acquisition of Thompson Creek Metals Company (TCMC) (all in U.S. dollars):
- Revenues for the fourth quarter and full year 2006 totaled $150.8 million -- all occurring from sales mainly of molybdenum in the 67 days following the acquisition -- amounting to approximately $2.25 million per day in the period October 26 to December 31, 2006.
- Cash flow from operating activities, mostly in the post-acquisition period, totaled $75.4 million.
- Company ended 2006 with cash balances of $98.1 million after paying, subsequent to closing, $61.5 million owed to the TCMC vendors relating to accounts receivable as provided for in the TCMC acquisition agreement. The Company's cash balances as of March 22, 2007 were approximately $135 million after also paying $64.3 million, including a prepayment premium, to discharge the Second Lien Credit Facility on March 15, 2007.
- Molybdenum production costs for output from the Thompson Creek and Endako mines averaged $6.28 per pound while realized prices on molybdenum sales averaged $25.74 per pound.
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- Net loss of $20.6 million in 2006 includes $68.9 million of inventory purchase price adjustment included in operating expenses and a non-cash charge of $14.5 million for stock options compensation.
- Conference call and webcast for analysts and investors scheduled for March 27, at 10:00 a.m. Eastern
Blue Pearl Mining Ltd., the world's largest publicly traded, pure molybdenum producer, today announced financial results for the year ended December 31, 2006 prepared in accordance with Canadian generally accepted accounting principles. All dollar amounts are in U.S. dollars unless otherwise indicated.
Blue Pearl's revenues totaled $150.8 million in 2006, derived mainly from the sale of molybdenum products subsequent to the Company's acquisition on October 26, 2006 of Thompson Creek Metals Company (TCMC). No revenues were earned by Blue Pearl in 2005 as it was in the development stage.
Operating expenses in 2006, which were incurred by TCMC during the period October 26 to December 31, 2006, totaled $145.1 million. Included in operating expenses was an acquisition expense of $68.9 million related to the inventory portion of the TCMC purchase price adjustment. TCMC held 7.8 million pounds of molybdenum in inventory on the acquisition date and this inventory was deemed to be purchased by Blue Pearl, for accounting purposes, at fair value, resulting in an uplift of inventory costs of $98.5 million over the original book value. Of this, $68.9 million was charged to operating expenses in 2006 and the remaining $29.6 million is expected to be charged to operating expenses in the first quarter of 2007 as the related inventory is sold. Blue Pearl had no operating expenses in 2005.
Among the Company's other 2006 expenses was a non-cash charge of $14.5 million for stock-based compensation as a result of options being granted to 110 members of management, senior operations personnel, directors and other staff. Stock-based compensation in 2005 was $0.4 million.
General and administrative expenses totaled $4.6 million in 2006, compared with $1.5 million in 2005. Exploration and development expenses, which were mainly related to the Davidson Project, were $8.6 million in 2006 versus $2.3 million a year earlier.
Net loss for 2006 was $20.6 million or $0.36 per basic and diluted share, compared with a net loss for 2005 of $4.1 million or $0.13 per basic and diluted share. The per share figures are based on a weighted-average number of shares outstanding of 57,688,000 in 2006 and 31,879,000 in 2005. As of December 31, 2006, there were 100,528,000 shares outstanding.
Cash generated by operating activities totaled $75.4 million in 2006, compared with cash used of $2.7 million in 2005.
Cash balances were $98.1 million as at December 31, 2006 versus $6.9 million a year earlier.
During 2006, mainly to finance the TCMC acquisition, the Company raised $233.7 million from equity issues and incurred $401.9 million in long-term debt. In 2005, $9.8 million was raised from equity issues.
Total assets at the end of 2006 were $935.7 million, up from $8.4 million a year earlier.
Revenues in the fourth quarter of 2006 were $150.8 million. There were no revenues in the fourth quarter of 2005. Net loss was $12.4 million or $0.14 per basic and diluted share in the fourth quarter of 2006, compared with $2.5 million or $0.06 per basic and diluted share in the corresponding period of 2005.
In 2006, the Company, following the TCMC acquisition, produced 3.84 million pounds of molybdenum at an average production cost of $6.28 per pound. The Company's U.S. operations produced 2.47 million pounds at an average cost of $5.83 per pound while the Canadian operations produced 1.37 million pounds at an average cost of $7.30 per pound. The amounts produced reflect molybdenum produced at the Thompson Creek and Endako mines but do not include molybdenum purchased from third parties, roasted and sold by the Company. The average costs reflect production costs, including roasting costs, for molybdenum from the Thompson Creek and Endako mines only.
The price of molybdenum, which averaged $4.50 per pound between 1994 and 2004, peaked at $40 per pound in June 2005 and has since moderated somewhat. In 2006, the average price of molybdenum remained historically strong at approximately $25 per pound. The expected trends in supply and demand for molybdenum suggest a positive near-term outlook for the price. Barring a world recession, demand for molybdenum is expected to continue to grow. In the absence of new supply coming from China and given numerous constraints on overall production growth outside of China, the price of molybdenum is expected to remain relatively strong in the near future.
As previously announced, the Company is expecting to produce 21 million pounds of molybdenum in 2007 and 27 million pounds in 2008 from its existing Thompson Creek and Endako mines. This production profile and the anticipated strong sales prices are expected to produce strong cash flow for the Company and to allow the Company to meet its cash requirements for operations, capital expenditures, debt payments and any contingent payment accruing during 2007.
One of the Company's goals is to reduce its long-term debt. As previously announced, the Company prepaid in full its $61.9 million Second Lien Credit Facility plus a prepayment premium of $2.5 million on March 15, 2007. The remaining bank debt of approximately $340 million (First Lien Credit Facility), on which the Company is required to pay principal of $18.75 million per quarter in 2007, can be prepaid without penalty and if molybdenum prices remain sufficiently strong then debt payments will be made above the scheduled minimum amounts. The Company's cash balances on March 22, 2007 were approximately $135 million. As of the end of March 2007, after the regular quarterly payment on the First Lien is made at month-end, Blue Pearl's bank debt is expected to be less than $320 million.
Both the Thompson Creek and Endako Mines are developing new plans based on a reevaluation of mineral resources and reserves assuming a long-term molybdenum price of $10 per pound and updated costs. Previous mine plans had assumed a long-term price of $5 per pound at Thompson Creek and $3.50 per pound at Endako. The new plans are expected to increase reserves and mine life at both operations when they are completed in 2007.
The Davidson Deposit, which is Canada's largest undeveloped molybdenum deposit, is important to the Company's future as it represents an opportunity for organic growth at low capital cost. The deposit's high-grade core is easily accessible with minimal impact to the environment. A feasibility study including a new mineral reserve estimate is currently underway and is expected to be completed during the second quarter of 2007.
Additional information on the Company's financial position is available in Blue Pearl's 2006 Financial Statements and Management's Discussion and Analysis, which will be filed with SEDAR (www.sedar.com) and posted on the Company's website (www.bluepearl.ca).