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Mercator Minerals Ltd
Symbol ML
Shares Issued 315,675,277
Close 2014-08-07 C$ 0.05
Market Cap C$ 15,783,764
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Mercator Minerals loses $3-million in Q2

2014-08-07 16:49 ET - News Release

Mr. D. Bruce McLeod reports

MERCATOR MINERALS REPORTS SECOND QUARTER 2014 RESULTS

Mercator Minerals Ltd. has released its financial and operating results for the three months and six months ended June 30, 2014. During the second quarter 2014, the company generated revenues of $69.8-million, cash flow from operations of $8.4-million, a net loss of $3.0-million (loss of one cent per share, basic) or an adjusted net income of $5.2-million (adjusted earnings of two cents per share).

"Continued quarter-over-quarter improvements in productivity and lower costs allowed our Mineral Park mine to generate $11.0-million in operating cash flows this quarter, the highest since Q3 2011," stated D. Bruce McLeod, president and chief executive officer of Mercator. "Continued positive operating cash flows will allow Mineral Park to sustain the productivity gains made and to pursue additional low-capital productivity improvements that are designed to provide further cost reductions."

Second quarter 2014 highlights and other significant items:

  • Copper equivalent production was 19.4 million pounds, composed of 8.8 million pounds of copper in concentrates and cathode and 2.6 million pounds of molybdenum in concentrates.
  • Copper and molybdenum sales in second quarter 2014 were 8.9 million pounds and 2.5 million pounds, respectively, which generated revenues of $69.8-million, or 9 per cent higher than in second quarter 2013. Despite the lower metal sale volumes, the primary reason for the higher revenues was the higher molybdenum prices realized ($16 per pound) and higher copper prices realized ($3.27 per pound) in second quarter 2014 as compared with second quarter 2013. The higher molybdenum prices realized were a result of higher molybdenum prices and positive mark-to-market adjustment on molybdenum in concentrate sales. Despite lower copper prices in second quarter 2014 than in second quarter 2013, the higher copper prices realized were due to positive mark-to-market adjustment on copper in concentrate sales related to deliveries in prior periods.
  • Total cash cost, as determined on a co-product accounting basis, for second quarter 2014, was $2.43 per pound of total copper produced and $12.66 per pound of molybdenum produced as compared with $2.75 per pound of copper produced and $10.46 per pound of molybdenum produced in second quarter 2013.
  • Cash flow from operating activities was $8.4-million (the highest since third quarter 2011), with $11.0-million from Mineral Park as a stand-alone operation.
  • Unrestricted cash at June 30, 2014, was $9.2-million.

                           OVERVIEW
             ($ millions, unless otherwise noted)

                                             Three months        Six months
                                            ended June 30,    ended June 30,
                                            2014     2013     2014     2013

Revenues                                   $69.8    $64.2   $111.1   $118.7
Gross profit (loss)                         10.8     (4.3)      --     (3.8)
Net (loss) income                           (3.0)     8.8     (5.4)    10.5
Earnings (loss) per share, basic           (0.01)    0.03    (0.02)    0.03
Adjusted net (loss) income                   5.2    (10.7)   (11.6)   (19.7)
Adjusted (loss) earnings per share          0.02    (0.03)   (0.04)   (0.06)
Cash flow from (used by) operations          8.4      3.8    (1.4)      3.9
Sales (million pounds)
Copper                                       8.9     10.9     15.5     18.8
Molybdenum                                   2.5      2.8      4.6      5.1
Production (million pounds)
Copper                                       8.8      9.9     16.0     19.0
Molybdenum                                   2.6      2.8      4.7      5.2
Copper equivalent                           19.4     22.7     35.6     43.1
Throughput (tons per day)                 41,601   45,177   38,808   43,964
Recoveries (%)
Copper                                      80.4     79.8     80.1     81.2
Molybdenum                                  75.2     78.6     78.4     80.2
On-site operating costs ($/ton milled)     11.62    10.75    12.06    10.95
Cash costs on a co-product basis
($/lb)
Copper                                      2.43     2.75     2.75     2.74
Molybdenum                                 12.66    10.46    10.46    10.75
Average realized prices ($/lb)
Copper (excluding hedges)                   3.27     3.05     3.12     3.27
Molybdenum                                 16.00    10.64    13.39    10.84

Revenues were 9 per cent higher in second quarter 2014 than in second quarter 2013, primarily due to prices realized for copper being 7 per cent higher and for molybdenum being 50 per cent higher, which more than offset the 18-per-cent-lower copper and 11-per-cent-lower molybdenum sales. The 7-per-cent increase in realized copper prices is due primarily to mark-to-market adjustments on the company's unsettled copper concentrate sales. The 50-per-cent increase in realized molybdenum prices is primarily due to a 30-per-cent increase in the average spot price of molybdenum with the balance of the increase a result of mark-to-market adjustments on the company's unsettled molybdenum concentrate sales. Cash costs of production, when comparing second quarter 2014 with second quarter 2013, on a co-product accounting basis, were 12 per cent lower for copper and 21 per cent higher for molybdenum. On-site operating costs of $11.62 per ton milled in second quarter 2014 were 8 per cent higher, primarily due to mining in harder ore sections of the pit, resulting in lower throughput rates and higher operating costs. As a result of the operating factors noted herein, gross profit was $10.8-million in second quarter 2014, as compared with a loss of $4.3-million in second quarter 2013. In addition to the impact of the mining operations, variations in net income achieved in second quarter 2014 of $11.6-million, as compared with second quarter 2013, were primarily impacted by realized and unrealized gains/losses on derivative instruments.

Mineral Park mine

Since the receipt of the initial bridge loan proceeds in late December, 2013 (see Dec. 23, 2013, press release), Mineral Park has improved operations month over month throughout the first half of 2014 with second quarter 2014 better than first quarter 2014 operations. Total copper production in second quarter 2014 was 8.8 million pounds, which was 23 per cent higher than in first quarter 2014, with June, 2014, total copper production of 3.6 million pounds. Likewise, molybdenum production in second quarter 2014 was 2.6 million pounds, which was 18 per cent higher than in first quarter 2014, with May and June, 2014, molybdenum production totalling 2.0 million pounds.

Total tons mined of 7.7 million in second quarter 2014 were 35 per cent higher than in first quarter 2014, with June, 2014, at 2.4 million tons mined. The sequentially higher mining rate is primarily attributed to improved equipment availability and productivity improvement initiatives (including continued blasting optimizations). Copper grades mined were consistent quarter over quarter at 0.14 per cent with molybdenum grades mined slightly higher than prior quarters at 0.045 per cent.

The average throughput rate in the mill in second quarter 2014 was 41,601 tons per day, with June, 2014, mill throughput rate of 43,217 tpd (despite both SAG mills having taken downtime to be relined during the month). The increased throughput was achieved despite the harder than expected ore mined and is a result of several productivity initiatives under way (including grinding circuit optimizations and an on-site contract pebble crusher). Recoveries of 80.4 per cent and 75.2 per cent, for copper and molybdenum, respectively, in second quarter 2014, continue to be above mill design rates.

Outlook

Although guidance has not been provided for second-half 2014, the company believes the production increase reflected in the first-half 2014 results is sustainable and is based on the following initiatives:

  • Enhanced mill throughput rates with continued process optimization;
  • Optimization of the mining fleet;
  • The pushback into softer, higher-grade supergene ore in the Ithaca pit in fourth quarter 2014;
  • Optimized mine plan with higher-grade ores to be mined in the near term to better match current commodity prices;
  • Increased mining of leach ores to better utilize existing SX/EW plant capacity;
  • Increased warehouse stocks with a larger inventory of critical spare parts;
  • Concentrator flow sheet optimization to reduce reagents and increase concentrate grades;
  • Further optimization of the SAG mills to achieve higher throughput;
  • On-site contract pebble crusher to improve grinding capacity.

Review

With the termination of the Intergeo transaction and the forbearance granted by MPI lenders in exercising their various rights and remedies under the MPI credit facility until up to Aug. 15, 2014 (see Aug. 1, 2014, press release), the company, with the support of its financial adviser, BMO Capital Markets, is fully considering its alternatives that may include, but are not limited to, a sale of the company, a business combination with another entity, a sale of all or a portion of the assets of the company, an investment in the company, or any combination thereof.

At present, there can be no assurance as to what, if any, alternatives might be pursued by the company. The company does not intend to disclose further details with respect to its evaluation of its alternatives unless and until the board of directors has approved a specific transaction or it otherwise determines that disclosure is appropriate.

As a result of the continuing process, management will not be hosting a webcast/conference call to discuss second quarter 2014 financial results, nor will the company be providing production guidance.

Financial statements and management's discussion and analysis

This news release should be read in conjunction with the MD&A and financial statements for the three- and six-month periods ended June 30, 2014, which have been posted on Mercator's website and on SEDAR under the company's profile.

Quality assurance/quality control

Gary Simmerman, BSc in mining engineering, FAusIMM, a consultant to the company, a qualified person as defined by National Instrument 43-101, supervised the preparation of and verified the technical information contained in this news release.

We seek Safe Harbor.

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