Miramar’s Board Re-Elected, Bill Myckatyn Joins the Board
Miramar Mining Corporation (TSX: MAE)(AMEX: MNG) today announced that all of the Miramar directors were re-elected with overwhelming shareholder support at the Annual General Meeting held in Vancouver May 8, 2007 (the “AGM”). Miramar is also pleased to announce that William Myckatyn was nominated at the meeting and elected to the Board of Directors.
Mr. Myckatyn is a mining engineer with extensive technical and management experience in mining development and operations. He is the co-founder and Chairman of Quadra Mining Ltd. and formerly the President of Dayton Mining Corporation, a predecessor company of Pacific Rim Mining Corp., and formerly the President and CEO of Gibraltar Mines.
“We are very pleased that Bill Myckatyn has agreed to join our Board,” said Tony Walsh, President and CEO. “Bill’s extensive experience in the development of mining projects and the operation of companies like ours will be a great addition.”
At the AGM the shareholders approved proposed amendments of the Miramar’s stock option plan to increase the number of shares that may be issued on the exercise of stock options to 10% of the issued capital of Miramar and ratified options previously granted subject to shareholder approval.
During the AGM, Miramar reviewed its achievements during 2006 and plans for 2007.
2006 was the most successful year in the Company’s history and included the following milestones:
– The Nunavut Impact Review Board (NIRB) recommending that the Doris North Project proceed and the Minister of Indian and Northern Affairs accepting the recommendation;
– Miramar completing 65,775m of drilling in 233 drill holes on the Hope Bay property;
– Drilling in the Madrid area, which hosts two-thirds of the Hope Bay resource, was successful in defining mineralization in the gaps between the Suluk, Rand, Naartok East and West deposits, and also expanding Suluk to the south and Naartok East to the north;
– A preliminary assessment for Phase II being started to determine whether Phase II should be an underground or open-pit operation; and
– The BN zone at Boston was discovered.
2007 plans include:
– Proceed with Doris North permitting – revised materials have been filed with the Nunavut Water Board and the remaining required permits are in progress;
– Update the Doris North feasibility study by mid year;
– Complete engineering studies to determine whether Phase II will be an open pit or underground operation;
– Initiate infill and expansion drilling to support resource conversion from inferred to the indicated category for inclusion in the Phase 2 feasibility at Madrid — positive results from the first drilling at the Suluk deposit have been recently announced;
– Continue an aggressive resource expansion program at Madrid where a number of the deposits are open;
– Initiate limited broad spaced exploration drilling at Madrid to define the overall size of the Madrid system, both at depth and along strike;
– Initiate an aggressive exploration program that will test high potential targets along the 21 km long Madrid trend utilizing improved understanding of the Madrid system geology and mineralization as well as comparative traits that Madrid has with the Timmins and Larder Lake camps in Ontario;
– Initiate resource expansion drilling at the newly defined BN zone at Boston as well as complete a sampling program on historical drilling the Boston B2 resource area; and
– Complete sufficient regional exploration to meet assessment requirements and thereby maintain entire Hope Bay belt.
First Quarter Financial Results
For the quarter ended March 31, 2007, the Company reported net earnings of $0.8 million or $0.00 per share compared to a net loss of $1.1 million or $0.01 per share in the same period of 2006. The difference is largely attributable to lower expenses in the first quarter of 2007 for stock-based compensation and severance and closure costs. Stock-based compensation was $nil in 2007 compared to $1.4 million in the same period of 2006. While the Company granted approximately 3.0 million additional stock options in the first quarter of 2007, no stock-based compensation expense was recorded as these options were granted subject to shareholder approval. The fair value of these options will be determined and the expense will be recorded on the deemed grant date which was May 8, 2007, the date of the Company’s annual general meeting.
Miramar ended the period with working capital of $138.0 million including cash and cash equivalents of $145.1 million compared to $149.8 million of cash and cash equivalents and short term investments at December 31, 2006.
Miramar Mining Corporation
Miramar is a Canadian gold company that controls the Hope Bay project, a large undeveloped gold project in Canada. The Hope Bay project extends over 1,000 sq. km. and encompasses one of the most prospective undeveloped greenstone belts in Canada. Miramar aims to become an intermediate gold producer through the integrated development of the Hope Bay belt. Any production at Hope Bay is subject to positive feasibility studies, permitting and regulatory approval, the availability of financing and other contingencies.
Additional Information
All other information previously released on the Hope Bay Project is also available on Miramar’s website at http://www.miramarmining.com/.
Forward-Looking Statements
Statements relating to planned permitting, construction and operation and commencement of production at the Doris North Mine at the Hope Bay project forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and securities legislation in various provinces in Canada. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “aims”, “potential”, “goal”, “objective”, “prospective”, and similar expressions, or that events or conditions “will”, “would”, “may”, “can”, “could” or “should” occur. Information inferred from the interpretation of drilling results and information concerning mineral resource estimates may also be deemed to be forward-looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. These forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation: risks related to fluctuations in gold prices; uncertainties related to raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company’s properties; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all or that conditions imposed in connection with those permits may not be achievable on an economic basis; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; the need for commercial cooperation with NIRB, NWB and other governmental agencies, the possibility that the estimated recovery rates may not be achieved; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of environmental contamination or damage resulting from Miramar’s operations and other risks and uncertainties, including those described in the Miramar’s Annual Report on Form 40-F for the year ended December 31, 2006 and Reports on Form 6-K filed with the Securities and Exchange Commission.
Forward-looking statements are based on the beliefs, estimates and opinions of Miramar’s management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements if management’s beliefs, estimates or opinions, or other factors, should change.
This news release has been authorized by the undersigned on behalf of Miramar Mining Corporation.
Consolidated Financial Statements
(Expressed in Canadian dollars)
MIRAMAR MINING CORPORATION
Three month periods ended March 31, 2007 and 2006
MIRAMAR MINING CORPORATION Consolidated Balance Sheets (Expressed in thousands of Canadian dollars) March 31, 2007 and December 31, 2006 ————————————————————————- March 31, December 31, 2007 2006 (unaudited) ————————————————————————- Assets Current assets: Cash and cash equivalents $ 145,090 $ 145,800 Short term investments – 3,957 Accounts receivables 1,283 1,781 Inventory 5,075 5,243 Power credits 389 389 Prepaid expenses 831 322 ———————————————————————— 152,668 157,492 Power credits 683 780 Property, plant and equipment (note 4) 7,108 6,547 Mineral properties (note 5) 210,065 204,892 Cash collateral deposits 15,363 15,263 Investment in Northern Orion Explorations Ltd. 6,305 6,305 Investments (note 6) 10,351 969 Other assets 1,888 1,647 ————————————————————————- $ 404,431 $ 393,895 ————————————————————————- ————————————————————————- Liabilities and Shareholders’ Equity Current liabilities Accounts payable and accrued liabilities $ 5,629 $ 4,976 Current portion of site reclamation and closure costs (note 7) 8,671 8,473 Current portion of deferred gain 389 389 ———————————————————————— 14,689 13,838 Deferred gain 683 780 Provision for site reclamation and closure costs (note 7) 10,195 11,002 Future income tax liability 35,027 25,981 ————————————————————————- 60,594 51,601 Shareholders’ equity: Share capital (note 8) 543,490 551,480 Contributed surplus 4,691 5,213 Deficit (213,597) (214,399) Accumulated other comprehensive income (note 3) 9,253 – ————————————————————————- 343,837 342,294 ————————————————————————- $ 404,431 $ 393,895 ————————————————————————- ————————————————————————- See accompanying notes to consolidated financial statements. MIRAMAR MINING CORPORATION Consolidated Statements of Operations and Deficit (Expressed in thousands of Canadian dollars, except per share amounts) For the three month periods ended March 31, 2007 and 2006 ————————————————————————- Three months ended March 31, ————————— 2007 2006 (unaudited) (unaudited) ————————————————————————- Expenses: Depreciation, depletion and accretion $ 274 $ 135 General and administration 504 442 Salaries 299 433 Stock-based compensation (note 8(c)) – 1,427 Professional services 411 228 Investor relations 78 132 Interest 203 118 Foreign exchange 7 40 Severances and closure 267 720 ———————————————————————— 2,043 3,675 ————————————————————————- Loss before undernoted (2,043) (3,675) Other income: Interest income 1,722 697 Other income 701 1,531 ———————————————————————— 2,423 2,228 ————————————————————————- Earnings (loss) before income taxes 380 (1,447) Income tax recovery (expense): Current – (70) Future 422 434 ———————————————————————— 422 364 ————————————————————————- Earnings (loss) for the period 802 (1,083) Deficit, beginning of the period (214,399) (212,428) ————————————————————————- Deficit, end of the period $ (213,597) $ (213,511) ————————————————————————- ————————————————————————- Basic and diluted loss per share $ 0.00 $ (0.01) Weighted average number of common shares outstanding 217,395,018 187,024,599 ————————————————————————- ————————————————————————- Consolidated Statement of Comprehensive Income (Expressed in thousands of Canadian dollars) For the three month period ended March 31, 2007 ————————————————————————- 2007 (unaudited) ————————————————————————- Net earnings for the period before comprehensive income $ 802 Unrealized gains on available for sale investments 1,002 Reclassification of net realized gain on investment (701) ————————————————————————- Comprehensive earnings $ 1,103 ————————————————————————- ————————————————————————- See accompanying notes to consolidated financial statements. MIRAMAR MINING CORPORATION Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) For the three month periods ended March 31, 2007 and 2006 ————————————————————————- Three months ended March 31, ————————— 2007 2006 (unaudited) (unaudited) ————————————————————————- Cash provided by (used in): Operations: Earnings (loss) for the period $ 802 $ (1,083) Items not involving cash: Depreciation, depletion and accretion 274 135 Stock-based compensation – 1,427 Realized gain on investments and other (701) (1,531) Future income taxes (422) (434) Other 126 – Changes in non-cash working capital: Accounts receivable 498 (179) Inventory 168 (237) Prepaid expenses (509) (640) Accounts payable and accrued liabilities 908 2,204 Payments made on site reclamation (note 7) (846) (1,066) ———————————————————————— 301 (1,404) Financing: Issue of common shares for cash 956 1,874 ———————————————————————— 956 1,874 Investments: Expenditures on plant, equipment and deferred exploration (5,914) (4,186) Proceeds from (purchase of) short-term investments 3,957 (7,126) Proceeds on sale of assets 90 1,808 Purchase of collateral deposits, net (100) (4) ———————————————————————— (1,967) (9,508) ————————————————————————- Decrease in cash and cash equivalents (710) (9,038) Cash and cash equivalents, beginning of period 145,800 48,723 ————————————————————————- Cash and cash equivalents, end of period $ 145,090 $ 39,685 ————————————————————————- ————————————————————————- Supplementary information: Income taxes paid $ – $ 70 Interest received 1,306 697 Non-cash investing and financing activities: Fair value of stock options allocated to shares issued on exercise 522 762 Stock-based compensation included in deferred exploration – 863 Recognition of future income tax liabilities to mineral properties – 1,460 Common shares received on option agreement (note 4) 143 – ————————————————————————- ————————————————————————- See accompanying notes to consolidated financial statements.
MIRAMAR MINING CORPORATION
Notes to Interim Consolidated Financial Statements – Unaudited
(Tabular dollar amounts expressed in thousands of Canadian dollars except per share amounts)
For the three month periods ended March 31, 2007 and 2006
1. Interim Financial Statements:
These unaudited interim consolidated financial statements of Miramar Mining Corporation (the “Company”) have been prepared in accordance with the accounting principles and methods of application disclosed in the consolidated financial statements for the year ended December 31, 2006, except as disclosed in note 2. These interim consolidated financial statements as at March 31, 2007 and for the three months ended March 31, 2007 and 2006 are unaudited; however they reflect all adjustments necessary for the fair presentation in accordance with Canadian generally accepted accounting principles (“GAAP”) of the results for the interim periods presented. Certain comparative figures have been reclassified to conform to the current period presentation.
These financial statements do not include all disclosures required by Canadian GAAP for annual financial statements and accordingly the financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2006.
2. Changes in accounting policies:
Effective January 1, 2007, the Company adopted five new Canadian Institute of Chartered Accountants (“CICA”) accounting standards: (a) Handbook Section 1530, Comprehensive Income; (b) Handbook Section 3855, Financial Instruments – Recognition and Measurement; (c) Handbook Section 3861 Financial Instruments – Disclosure and Presentation; (d) Handbook Section 3865, Hedges; and (e) Handbook Section 1506, Accounting Changes. The main requirements of these new standards and the resulting financial statement impact are described below.
Consistent with the requirements of the new accounting standards, the Company has not restated any prior period amounts as a result of adopting the accounting changes. The effect of the adoption of these standards is summarized below.
(a) Comprehensive Income (Section 1530):
CICA Section 1530 introduces the term Comprehensive Income, which consists of net earnings and other comprehensive income (“OCI”). Comprehensive income represents changes in Shareholder’s equity during the period arising from transactions and other events with non-owner sources. OCI includes certain gains or losses, such as unrealized holding gains and losses from available for sale assets, that are excluded from net earnings in accordance with GAAP. As a result of adopting this standard, a Statement of Comprehensive Income now forms part of the Company’s consolidated financial statements. Cumulative changes in OCI are included in Accumulated Other Comprehensive Income, which is presented as a new category of Shareholder’s Equity in the balance sheet and is reconciled in note 3.
(b) Financial Instruments – Recognition and Measurement (Section 3855):
CICA Section 3855 sets out criteria for the recognition and measurement of financial instruments for fiscal years beginning on or after October 1, 2006. This standard requires all financial instruments within its scope, including derivatives, to be included on the balance sheet and measured either at fair value or, in certain circumstances when fair value may not be considered most relevant, at cost or amortized cost. Changes in fair value are to be recognized in either the statements of operations or the statement of comprehensive income.
All financial assets and liabilities are recognized when the Company becomes a party to the contract creating the item. As such, any of the Company’s outstanding financial assets and liabilities at the effective date of adoption are recognized and measured in accordance with the new requirements as if these requirements had always been in effect. Any changes to the fair values of assets and liabilities prior to January 1, 2007 were recognized by adjusting opening accumulated other comprehensive income.
All financial instruments are classified into one of the following five categories: held-for-trading, held to maturity, loans and receivables, available for sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification:
– Held to maturity investments, loans and receivables, and other financial liabilities are initially measured at fair value and subsequently measured at amortized cost. Amortization of premiums or discounts and transaction costs are amortized into net earnings, using the effective interest method.
– Available for sale financial assets are measured at fair value, with unrealized gains and losses recorded in other comprehensive income until the asset is realized, at which time they will be recorded in net earnings.
– Held for trading financial instruments are measured at fair value. All gains and losses resulting from changes in their fair value are included in net earnings in the period in which they arise.
– All derivative financial instruments are classified as held for trading financial instruments and are measured at fair value, even when they are part of a hedging relationship. All gains and losses resulting from changes in their fair value are included in net earnings in the period in which they arise.
Upon adoption of these new standards, the following adjustment was recorded with respect to the classification of the Company’s financial instruments.
– The Company has designated its investments as available for sale assets in accordance with Section 3855 and as a result now records the investments on the balance sheet at their fair market value based on quoted market prices. This change in accounting standard resulted in an increase in the carrying value the investments and accumulated other comprehensive income of $8,952,000 as at January 1, 2007. Unrealized gains and losses on these investments since January 1, 2007 have been included in the statement of comprehensive income. There is no net impact to future income taxes resulting from this adjustment as the future income tax liability is fully offset by a reduction in the Company’s future income tax valuation allowance.
(c) Financial Instruments – Disclosure and Presentation (Section 3861):
CICA Section 3861 sets out standards which address the presentation of financial instruments and non-financial derivates, and identifies the related information that should be disclosed. These standards also revise the requirements for entities to provide accounting policy disclosures, including disclosure of the criteria for designating as held-for-trading those financial assets or liabilities that are not required to be classified as held-for-trading; whether categories of normal purchases and sales of financial assets are accounted for at trade date or settlement date; the accounting policy for transaction costs on financial assets and financial liabilities classified as other than held-for-trading; and provides several new requirements for disclosure about fair value. Disclosure related to the fair value of the Company’s available for sale investments is included in note 6 to these financial statements.
(d) Hedging (Section 3865):
CICA Section 3865 specifies the circumstances under which hedge accounting is permissible and how hedge accounting may be performed. The Company currently does not hold any financial instruments designated for hedge accounting.
(e) Accounting Changes (Section 1506):
CICA Section 1506 revised the standards on changes in accounting policy, estimates or errors to require a change in accounting policy to be applied retrospectively (unless doing so is impracticable or is specified otherwise by an new accounting standard), changes in estimates to be recorded prospectively, and prior period errors to be corrected retrospectively. Voluntary changes in accounting policy are allowed only when they result in financial statements that provide reliable and more relevant information. In addition, these revised standards call for enhanced disclosures about the effects of changes in accounting policies, estimates and errors on the financial statements. The impact of this new standard cannot be determined until such time as the Company makes a change in accounting policy, other than the changes resulting from the implementation of the new CICA Handbook standards discussed in this note.
3. Accumulated other comprehensive income:
———————————————————————– — 2007 ————————————————————————- Balance, beginning of the period $ – Adjustment to opening balance – change in accounting policy (note 2) 8,952 Unrealized gains on available for sale investments 1,002 Reclassification of net realized gain on available sale investment (701) ————————————————————————- Balance, end of the period $ 9,253 ————————————————————————- ————————————————————————-
4. Property, plant and equipment:
———————————————————————– — March 31, December 31, 2007 2006 ————————————————————————– Accumulated depreciation and Net book Net book Cost depletion value value ————————————————————————– Mine plant and equipment $ 118,017 $ 115,923 $ 2,094 $ 2,094 Exploration equipment 3,460 774 2,686 2,720 Construction in progress 1,806 – 1,806 1,177 Computer equipment 1,423 1,055 368 379 Leasehold and office 587 433 154 177 ————————————————————————– Total $ 125,293 $ 118,185 $ 7,108 $ 6,547 ————————————————————————– ————————————————————————–
5. Mineral properties:
The following is a summary of exploration and development costs incurred related to the Company’s Hope Bay Project:
———————————————————————– — Three months ended March 31, ————————— 2007 2006 ————————————————————————– Balance, beginning of period $ 204,892 $ 170,817 Additions: Drilling 369 731 Sample analysis 217 25 Personnel and contracts 1,028 747 Stock-based compensation – 863 Supplies and equipment 230 173 Other exploration costs 404 345 Title and claim management 60 10 Transportation and freight 997 778 Camp and infrastructure 734 267 Environmental and permitting 446 575 Feasibility and studies 830 396 Future income taxes related to the above – 1,460 ————————————————————————– 5,315 6,371 Disposition of mineral property (142) – ————————————————————————– Balance, end of period $ 210,065 $ 177,188 ————————————————————————– ————————————————————————–
On September 20, 2004, the Company completed an option agreement with Maximus Ventures Ltd. (“Maximus”), whereby Maximus can earn a 75% interest in the Eastern Contact and Twin Peaks areas of Hope Bay by spending $7.5 million scheduled over a three-year period. In consideration for entering the option agreement, Maximus is to pay the Company five million shares of Maximus as repayment for past expenditures on the properties, issued over a three-year period. Additional shares could also be issued to the Company at specific resource milestones. In March 2007, the Company received 0.5 million additional shares of Maximus which it has been recorded as part of investments, with a corresponding decrease of $142,000 recorded against the Hope Bay mineral property. In total at March 31, 2007, the Company had 4.0 million shares of Maximus.
6. Investments:
The fair value of investments at March 31, 2007, based on quoted market values, are as follows:
———————————————————————– — March 31, March 31, Accumulated 2007 2007 unrealized Carrying Cost basis holding gains value ————————————————————————– Available for sale Sherwood Copper Corp. $ 174 $ 8,909 $ 9,083 Maximus 887 253 1,140 Other 37 91 128 ————————————————————————– Total $ 1,098 $ 9,253 $ 10,351 ————————————————————————– ————————————————————————–
On January 29, 2007, the Company sold 150,000 of its shares in Sherwood Copper Corp. to a former officer pursuant to a termination agreement.
7. Site reclamation and closure:
The Company has recorded provisions for the estimated cost of site closure and reclamation relating to past mining activities at the Con Mine and past exploration activities at the Hope Bay Project. The following is a reconciliation of the changes in the provision for site reclamation and closure during the year:
———————————————————————– — 2007 ————————————————————————– Balance, beginning of the period $ 19,475 Site closure and reclamation costs incurred (846) Accretion expense 237 ————————————————————————– Balance, end of the period $ 18,866 ————————————————————————– ————————————————————————– Allocated between: Current portion $ 8,671 Non-current portion 10,195 ————————————————————————– $ 18,866 ————————————————————————– ————————————————————————–
8. Share capital:
(a) Authorized:
500,000,000 common shares without par value
(b) Issued:
———————————————————————– — Common shares ———————– Number of shares Amount ————————————————————————– Balance, December 31, 2006: 217,125,038 $ 551,480 Issued: Future income tax effect of flow-through shares – (9,468) On exercise of stock options 509,765 1,478 ————————————————————————– Balance, March 31, 2007 217,634,803 $ 543,490 ————————————————————————– ————————————————————————–
(c) Stock options:
At March 31, 2007, the Company had share options outstanding as follows:
———————————————————————– — Average Share exercise options price ————————————————————————– Beginning of the period 5,058,638 $ 2.67 Granted 3,037,500 4.93 Exercised (509,765) 1.89 ————————————————————————– End of the period 7,586,373 $ 3.62 ————————————————————————– ————————————————————————– Exercisable 3,039,795 $ 2.59 ————————————————————————– ————————————————————————–
As at March 31, 2007, 3,039,795 options were fully vested and expire as follows:
———————————————————————– — Exercise Year Number price ————————————————————————– 2008 436,676 $ 1.89 2009 1,198,982 3.22 2010 581,206 1.30 2011 822,931 2.97 ————————————————————————– ————————————————————————–
Exercisable options exclude options which are contingent on future performance targets (790,000 options) and options which are restricted from exercise pending shareholder approval of an increase in the stock option plan (3,756,578 options).
(d) Warrants and brokers compensation options:
At March 31, 2007, the Company had 18,500,000 warrants outstanding with an exercise price of $2.75 per share. These warrants were granted to Newmont as described in note 11(b) of the annual consolidated financial statements.
9. Related parties:
The Company owns 6.5% of Maximus, a company related by virtue of a common director. The Company supplied services on a cost recovery basis to Maximus totaling $17,000 during the three month period ended March 31, 2007 (2006 – $nil). Transactions with related parties are recorded at their exchange amount which is the amount of consideration received as established and agreed to by the Company and Maximus.
10. Commitments and contingencies:
(a) In 1995, the Company entered into a joint exploration transaction with an investor that resulted in a renunciation of certain resource expenses being made to the investor. The amount of the renunciation was based upon an independent valuation prepared for the Company relating to the Con Mine assets. In 2000, the Canada Revenue Agency (“CRA”) issued a reassessment notice challenging the valuation that formed the basis for this transaction. The reassessment does not give rise to any taxes payable by the Company. However, as part of the original transaction, the Company agreed to compensate the investor for any shortfall in the renunciation made by the Company to a maximum of $2.7 million plus accrued interest. On March 29, 2007, the Company and the CRA reached a settlement regarding the reassessment which adjusts certain tax pools of the Company and preserves the amount of the renunciation originally made to the investor. Accordingly, the Company no longer has a contingent liability with respect to possible payments to the investor. The settlement does not result in any income payable by the Company.
(b) In January 2007, the Company entered into a purchase commitment of approximately $5.7 million to acquire a 118 person camp facility from a manufacturer. Under the terms of the agreement, the Company will pay for the construction costs prior to its shipment to the Hope Bay site, which is expected to be in July 2007. The Company has the right to transfer its obligations under the purchase agreement to a third party.
MIRAMAR MINING CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) provides an analysis of the financial results of Miramar Mining Corporation (the “Company”) for the three month period ended March 31, 2007 compared with the same period in the previous year. In order to better understand the MD&A, it should be read in conjunction with the annual consolidated financial statements for the years ended December 31, 2006 and 2005 and related notes. The Company’s consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and expressed in thousands of Canadian dollars, except per share amounts. This MD&A is dated as of May 8, 2007. All amounts are expressed in Canadian dollars, except as otherwise indicated.
OVERVIEW
The Company’s mining and exploration assets are primarily gold assets in the Canadian Arctic. The Company has developed considerable experience in operations, exploration and logistics in the Canadian Arctic where the Company has focused its activities for more than ten years. In 2004, the Company terminated all mining activities at its Con and Giant mines in Yellowknife, Northwest Territories. Since then, the Company’s business has been focused on the exploration and development of the Hope Bay gold mineral project in Nunavut (the “Hope Bay Project”). The Hope Bay Project is 100% owned by the Company and extends over 1,000 square kilometers. The Company believes the project encompasses one of the most prospective undeveloped greenstone belts in Canada. The belt contains a number of significant gold deposits including the Doris North deposit which the Company expects to become the first new gold mine in Nunavut.
The Company’s goal is to become an intermediate gold producer through the phased development of the Hope Bay Project.
– Phase 1: Short-term: Develop a small scale, high return gold mine at Doris North with the objective of generating significant cash flow, after capital payback, to advance the subsequent phases while minimizing equity dilution. A feasibility study on the Doris North deposit prepared in early 2003 concluded a two year mine at Doris North which could produce approximately 155,000 ounces of gold per year (the “Doris North Project”) was feasible.
– Phase 2: Medium-term: Extend and expand production levels to a targeted production level of either approximately 300,000 ounces per year or 600,000 ounces per year. The potential mining alternatives which are under consideration in technical and economic studies are: a) an underground operation with a targeted production of approximately 6,000 tonnes per day and focused on developing the higher grade, more accessible upper portions of the Boston, Doris Central and Madrid deposits, and b) a larger scale (“Large Pit Concept”) operation with a targeted production of approximately 16,000 tonnes per day, based upon open pit mining at Madrid and underground mining at the Boston and Doris deposits.
– Phase 3: Longer-term: Continue exploration efforts at Hope Bay with the objective of discovering new deposits and expanding the current known resources in order to provide additional resources to extend mine production.
To achieve these objectives, the Company needs to successfully complete, among other things, the current permitting process for the Doris North Project, complete financing for mine construction, successfully construct and place into production the Doris North Project, complete technical and economic studies on Phase 2 development of the Boston, Doris and Madrid deposits and identify additional resources, complete feasibility studies on Phase 2 and complete permitting on Phase 2.
FIRST QUARTER HIGHLIGHTS
– Hope Bay exploration and project development budget for 2007 was approved totaling $39.6 million, which includes $31.4 million for drilling and exploration activities with the objective of completing approximately 72,000 meters of drilling targeted to continue to expand and extend existing deposits and explore for new deposits. Additionally, $8.2 million has been budgeted to advance Phase 2 engineering and environmental studies.
– Hope Bay mine construction budget for 2007 was also approved totaling $17.9 million; the budget includes the cost of the acquisition of a 118 person camp for the Doris North Mine, some initial site preparation and small equipment purchases along with the expected costs to complete the permitting and licensing process.
– Exploration drilling commenced on March 17, 2007 and a total of 2,355 meters were completed during the first quarter in the Madrid area.
– Subsequent to the quarter, on April 4, 2007, the Company released its updated resources for Hope Bay as at December 31, 2006 of 5.2 million ounces of gold in the indicated resource category and 5.5 million ounces of gold in the inferred resource category. Total resources increased by 22% after incorporating the affect of the 2006 drilling programs.
– Also subsequent to the quarter, on April 26, 2007, the Company reported significant results from the drilling completed in March 2007, including hole 07PMD500 which encountered 8.44 g/t over 60.2 meters at the Suluk deposit within the Madrid area. Initial drilling has encountered wider intercepts of gold mineralization at higher grade than expected.
– The Company’s net earnings for the three month period ended March 31, 2006 was $0.8 million or $0.00 per share.
OPERATIONS OVERVIEW
Selected Financial Data
The following tables summarize total revenue, loss and loss per share over the last eight fiscal quarters (in thousands of dollars except per share amounts).
———————————————————————– – 2007 Q1 2006 Q4 2006 Q3 2006 Q2 Revenue/other income $ 2,423 $ 3,988 $ 1,762 $ 1,109 Earnings/(loss) $ 802 $ (3,151) $ 357 $ 1,906 Per share $ 0.00 $ (0.01) $ 0.00 $ 0.01 ———————————————————————— 2006 Q1 2005 Q4 2005 Q3 2005 Q2 Revenue/other income $ 2,228 $ 247 $ 171 $ 614 Earnings/(loss) $ (1,083) $ (8,348) $ (1,025) $ (481) Per share $ (0.01) $ (0.05) $ (0.01) $ 0.00 ————————————————————————
Earnings
For the period ended March 31, 2007, the Company had net earnings of $0.8 million or $0.00 per share compared to a net loss of $1.1 million or $0.01 per share in the same period of 2006. The difference is largely attributable to lower expenses in the first quarter of 2007 for stock-based compensation and severance and closure costs (see section below headed “Operating Costs” for detailed discussion). Interest and other income totaled $2.4 million in the first three months of 2007 compared to $2.2 million in the same period of 2006. Interest income in the first quarter of 2007 increased by $1.0 million due largely to higher cash balances. As at March 31, 2007 cash and short-term investments totaled $145.1 million which was $73.3 million higher than the balance at March 31, 2006. Other income, was $0.8 million lower in the first quarter of 2007 compared to the same period of 2006 due largely to fewer investments sold in the 2007 period. Other income in 2007 was a realized gain on the sale of shares in Sherwood Copper Corporation (“Sherwood”). Other income in the 2006 period was a realized gain of the sale of shares of Sherwood and American Gold Capital.
Operating Costs
During the three month period ended March 31, 2007, general and administrative expenses, salaries, professional services, investor relations and interest and penalties totaled $1.5 million compared to $1.4 million in the same period of 2006 due to higher interest expense which is required by the Income Tax Act (Canada) relating to unexpended flow-through expenditures. Stock-based compensation was $nil in 2007 compared to $1.4 million in the same period of 2006. While the Company granted approximately 3.0 million additional stock options in the first quarter of 2007, no stock-based compensation expense was recorded as these options were granted subject to shareholder approval. The fair value of these options will be determined and the expense will be recorded on the deemed grant date which was May 8, 2007, the date of the Company’s annual general meeting. Depreciation, depletion and accretion expense in the first quarter of 2007 was $0.3 million compared to $0.1 million in the same period of 2006 due to higher accretion expense on Con Mine site reclamation and closure obligations. In the first quarter of 2007, severance and closure costs were $0.3 million compared to $0.7 million for the same period of 2006. The severance and closure costs in 2007 include payments of $0.2 million related to former employees at the Yellowknife mines and a mark-to-market adjustment on the fair value of options granted to a former employee to purchase certain common shares of Sherwood owned by the Company.
EXPLORATION AND DEVELOPMENT ACTIVITIES
The Company’s focus continues to be on the Hope Bay Project. The Company is committed to a strategy of advancing the Hope Bay Project to a production decision while continuing to expand gold resources. The staged development strategy will focus first on the high grade gold Doris North Project, with the goal of generating cash flow to pay for mining infrastructure and to partially fund the subsequent development of a bulk tonnage operation at Madrid and a satellite mining operation at the Boston deposit which is approximately 50 kilometers south of the Doris North deposit area. The Company’s exploration strategy will focus on expanding the size and increasing the confidence level of existing deposits and on continued exploration for new gold resources in order to support a sustained production profile. The Company will continue to conduct grassroots exploration alone and, in certain circumstances, in cooperation with strategic partners on selected portions of the Hope Bay mineral claims. To achieve these objectives, the Company needs to successfully complete, among other things, the current permitting process for the Doris North Project, complete financing for mine construction, successfully construct and place into production the Doris North deposit, complete technical and economic studies on Phase 2 development of the Boston, Doris and Madrid deposits and identify additional resources, complete feasibility studies on Phase 2 and complete permitting on Phase 2.
In the first quarter of 2007, the Company approved spending programs at Hope Bay for exploration and project development for 2007 totaling $39.6 million, which includes $31.4 million for drilling and exploration activities with the objective of completing approximately 72,000 meters of drilling targeted to continue to expand and extend existing deposits and explore for new deposits. Additionally, $8.2 million has been budgeted to advance Phase 2 engineering and environmental studies. Hope Bay mine construction budget for 2007 was also approved totaling $17.9 million; the budget includes the cost of the acquisition of a 118 person camp for the Doris North Project, a mill building, some initial site preparation and small equipment purchases along with the expected costs to complete the permitting and licensing process.
The Hope Bay exploration camp was reopened in late February and the season’s drilling activity commenced on March 17, 2007. Drilling activities were focused at the Suluk deposit which is in the Madrid deposit area and accounted for a total of 2,355 meters. Subsequent to the first quarter of 2007, significant results from the drilling completed were released including hole 07PMD500 which identified a shallow intercept of 8.44 g/t over 60.2 meters, hole 07PMD502 intercepted 2.9 g/t over 82.5 meters and 07PMD505 intercepted 4.5 g/t over 27.2 meters and South Suluk hole 07PSD129 intercepted 10 g/t over 5 meters. In general, the near surface grades are higher than previously interpreted and drilling has been able to expand and extend the mineralization at Suluk to depth.
Also subsequent to the quarter, on April 20, 2007, the Company reported its revised resource calculation incorporating the results of the successful exploration activities in 2006 on the Hope Bay Project. The revised resource calculation increased the total resources by 1.8 million ounces, or 22%. Given the potential for a large open pit operation at the Madrid deposit area, the Company was able to reduce the cutoff grade applied to those resources, which in part led to the reported increase. However, using the same cutoff grades as in 2005, approximately 0.5 million ounces were added to the total resources.
The tables below summarize the reported resources at the Hope Bay Project as at December 31, 2006
HOPE BAY INDICATED MINERAL RESOURCES AT DECEMBER 31, 2006 —————————————————————— Indicated ———————- Cutoff Contained Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(1) —————————————————————— Madrid Deposit Area Naartok East 11,353,900 3.7 1.5 1,350,727 Naartok West 6,794,400 3.7 1.5 797,672 Rand 2,957,000 2.5 1.5 239,910 Suluk 11,427,700 3.6 1.5 1,313,989 South Patch 0 0.0 0.0 0 Subtotal Madrid 32,533,000 3.5 3,702,298 Doris Deposit Doris Hinge(2) 345,000 34.7 8 385,000 Doris North/Connector N/A Doris Central 824,000 12.9 5 341,000 Doris Pillars N/A N/A N/A Subtotal Doris 1,169,000 19.3 726,000 Boston Deposit Boston B2 1,949,000 11.4 4 713,000 Boston B3/B4 363,000 7.3 4 85,000 Subtotal Boston 2,312,000 10.7 798,000 Total Indicated(3) 36,014,000 4.51 5,226,298 —————————————————————— (1) Disclosure of contained ounces is permitted under Canadian regulations; however, the United States Securities and Exchange Commission generally permits mineralization that does not constitute “reserves” to be reported only as in place tonnage and grade. See discussion under the heading “Cautionary Note for U.S. Investors” for a description of differences between Canadian and U.S. requirements for estimates of mineralization. (2) Includes the undiluted, unrecovered Probable Mineral Reserve for Doris Hinge referred to below. (3) Numbers may not add up exactly due to rounding. HOPE BAY INFERRED MINERAL RESOURCES AT DECEMBER 31, 2006 —————————————————————— Inferred ———————- Cutoff Contained Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(1) —————————————————————— Madrid Deposit Area Naartok East 14,368,900 2.8 1.5 1,274,903 Naartok West 5,228,100 3.4 1.5 565,276 Rand 5,373,600 2.3 1.5 403,284 Suluk 17,342,000 2.8 1.5 1,546,437 South Patch 227,000 22.5 7 164,202 Subtotal Madrid 42,539,600 2.9 3,954,102 Doris Deposit Doris Hinge 28,000 10.0 8 9,000 Doris North/Connector 1,270,000 13.9 5 569,000 Doris Central 73,000 12.8 5 30,000 Doris Pillars 263,000 18.6 5-7 158,000 Subtotal Doris 1,634,000 14.5 766,000 Boston Deposit Boston B2 995,000 9.1 4 292,000 Boston B3/B4 1,437,000 9.7 4 449,000 Subtotal Boston 2,431,000 9.5 741,000 Total Inferred(2)(3) 46,604,600 3.64 5,461,102 —————————————————————— (1) Disclosure of contained ounces is permitted under Canadian regulations; however, the United States Securities and Exchange Commission generally permits mineralization that does not constitute “reserves” to be reported only as in place tonnage and grade. See discussion under the heading “Cautionary Note for U.S. Investors” for a description of differences between Canadian and U.S. requirements for estimates of mineralization. (2) Inferred Mineral Resources are reported in addition to Indicated Mineral Resources. (3) Numbers may not add up exactly due to rounding.
The Company reports a Probable Mineral Reserve of 458,200 tonnes grading 22 grams Au/t for the Doris Hinge zone which is included in the Indicated Mineral Resource. The Probable Mineral Reserve was estimated during the course of a Feasibility Study carried out by Steffen Robertson and Kirsten (Canada) Inc. on the Doris North Project in 2002. This Probable Mineral Reserve is included within the Indicated Mineral Resource reported in the table above entitled “Hope Bay Indicated Mineral Resource”, to which dilution of 39% and a mining recovery factor of 95% have been applied.
During the first quarter of 2007, the Company continued to advance studies, including alternative mining concepts, which will assess the optimal mining and milling capacity for the next phase of development at Hope Bay. The results of the technical and economic studies are targeted to be completed in the second quarter of 2007. The results of these studies will define the direction for Phase 2 development of Hope Bay. The Company plans to commence a feasibility study on Phase 2 in the second half of 2007 and expects that the process will take 12 to 18 months to complete. Upon establishing the parameters for Phase 2, the Company plans to embark on the project approval process in 2007 by filing a preliminary project description with the Nunavut Impact Review Board (“NIRB”) and initiating the process to study the environmental impacts of the proposed project.
The Company continues to work towards obtaining permits and licenses for the Doris North Project. In early May 2007, the finalized support documentation requested by the Nunavut Water Board was submitted with the expectation that the technical session and a final public hearing for the water license application will be set for the summer of 2007. In late April, the application for the Roberts Bay jetty foreshore lease was submitted to Indian and Northern Affairs Canada, Department of Fisheries (“DFO”) and Transport Canada with the aim of obtaining the required authorizations to allow construction of the jetty at Roberts Bay in the summer of 2007 in time to receive the sealift shipment of construction equipment and materials in August 2007. In September 2006, the Company filed materials to support its application for amendment of Schedule II of the Metal Mining Effluent Regulations (“MMER”) to include Tail Lake as a designated tailings impoundment area. In January 2007, the DFO accepted the Company’s selection of the proposed tailings disposal plan and requested that Environment Canada amend the MMER to include Tail Lake in Schedule II; this amendment is expected in the second half of 2007. The Company continues to expect that the permitting process will proceed in a manner which will allow the Company to proceed with its plans for initial site development in 2007, completion in 2008 and commencement of production in the second half of 2008. In January 2007, the Company engaged SNC-Lavalin to update the feasibility study which was completed on Doris North in 2003. The update is expected to be completed in the second quarter of 2007.
CAPITAL PROGRAMS
During the first quarter of 2007, the Company incurred capital expenditures of $5.3 million for exploration and project activities at Hope Bay and $0.6 million for property, plant and equipment compared to expenditures in the same period of 2006 of $6.4 million for exploration and project activities at Hope Bay and $0.1 million for property, plant and equipment.
FINANCING AND LIQUIDITY
At March 31, 2007, the Company had consolidated working capital of $138.0 million compared to $143.7 million at the end of 2006. At March 31, 2007, the Company had $145.1 million of cash and cash equivalents compared to $149.8 million of cash and cash equivalents and short term investments at December 31, 2006. At March 31, 2007, the Company also had $15.4 million in reclamation security trusts and cash collateral deposits for reclamation bonds which are classified outside of working capital.
The Company believes it has sufficient cash resources and liquidity to sustain its planned activities in 2007 and to complete initial construction planned in 2007 for Phase 1 mine development. The future exploration and development of the Hope Bay Project may require the Company to raise additional capital through a combination of project debt and equity financings. The Company’s strategy is to use equity financing for exploration activities and the maximum amount of project debt to build mining infrastructure until sufficient cash flow is generated from mining operations.
LIABILITIES AND CONTINGENCIES
The Company has the legal obligation to reclaim properties for which it holds water licenses and exploration and mining agreements. The Company has estimated these asset retirement obligations at December 31, 2006, in accordance with accounting guidelines described above, to be an aggregate of $23.4 million