The one-off charges for Q4 make the results pretty ugly. Doesn't surprise me after seeing First Quantum's results the other day. They were nasty too.
Will be interesting to see how Canada reacts tonight.
I'll wait until after the conference call and had a chance to review the MD&A before commenting further.
Key points for the quarter
• Financial results for the fourth quarter 2008 were impacted by one-off charges totalling $143.0 million as follows: o Provision for impairment of assets at the Company’s DRC mining operations of $73.2 million; o A write-down of $28.8 million in the value of exploration carried in the balance sheet; o Provision of $23.7 million for impairment of available-for-sale investments; o Provision for doubtful debts of $7.8 million;
o Severance payments and demobilization costs of $8.8 million incurred as a result of the suspension of construction works at Kinsevere Stage II and placing operations on care and maintenance; and o An impairment of $0.7 million in connection with the write-down of the value of the Company’s investment in Sub Sahara Resources NL (“Sub-Sahara”).
Cutting operating and administrative costs to the minimum necessary to support essential operations with the Company’s workforce reduced from 2,200 employees in November 2008 to the current level of 360 employees, with the Board, senior management and staff making a personal contribution to the efforts to lower costs with a 20% reduction in salaries and fees and no bonuses to be paid for 2008.
• Net copper sales of $13.9 million, a decrease of 83% compared to the fourth quarter 2007.
• Net loss of $151.2 million (-$2.12 per share), compared to net income of $21.7 million ($0.31 per share) in the fourth quarter of 2007.
• Negative cash flows from operating activities, before working capital movements, of $26.1 million (-$0.37 per share), compared to positive cash flow of $46.7 million ($0.66 per share) in the fourth quarter of 2007.
• Quarterly production of 7,488 tonnes of copper and 174,463 ounces of silver produced in concentrate, a decrease of 56% and 76% respectively compared to the fourth quarter of 2007.
• Kinsevere Stage II SX-EW development placed on hold until adequate funding secured.
• Mining operations and operation of the HMS plant at Kinsevere suspended during the fourth quarter of 2008. • Suspension of concentrate production, postponement of underground development work and initiation of a care and maintenance program at its Dikulushi mine in December 2008.
• Cessation of HMS processing operations at the Mutoshi mine.
Key points for the year • Production of 41,354 tonnes of copper, a decrease of 13% compared to 2007. • Net sales of $191.2 million, a decrease of 27% compared to the same period of 2007. • Operating profit before severance and demobilzation costs of $5.8 million, a decrease of 96% compared to 2007. • Net loss of $138.5 million or -$1.95 per share, a decrease of 218% compared to 2007. 3 • Operating cash flow before working capital movements of $33.8 million or $0.47 per share.
• Total one-off charges of $151.0 million, comprised of assets ($73.2m), exploration ($31.3m), available-forsale investments ($26.3m), severance payments and demobilization costs ($8.8 million), trade receivables ($7.8m), and equity accounted investments ($3.6m).
Near term objectives (next six months) • Finalization of debt funding for the Kinsevere Stage II development and recommencement of construction works. • Preservation of the Company’s cash reserves. • Reaching agreement with Gécamines regarding the Group’s Mutoshi mineral properties. • Completion of a further updated Mineral Resource and Reserve for Kinsevere. Longer term objectives (2009 onwards) • Completion of construction and commissioning of the Kinsevere Stage II SX-EW plant. • Completion of a pre-feasibility study for the Mutoshi Stage II SX-EW project. • Completion of preliminary studies on the mining and processing of the sulphide resource at Kinsevere.
Group net sales decrease 83% to $13.9 million owing to lower volume of copper sold and also lower copper prices Net sales decreased owing to a reduction in the tonnes of copper sold (down 45% to 5,743 tonnes of payable copper from sales in the fourth quarter of 2007) and a decrease in the realized copper price recognized during the quarter (down 68% compared to the fourth quarter of 2007).
Group copper production was 56% lower than the fourth quarter 2007, mainly due to Dikulushi and Mutoshi being placed on care and maintenance and the suspension of mining and operation of the HMS and spirals plant at Kinsevere.
Copper production at Dikulushi decreased by 75% compared to the fourth quarter of 2007 due to lower than planned tonnes mined from the underground mine that was the result of a change in the mining method for the underground mine development, which when combined with low-grade stockpiled material resulted in lower metallurgical recoveries from processing operations. Due to the decline in the copper price during the quarter and following quarter end, a provisional pricing adjustment of $6.2 million has been recognized during the quarter ($0.49/lbs of payable Cu). Kinsevere net sales decrease 75% to $5.9 million due to a decrease in volume of concentrate sales.
Net sales compared to the fourth quarter 2007 were lower as a result of a decrease in tonnes of payable copper sold (down 43%) and also a decrease in realized copper price (down 57%). This was due to decreased copper production from suspension of operations at the HMS and spirals plant in November 2008.
Dikulushi net sales decrease 90% to $5.0 million owing to lower volume of concentrate sales. Net sales compared to the fourth quarter 2007 decreased 90% as a result of lower payable copper sold. Copper production at Dikulushi decreased by 75% due to lower underground extraction rates, lower head grades and the mine being placed on care and maintenance in December 2008. The fall in copper prices, including provisional pricing adjustments, resulted in an 82% decrease in realized price, compared to the fourth quarter of 2007. Mutoshi net sales decrease 30% to $3.0 million due to a decrease in volume of concentrate sales and lower realized copper prices.
Net sales compared to the fourth quarter 2007 were lower as a result of a decrease in the realized copper prices (down 53%) offset by an increase in the quantity of payable copper sold (up 47%). Group records operating loss of $50.1 million owing to lower sales volume, lower realized copper price and higher operating costs due to operations being placed on care and maintenance.
Group operating loss was primarily due to a fall in operating profits at all operating units. During the quarter the Company placed its Dikulushi operation on care and maintenance and ceased its HMS processing operations at Mutoshi. This has resulted in lower copper production compared to the same period last year.
Operating profit at Dikulushi decreased due to lower sales volume and a decrease in realized copper prices. The operating loss at Mutoshi was due to reduced copper production and higher operating costs resulting from processing of finergrained low-grade ore. The operating loss at Kinsevere was due to the HMS plant being placed on care and maintenance and lower sales volume with a lower realized copper price. During the quarter the Company provided for $7.8 million towards provision for doubtful debts, mainly due to the failure of one significant customer.
AVM Price at posting:
$1.21 Sentiment: Buy Disclosure: Held
(20min delay)