U.S. Silver Reports Second Quarter 2008 Financial Results
TORONTO, ONTARIO–(Marketwire – Aug. 28, 2008) – U.S. Silver Corporation (TSX VENTURE:USA) (“U.S. Silver” or the “Company”) is pleased to announce its consolidated financial results for the second quarter ended June 30, 2008. The consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) have been filed on SEDAR and can be viewed under the Company’s profile at www.sedar.com.
Highlights and Milestones of Second Quarter 2008
– Achieved Comprehensive Income of nearly $1.7 million
– Net Loss of $890,000 from operating activities
– Production of approximately 414,000 ounces of silver, up 36% vs. first quarter 2008
– Production of approximately 77,950 silver equivalent ounces in the form of copper and lead, an increase of 85% vs. first quarter 2008
– Revenues of over $10 million
– Increased daily production in second quarter to 778 tons, an increase of more than 235% vs. the average daily volume in 2007
– Increased proven and probable reserves by 61% to over 17 million ounces of silver
– Galena Shaft repair progresses on schedule, with completion expected in late 2008
– Completed over 15,000 ft of underground development and exploration drilling
– Completed over 2,500 ft of underground development drifting
Second Quarter 2008 Financial Results
The Company recorded revenues of $10.1 million (vs. $5.4 million in the three month period ending June 30, 2007 (“Q207″)). Net Loss after provision for taxes was $0.9 million and Comprehensive Net Income was $1.6 million. Revenues for the period were higher than last year primarily due to higher production volumes and higher metals prices. The Company’s focus on infrastructure improvements, employee training, and resource development is finally increasing production levels. The turnaround at these operations will continue through 2008, with both tonnage and grade improving.
Operating expenses for the three month period ended June 30 2008 (“Q208″) were $11.5 million (vs. $7.3 million for Q207). Increased expenses were due to an increase in production tonnage, higher staffing levels and increased costs for materials and supplies. Q208 operating expenses consisted primarily of $9.9 million in mining costs, $0.9 million in general and administrative expense and exploration costs of $0.5 million. Exploration costs were essentially unchanged vs. those in Q207. The recent level of exploration costs can be expected to continue as the Company is continuously building its reserves and resources.
Depreciation expense for the period was nominal because the major part of both numbers is now reflected in the Cost of Mining. Within the Cost of Mining, depreciation and depletion was $0.5 million vs. $0.2 million in Q207, reflecting a larger investment in mining assets over the last year and a somewhat higher level of production.
The Net Loss in Q208, after a provision for tax recovery of $0.5 million, was $.89 million vs. a Net Loss of $2.7 million in Q207. Other Comprehensive Income for the period was $2.4 million, consisting of unrealized gains on cash flow hedge contracts on forecasted lead production, unrealized losses on Available For Sale investments (marked to market stock investments) and the effects of foreign exchange activities. Therefore, Comprehensive Income was $1.65 million for the period versus a Comprehensive Loss of $2.1 million in Q207.
The Company has no long-term debt and had over $13 million in cash and equivalents and $8 million in investments at the end of the Q208.
Operational Update – Analysis of First Quarter 2008
Overall tonnage has continued to improve through the second quarter to the point where the main Galena mill is now running relatively close to full capacity at 750 tons per day of silver- copper, but only for five days a week. The Mine Plan for 2008 anticipates this mill expanding to a seven day operation by year end 2008. Inside the Galena Mill there is an additional 350 ton per day mill and flotation circuit that is currently being repaired and renovated for use in early 2009. The Company is currently planning to activate this circuit for the treatment of lead-silver ores as material becomes available in early 2009.
The Coeur Mill has been run for most of 2008 at approximately 200 tons per day of silver-lead ore, which is roughly half of capacity. The Mine Plan anticipates that this mill will expand to full capacity in the fourth quarter, operating seven days per week. Additional lead-silver ores being produced will be processed in the newly renovated 350 ton per day mill (called the No. 3 mill) inside the Galena Mill in early 2009. This means that by early 2009 the company will be operating three separate mill circuits. One will be dedicated to silver-copper ores with 750 tons per day capacity and two will be dedicated to silver-lead ore with a combined capacity of 750 tons per day.
The continued exploration and development of the 2400 level is one of the highlights of the quarter with phase 1 of the development sequence having been completed by the end of the quarter. On-going exploration drilling continues to show excellent results with multiple high-grade intercepts. Several veins containing both silver- copper and silver-lead mineralization continue to be explored. Exploration of the veins by initial mining activities began in April with additional exploration and development activities expected to continue for another year.
Development on the 5200 level is going well with intersections on the 175 Vein providing excellent results. The 175 Vein on the west side of the crosscut was 17.6 feet thick and ran 9.92 opt silver and 13.29% lead. The vein in the east side was 32.9 feet thick with a grade of 7.21 opt silver and 10.00% lead. The 175 Vein is being carried in the inferred resource for the Galena mine but a portion of the resource will be upgraded to measured or indicated reserve by the end of the year. Production from this level will start late this year.
The Company invested, and continues to invest, in capital improvements and exploration at the Galena mine complex with approximately $4.4 million spent in the second quarter. Large capital projects include, the rehabilitation of the Galena shaft, purchase of new and rebuilt conventional mining equipment, exploration activities, and rehabilitation and development activities in multiple underground working areas.
Total production from both ore types at the time of writing is between 800-900 tons per day with monthly silver production at approximately 175,000 ounces with an additional 80,000 ounces of silver equivalents. Overall production level is forecast to increase to over 1000 tons per day by year end 2008 with silver production reaching over 225,000 ounces per month.
——————————————————————– ——- Production Statistics____________Q2 07____Q3 07____Q4 07____Q1 08____ Q2 08 ——————————————————————– ——- Total tonnage__________________ 19,234__ 18,852__ 27,107__ 35,724____42,791 Tons per day______________________ 300______299______444______558______ 669 Total ounces Ag________________302,188__265,547__283,423__291,203__ 416,972 Ounces per day__________________ 4,722____4,215____4,646____4,550____ 6,515 Total copper production – lbs__319,964__184,965__160,665__178,269__ 212,178 Total lead production – lbs________N/A______N/A__451,163__822,634 1,037,045 Estimated cash costs____________$10.63__ $12.62__ $14.69__ $12.10____$14.04 ——————————————————————– ——-
The costs at the Galena Mine in the second quarter remained high at $14.04 per ounce of silver. Management believes that costs will decline, particularly in the fourth quarter of 2008, as the fixed costs of both mining and milling will be spread over greater silver production. In addition, grades in both ore types will increase as ore production moves from development into regular production where dilution levels will shrink. Management remains focused on improving grade control at the Galena mine as such control will reduce costs of production.
While the per ounce costs are calculated on a net of by-product credit basis the copper and lead production has not yet significantly lowered costs. However, lead production, is forecast to increase significantly in the final quarter of 2008 as the Coeur Mill moves from milling approximately 200 tons per day of lead- silver ore over a five-day work week to over 400 tons per day on a seven-day work week, coupled with an improved grade. July lead- silver ores averaged 3.9% Pb and 5.0 ounces Ag per ton. Year-end grades are forecast to reach approximately 7% Pb and over 7 ounces Ag per ton. Management believes this increase in lead production is one aspect that will help lower per ounce silver costs.
The repairs to the Galena shaft continued on schedule with final repairs still expected to be completed by the end of 2008. The shaft repair started at the 2400 level and is currently down to the 2930 foot elevation with nearly 550 feet of shaft repair complete. The shaft will be completely cement-lined from the 2400 level down to the 3200 level when the repairs are complete in four months. The completion of this shaft repair will allow for the hoisting of men, materials, and rock through the shaft and will significantly increase overall hoisting capacity at the mine. Additionally, access to a number of key high-grade silver-lead and silver-copper resources will be enhanced once the Galena shaft is restored to full functionality.
ABOUT U.S. SILVER CORPORATION
U.S. Silver, through its wholly-owned subsidiaries, owns and operates the Galena, Coeur, and Caladay silver-lead-copper mines in Shoshone County, Idaho, with the Galena mine being the second most prolific silver producer in U.S. history. Total silver production from U.S. Silver’s mining complex has exceeded 210 million ounces of silver production since 1953. U.S. Silver controls a land package now totaling approximately 18,000 acres in the heart of the Coeur d’Alene Mining District. U.S. Silver is focused on expanding its production from existing operations as well as exploring and developing its extensive Silver Valley holdings.
Certain information in this press release may contain forward- looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at www.sedar.com.
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