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2016-11-11

NGEX REPORTS THIRD QUARTER 2016 RESULTS

ORTS THIRD QUARTER 2016 RESULTS
November 10, 2016: NGEx Resources Inc. (TSX: NGQ) (OMX: NGQ) (“NGEx” or the
“Company”) is pleased to announce its results for the three and nine months
ended September 30, 2016. HIGHLIGHTS The spin out of the Company’s
wholly-owned Filo del Sol property into Filo Mining Corp. through a Plan of
Arrangement under the Canada Business Corporations Act (the "Arrangement")
was completed on August 16, 2016. Filo Mining Corp. common shares began
trading on the TSX Venture Exchange and the Nasdaq First North Exchange on
August 26, 2016 and September 6, 2016, respectively, under the trading
symbol “FIL”. The Arrangement was designed to deliver greater value to
shareholders by unlocking the value of the Filo del Sol Project and
minimizing dilution of the Company’s Constellation Project. With the spin
out of Filo Mining complete, the Company is focused on advancing its 60%
owned Project Constellation which includes the Los Helados and Josemaria
deposits located, respectively, in Region III of Chile and in the adjacent
San Juan Province of Argentina. Project Constellation is one of the largest
undeveloped copper-gold projects in South America. On September 19, 2016
NGEx provided an update on the Company’s plans to advance Project
Constellation and take advantage of opportunities to add value at modest
costs by evaluating lower cost development options including: assessing the
potential to initially develop Josemaria at a smaller scale; testing the
heap leach potential of the oxide cap at Josemaria; and reducing timelines
to development by starting the process of acquiring water rights and
continuing baseline environmental studies. The Company also plans to work
up a number earlier stage exploration targets between Los Helados and
Josemaria. During the third quarter of 2016, NGEx also secured the surface
rights covering the Los Helados deposit, including areas for infrastructure
and access, representing an important milestone in Project Constellation’s
development. Mr. Wojtek Wodzicki, President and CEO commented, "With the
spin-out of Filo Mining, NGEx will focus on realizing the value potential
of Los Helados and Josemaria. We see clear opportunities to add value at
modest costs. A recent surface rights acquisition at Los Helados is an
example of this approach in action. During the coming year we plan targeted
work to add value to the Constellation project including; leach test work
on the oxide gold zone at Josemaria, targeted exploration on some of the
earlier stage prospects between Los Helados and Josemaria, as well as
continued environmental baseline studies. There are very few large, junior
controlled, copper projects in the world and our goal is to position NGEx
as the premier play on a recovering copper market." FINANCIAL RESULTS (in
thousands, except per share amounts) Three months Nine months ended ended
September 30, September 30,
--------------------------------------------------------------------------------
2016 2015 2016 2015
--------------------------------------------------------------------------------
Exploration expenses 1,880 1,966 5,207 17,098 General and administration
(“G&A”) 927 614 2,672 2,776 Gain on spin-off transaction (30,032) -
(30,032) - Net (income) / loss (27,812) 2,674 (22,328) 19,676 Basic and
diluted (income) / loss per share (0.14) 0.01 (0.11) 0.10
--------------------------------------------------------------------------------
SELECTED FINANCIAL INFORMATION (in thousands) September 30, 2016 December
31, 2015 ------------------------------------------------------------ Cash
1,454 2,113 Working capital 1,596 930 Mineral properties 6,178 12,770 Total
assets 10,232 17,008 Long-term liabilities 803 875
------------------------------------------------------------ The Company
incurred $1.9 million in exploration and project investigation expenses
during the current quarter in 2016, which included the US$0.5 million
payment to secure land surface access rights in August 2016. Overall field
related activities were minimal following the completion of the Integrated
PEA in February 2016, compared to the work performed in 2015. The scoping
level study, to evaluate the potential of combining the Los Helados and
Josemaria operations, began in mid 2015, resulting in higher costs for the
conceptual study as well as consulting, geochemistry and geophysics work
during the third quarter of 2015. The $0.3 million increase in G&A costs
for the current quarter is primarily attributable to additional
professional and stock exchange related fees required in completing the
Arrangement. Share-based compensation charges were also higher in the third
quarter of 2016 compared to 2015, as the replacement option received by the
option holders of the Company became fully vested with no further service
obligations required after the effective date of the Arrangement. The
Company recorded a $30 million gain for the current quarter as a result of
accounting for the spin-out of Filo Mining as a distribution in kind to its
shareholders. The distribution to shareholders must be accounted for at
fair value according to IFRS standards, with the difference between that
value and the carrying amount of the net assets recognized in the statement
of comprehensive income. As a result of the $30 million gain on the
spin-out and a $0.5 million gain on the disposition of investments, the
Company reported a $28 million net income for the current third quarter of
2016, compared to a net loss of $2.7 million for the third quarter of 2015.
Net income for the nine months ended September 30, 2016 totaled $22
million, compared to a net loss of $20 million for the same period in 2015.
The reporting of net income was primarily due to the $30 million gain on
the spin-off, a $12 million reduction in exploration expenditures, and the
recognition of a $0.5 gain on disposition of investments. Exploration
expenditures during the nine month period in 2016 were lower due to the
reduction in the scale of exploration activities performed on its projects
following the completion of its Integrated PEA in February 2016, compared
to the work performed in 2015. As the 2015 exploration program for Project
Constellation and Filo del Sol included 7,696 meters of drilling activities
during the nine month period in 2015, the 2015 exploration and project
investigation costs were significantly higher than the costs incurred for
the current 2016 period. Cost savings from a devalued Argentine peso
further contributed to the change in net income/loss between the 2016
period and the 2015 period. The Company formalized a cost-sharing
arrangement with Filo Mining as of the effective date of the Arrangement,
upon which both NGEx and Filo Mining would benefit from cost synergies of
sharing certain corporate administrative and overhead costs going forward.
LIQUIDITY AND CAPITAL RESOURCES At September 30, 2016, the Company had cash
and working capital of $1.5 million and $1.6 million, respectively,
compared to cash and working capital of $2.1 million and $0.9 million,
respectively, at December 31, 2015. The $10.5 million funds received from
the two separate private placement financings completed earlier this year
were primarily spent on operations and exploration activities for the nine
months ended September 30, 2016. The Company also paid $3 million to Filo
Mining in connection with the spin-out and US$0.5 million to secure the
land surface access agreement in August 2016. The remaining cash and
working capital of the Company will be used to focus on exploring potential
development scenarios for the Project Constellation assets. The transaction
costs associated with the Arrangement totaled $0.5 million and were
incurred entirely by the Company. The Company currently has a credit
facility of US $0.5 million as an additional source of liquidity to manage
its cash flow. As at September 30, 2016, the Company had no outstanding
balance due on the credit facility. During the current period, the Company
amended the terms of the agreement to extend the maturity date of the
debenture to the earlier of January 20, 2017 and the completion date of the
next equity financing. OUTLOOK The Company remains focused on the
advancement of Project Constellation and on continued efforts to lay the
groundwork for the development of this significant asset. Work is planned
to explore the varied development options that these projects provide in
this new mining region. Specifically, the Company sees clear opportunities
to add value, at modest costs, by evaluating lower cost development options
and identifying other opportunities to improve the project, including: --

Assessing the potential to initially develop Josemaria at a smaller scale.
Josemaria has a zone of near surface, higher grade mineralization. The
Company plans to complete an internal scoping study that would focus on the
potential of this material to enable a lower initial capex, scaled
development of Josemaria;

--

Testing the recovery of gold from the oxide cap at Josemaría, which
contains approximately 450,000 ounces of gold within an Indicated resource
of 43 million tonnes at a grade of 0.32 g/t gold. This material was
considered as waste in the Integrated PEA mine plan, however, the limited
leach test work completed to date showed good gold recoveries and further
test work is planned to evaluate whether it could contribute to project
economics;

--

Evaluating high potential regional exploration targets within a few
kilometers of the existing deposits and the proposed plant site;

--

Reducing timelines to development by starting the process of acquiring
water rights to support the project. The proposed process plant location in
Argentina greatly reduces the cost and risk of securing a water supply
since water will be sourced from Argentina rather than from Chile;

--

Continuing baseline environmental studies and community relations programs;
and

--

Exploring potential regional synergies and cooperative development plans
with other regional operators to utilize spare capacity of processing
plants and infrastructure, including port facilities. Innovative
development concepts such as Teck-Goldcorp's Nueva Union Project open up
the potential for sharing infrastructure on a regional scale by connecting
deposits via long distance conveyor systems.

The Company continues to pursue these de-risking opportunities and will
seek to engage with potential partners to lay the groundwork for either
eventual development by the Company and its partners or for sale to a third
party. Efforts will be focused on exploring all potential development
scenarios for the Project Constellation assets while keeping costs to a
minimum. CORPORATE UPDATE Resignation and Appointment of Directors Mr. Paul
Conibear, a Director of the Com...

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