August 14, 2008
Ivernia Inc. Reports Second Quarter 2008 Financial Results
All Dollar Amounts are in U.S. Dollars Unless Otherwise Indicated
Ivernia Inc. ("Ivernia" or the "Company") (TSX: IVW) today reported an operating loss(1) of $2.5 million and a net loss of $5.1 million, or $(0.03) per common share for the second quarter of 2008. Results for the quarter continue to be impacted by the temporary suspension of operations at the Magellan mine, which became effective April 6, 2007. Resumption of operations is pending final Ministerial sign-off that the Company has satisfied the conditions set by the Environment Minister in the January 2008 conditional approval for sealed shipments of lead concentrate through the Port of Fremantle in Western Australia. During the quarter, costs associated with maintaining the Magellan mine on care and maintenance were $2.2 million.
- Made significant advances in meeting the Western Australian Environment Minister's conditions for securing final sign-off to resume shipments and operations by submitting the draft plans and related documents to the necessary Government agencies for review and comment.
- By the middle of the third quarter responses had been received from relevant Government agencies for the draft plans and related documents required to meet the conditions set by the Western Australian Environment Minister to resume shipments and operations. Final plans, incorporating all required changes will be submitted in the near future to the Environment Minister, clearing the way for a decision on formal approval for the export of product through Fremantle, and for normal mining operations to re-commence.
- Positive collaboration with the Esperance Port Authority ("EsPA") on the formal lead removal plan for the export of 8,000 dry tonnes of Magellan's lead concentrate stockpiled at the port.
- Good progress on discussions with the State Government on a framework for the Company to contribute to the cleanup of lead contamination in the Esperance port and town.
- Developed, with the Shire of Esperance, a framework and guidelines for a community fund which will assist with a range of local projects.
- Improved operational performance of mobile bagging equipment with additional modifications; the equipment will be utilized in the export shipment of the stockpiled lead concentrate at the Port of Esperance.
- Continued to supplement core management team in anticipation of operations restart and pursuing growth opportunities.
- Strengthened the Company's financial position with:
-- The early conversion by the lenders of $20 million of the Secured Facility into common shares of the Company
-- The closing of the C$22 million private placement investment in Ivernia by China-based Yunnan Metallurgical Group's ("YMG") Australian subsidiary, Chihong International Mining Ltd.
- Appointed Mr. Chen Zhi, YMG's former Chairman and member of China's Peoples' Congress of Yunnan Province to the board of directors.
- Appointed Bruce Hooper as Vice President - Exploration and Development.
(1)Operating loss in 2008 is comprised of care and maintenance costs and amortization
"During the quarter, we have made significant progress on several management and operational areas important to restarting mining, concentrate production and shipping. Submission of our draft plans marked a major step forward in the approval process. In the current third quarter we received responses to these plans from all relevant Government agencies, and the incorporation of these comments into our plans is almost complete. This will allow final plans to be submitted to the Minister in compliance with his requirement for us to meet his stringent conditions for his formal approval to allow shipping of our product through Fremantle. We are confident our plans, which have been subjected to extensive review, comment and consultation, will meet the Minister's expectations. Good progress was also made in formalizing our commitment to contribute to Esperance and the lead-related clean-up in order to allow the community to move forward from the events of 2007."
"We recognize it has been a long process but our future method of shipment is completely different and requires substantial review, planning and high-level approval. We believe we are on the home stretch and every effort is being made to complete this in the most efficient and timely manner," commented Alan De'ath, Ivernia's President and CEO.
Temporary suspension of operations
Effective April 6, 2007 operations at the Company's Magellan mine were suspended and the mine placed on care and maintenance following the March 12, 2007 suspension of lead concentrate shipments through the Port of Esperance. The resumption of operations is pending final Ministerial sign-off from the Western Australian Government of a newly-developed sealed shipment process to export the mine's lead concentrate through the Port of Fremantle.
A full discussion of the events, in 2007, related to the placement of Magellan on temporary care and maintenance is contained in Ivernia's Annual Information Form ("AIF") dated March 31, 2008 under the heading "Three-Year History". The AIF is available at the Ivernia website www.ivernia.com and on SEDAR at www.sedar.com.
Update on progress toward the resumption of lead concentrate shipments
On January 17, 2008 the Western Australian Environment Minister, Hon. David Templeman, announced his conditional acceptance of the EPA's recommendations regarding the sealed shipment process for the export of lead concentrate. In accepting the recommendations, the Minister imposed additional conditions which must be met before final signoff is granted. The Company accepted these conditions and, together with the relevant government agencies, has made considerable progress in meeting them.
The Minister's conditions included:
- the lodgment of an A$5 million bond;
- the appointment of an independent auditor approved by the Minister and funded by Magellan Metals to inspect each bag and container at the mine and the port;
- the completion of a comprehensive Health, Hygiene and Environmental Management plan for the mining and export process to be prepared to the requirement of the Minister, on advice from the Department of Health, the Department of Consumer and Employment Protection, the Department of Industry & Resources and the Department of Environment & Conservation ("DEC"); and
- baseline testing to be conducted along the transport route prior to the first movement of lead and then regularly after that.
Magellan has also committed to:
- implementing a comprehensive information and support program with local authorities and community groups along the transportation route to ensure a thorough understanding of lead concentrate, its transportation process and the Emergency Response Plan for the immediate containment and rapid and complete clean up in the unlikely event of an accident creating a spill;
- transparent communication of monitoring results and compliance reporting in an easily accessible manner; and
- continuing its community information program.
During the second quarter, good progress was made in the process towards securing final sign-off to commence containerized shipping with Magellan submitting its draft plans and related documents required for pre-start compliance with the Minister's conditions to the relevant Government agencies. These plans govern the management and monitoring of transport of sealed shipments of lead concentrate from the mine through the Port of Fremantle for export and the lodgement of an A$5 million bond. By the middle of the third quarter responses had been received from all relevant Government agencies on the draft plans and related documents required to meet the conditions set by the Western Australian Environment Minister to resume shipments and operations. Final plans, incorporating all required changes will be submitted in the near future to the Environment Minister, clearing the way for a decision on formal approval for the export of product through Fremantle, and for normal mining operations to re-commence.
On August 7, 2008 the Western Australian Government announced that the next State election would be held on September 6, 2008. During the election period no major Government decisions are expected to be made, and therefore, final Ministerial sign-off is not anticipated until after the election is complete. During this period Magellan will continue working closely with Government agencies and regulators on finalizing all matters relating to Esperance and Fremantle so the election does not create delays.
Update on the removal of the lead concentrate stockpile at the Port of Esperance
Magellan is now working jointly with the EsPA and other relevant parties to finalize a Lead Removal Plan (LRP) addressing all safety, health and environmental risks and issues pertaining to the export of the Company's stockpiled lead concentrate. This joint approach is allowing all stakeholders to undertake a faster resolution of their respective issues prior to the EsPA formally submitting the LRP for approval by the DEC. Under the relevant regulations it is the EsPA that is required to seek approval from the DEC before the export shipment operation can be undertaken, but the plan will have had detailed input from all parties at that stage. During the third quarter detailed joint discussions were held in Esperance with the EsPA and other parties with the aim to finalize the LRP as soon as possible, allowing the remaining stockpile at the Port to be shipped.
Despite playing an integral role in developing the plan, the approval process is not directly under Magellan's control, so the anticipated timing cannot be determined at this time but is unlikely to occur until after the September 6, 2008 election. Community Relations and Contributions
During the quarter, Magellan and the Shire of Esperance developed a process and guidelines to establish a Magellan community fund which will provide assistance to applicable projects in the Esperance community over a three-year period. The fund will be activated following formalization of the Company's contribution to the clean-up of lead related matters in the community.
Planning for the re-start of operations
Following the receipt of conditional Ministerial approval of the sealed shipment process for the export of Magellan's lead concentrate, management started to progress its detailed planning for the anticipated re-start of operations. The main areas of focus during the quarter were:
- Completion of modifications to the mobile bagging equipment to achieve expected operating performance. Development plans for a fixed bagging unit and related infrastructure, which will be the longer-term solution for the bagging operations, are continuing;
- Completion of the initial phase of the recruitment program focused on procuring the key employees required for planning and preparing the restart. While the program was conducted in a tight labor market for skilled professionals, the Company was successful in recruiting highly qualified individuals and fulfilling the mandate. The second phase of the program will follow the receipt of final sign-off; and
- Advancing the planning processes with transport and other contractors.
The Company anticipates that once final Ministerial sign-off is received, export of the lead concentrate stockpile at mine site will take several months to complete as the logistics of the sealed shipment process are perfected. This arrangement is expected to provide cash flow to fund the full recruitment and training program for new employees and the phased re-start of operations. The Company anticipates it will take about four months from re-start to achieve normal operations.
Financial Summary -------------------------------------------------------------------------- Three months Six months ($ millions, unless otherwise indicated and ended ended per share amounts) June 30, 2008 June 30, 2008 -------------------------------------------------------------------------- (unaudited) Revenue - - Operating loss (2) (2.5) (4.7) Net loss (5.1) (12.0) Basic loss per share (0.03) (0.08) Cash (used in)/generated from operations before changes in working capital (4.4) (9.5) Changes in working capital (3.6) (3.4) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Concentrate inventory - 000's dry tonnes 27.0 27.0 -------------------------------------------------------------------------- --------------------------------------------------------------------------
As previously announced, effective April 2, 2008 Ivernia completed the early conversion of $20 million of the drawn amount under the Secured Facility into 18,518,518 common shares of the Company. The maturity date on the remaining $20 million that was drawn and an available $10 million was extended from April 27, 2008 to April 27, 2009. The agreement provides the Company with additional financial flexibility during the period of care and maintenance.
Also as previously announced, on April 24, 2008 China based Yunnan Metallurgical Group ("YMG") completed a private placement investment in the Company. A total of 14,692,488 common shares of Ivernia were issued at a price of C$1.50 per common share for cash proceeds of C$22 million.
Strengthening of management team
In July the Company announced the appointment of Bruce Hooper as Vice President -Exploration and Development who will be based at the Company's regional office in Perth, Australia. Bruce Hooper has almost 30 years of exploration and development experience in Australia and internationally. He has managed many successful exploration programs and is well experienced in taking initial exploration prospects through to evaluation and into production. He is an Honours Graduate from the University of Leeds, UK in Geological Sciences and has worked for both major resource companies and junior explorers. In recent years he has primarily worked in base metals but also has experience in gold, diamonds, uranium, coal and petroleum.
Ivernia is an international base metals operating, development and exploration company. The Company is the sole owner and operator of the Magellan lead mine in Western Australia. Upon recommencement of production, Magellan will be the world's largest pure lead mine accounting for approximately 2% of total world lead mine production.
Ivernia trades under the symbol "IVW" on the Toronto Stock Exchange. Additional information on Ivernia is available on the Company's website at www.ivernia.com and at SEDAR at www.sedar.com.
(2)Operating loss in 2008 is comprised of care and maintenance costs and amortization.
Certain statements contained in this document constitute forward-looking information within the meaning of securities laws. All statements included in this document (other than statements of historical facts) which address activities, events or developments that management anticipates will or may occur in the future are forward-looking statements, including statements as to the following: the duration of the suspension of the Company's mining and milling operations, the proposal to ship lead concentrate through the Port of Fremantle, the implications of the government of Western Australia's continuing investigations into the matters resulting in the suspension of mining operations, the possibility of legal or regulatory action (and any resulting costs or liabilities) which may be taken in connection with the matters being investigated, the estimated timing of the receipt of required regulatory approvals to ship the stranded lead concentrate at the Port of Esperance and recommence lead shipments from the Magellan mine, future targets and estimates for production, capital expenditures, operating costs, cash costs, mineral resources and ore reserves, recovery rates, grades and prices; business strategies and measures to implement such strategies; competitive strengths; estimated goals and plans for Ivernia's future business operations; and other such matters.
Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "contemplate", "target", "believe", "plan", "estimate", "expect", and "intend" and statements that an event or result "may", "will", "can", "should", "could" or "might" occur or be achieved and other similar expressions. These statements are based upon certain reasonable factors, assumptions and analyses made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. However, whether actual results and developments will conform with management's expectations is subject to a number of risks and uncertainties, including factors underlying management's assumptions such as; the results of the Australian government's continuing investigations into lead contamination at the Port of Esperance, the timing of the receipt of final regulatory approvals required to ship lead concentrate through the Port of Fremantle, the duration of the suspension of mining and milling operations, metal price volatility, lead concentrate treatment charges, exchange rates, regulatory proceeding and litigation, single mineral property, resources and reserves, health and safety, environmental factors, mining risks, metallurgy, labour and employment regulations, government regulations, insurance, refinancing risk, dependence on key personnel, constraints on cash flow and nature of mineral exploration and development. While we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect. These factors may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and there can be no assurance that the actual results or developments anticipated by management will be realized or, even if substantially realized, that they will have the expected results on the Company. Other risks and factors that could cause actual results to differ are described in Management's Discussion and Analysis ("MD&A") for the most recently completed year end under the heading "Risks and Uncertainties", and in the Company's most recently filed Annual Information Form under the heading "Risk Factors". Our MD&A, Annual Information Form and additional information on Ivernia are available on the Company's website at www.ivernia.com and on Ivernia's SEDAR profile at www.sedar.com. All of the forward-looking statements made in this document are based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time.
Contacts: Ivernia Inc. Mario Stifano Vice President and CFO (416) 867-9298 (416) 867-9384 (FAX) Email: [email protected] Website: www.ivernia.com
SOURCE: Ivernia Inc.