Mr. Scott Nelson reports
TITANIUM CORPORATION REPORTS SECOND QUARTER ENDED JUNE 30, 2019
Titanium Corp. Inc. has released its results for the three- and six-month periods ended June 30, 2019.
With the completion of the Feed project and progress on post-Feed activities, the company has continued to make excellent progress on commercialization of its CVW technology at Canadian Natural's Horizon oil sands site. The company continued engagement with various government agencies during the quarter to advance the contracting of the $50-million in government grant funding for the next phase of the project. The Feed project was completed on time and budget, and, on Aug. 1, 2019, the company announced the receipt of $991,000 from Emissions Reduction Alberta (ERA) representing a 20-per-cent holdback of ERA's contributions pending final project reporting and a third party audit of project costs now completed.
"The recent payment by ERA marks the official completion of the Feed phase of our project," commented Scott Nelson, Titanium's president and chief executive officer. "We are now focused on achieving a joint decision to move forward with the commercial project and associated government funding agreements."
Highlights for the three- and six-month periods ended June 30, 2019, and recent months include:
- On Aug. 1, 2019, the company announced receipt of the final payment of $991,000 related to the $5-million grant from ERA for partial financing of the Feed phase of the CVW Horizon project. The payment represents a 20-per-cent holdback by ERA which was subject to final project reporting and completion of a third party audit of project costs. The $9.9-million engineering design phase was supported by $5-million of grant funding from ERA with the company financing $1.4-million and Canadian Natural financing $3.5-million. The company completed the Feed project on time and on budget working with Canadian Natural, and the engineering firms of Stantec and IHC Robbins. Third party engineering commenced in April, 2018, and was completed in first quarter of 2019. The company also retained consultants and technical firms to assist with other aspects of the engineering design, and associated planning including project management, regulatory approvals, indigenous engagement and minerals marketing. Optimization of the project is continuing including refining capital and operating costs to achieve the most efficient and cost effective implementation of CVW technology.
- On Aug. 7, 2019, the company announced the appointment of Bruce Griffin to the board of directors as an independent director of the company. Mr. Griffin has also been appointed to the company's commercialization committee. Mr. Griffin is currently the senior vice-president, strategic development, of Lomon Billions Group, the world's third-largest producer of high-performance titanium-dioxide products. Mr. Griffin brings a deep understanding of the global minerals industry from its key markets and customers to its leading players, and has broad experience in operations, strategy, finance and capital markets.
- In May, 2019, the company announced the first and second closings of its non-brokered private placement for gross proceeds of $4,262,640 resulting in the issuance of 6,089,485 common shares and 3,044,743 warrants entitling the holder to purchase one common share of the company at an exercise price of $1.40 expiring on May 9 or May 30, 2022. As a result of the transaction, the company now has 88,166,359 common shares issued and outstanding. Legal expenses, exchange fees and cash selling commissions are expected to be $218,400 resulting in net proceeds to the company of $4,044,240. The net proceeds of the offering will be used to finance continuing efforts to commercialize the company's CVW technology and for general operating purposes.
- On March 14, 2019, the company announced $50-million in funding toward the next phase of the CVW Horizon project. The federal government awarded $45-million from two clean technology programs: Environment and Climate Change Canada, through its Low Carbon Economy Fund (LCEF), has committed to investing $40-million, and NRCan's clean growth program (CGP) has committed to investing $5-million in Titanium's first-of-a-kind sustainable technology designed to remediate oil sands froth treatment tailings. ERA awarded $5-million from their partner intake program aimed at improving environmental performance in Alberta's oil and gas sector. Funding from the LCEF and CGP programs are subject to finalizing funding agreements which will outline the conditions under which federal funding would be provided, including securing the remaining financing necessary to complete the project, fulfilling all applicable requirements associated with the project environmental assessments and indigenous consultation requirements, and finalizing the scope of the project costs eligible for program funding.
- The company has been meeting with other government agencies and Canadian investment banks regarding their potential participation in the structuring and financing of the project, and their support of the company in financial markets.
- The company is continuing cash conservation programs including those under which executive officers and directors receive a portion of their compensation and fees in restricted stock units and deferred stock units. This program is aimed to conserve cash, and further align management and the board with shareholder interests.
Titanium is focused on achieving long-term financial success by implementing its innovative CVW technologies in commercial operations at oil sands sites. With the Feed project completed, the company is working with Canadian Natural on the potential implementation of its technology at Canadian Natural's Horizon site. However, until commercial arrangements and investment decisions are made, and facilities are constructed and operating, the company expects to continue to incur losses. Currently, quarterly income/losses are comprising research and development project costs, recovery of project costs, and general and administrative expenditures.
Net (income) loss: For the three-month period ended June 30, 2019, the company reported net income of $52,000 or 0.1 cent per share. The net income of $52,000 was the result of the receipt during the quarter of ERA and Canadian Natural project contributions for costs incurred by the company in previous fiscal periods. The company received $965,000 in April, 2019, from ERA and Canadian Natural for project costs incurred for the fifth and final milestone of the project. The recovery of Feed project costs of $965,000 exceeded total R&D costs of $375,000, and $550,000 in general and administrative expenses. For the three-month period ended June 30, 2018, the company recorded a loss of $3,045,000 or four cents per share as project costs were being incurred, and the recovery of ERA and Canadian Natural costs occurred in subsequent quarters. For the six-month period ended June 30, 2019, the company had net income of $478,000 compared with a loss of $4,599,000 for the comparative period ended June 30, 2018. The recovery of Feed project costs of $2,485,000 for the six-month period ended June 30, 2019, exceeded total R&D costs of $917,000, and $1,105,000 in G&A expenses. For a development-stage company, and given the commitments under the Feed project, the net income reported was in line with expectations.
Research and development: R&D spending in the current quarter of $375,000 consisted primarily of post-Feed project costs related to and compensation for technical staff. R&D had a net recovery of $590,000 for the three-month period ended June 30, 2019, due to the $965,000 recovery of Feed project costs noted herein from the prior fiscal period. Project costs were lower by $2,536,000 for the three-month period ended June 30, 2019, compared with the same period in 2018 due to the completion of the project on Feb. 28, 2019. For the six-month period ended June 30, 2019, a net recovery of R&D costs was $1.6-million compared with a net R&D cost of $3.4-million for the six-month period ended June 30, 2018, where the expected project costs aligned with the higher work volumes and contributions for those costs were collected in future periods. The company continues to work on commercial project-related areas including market development and a minerals evaluation program for the new Horizon south mining area expected to be mined in the timeframe a potential CVW project would be commissioned.
General and administrative: G&A expenses for the three-month period ending June 30, 2019, were $550,000 compared with $581,000 for the three-month period ended June 30, 2018, a $31,000 decrease. The decrease relates primarily to a reduction in investor relations and regulatory costs offset by an increase in travel. The company reduced its investor relations cost as investor relations services were provided on an as-needed basis versus a fixed retainer in the prior fiscal period. Increase in travel costs during the three-month period ended June 30, 2019, related to market development work with potential customers for future mineral offtake agreements with customers in international markets. For the six-month period ended June 30, 2019, G&A costs were $1.1-million compared with $1.2-million for the comparative six-month period in 2018. As noted above, the decrease in G&A costs relate primarily to investor relations expenses being lower.
Cash position: The company had $4.8-million of cash consisting of interest-bearing cash accounts at June 30, 2019, as compared with $800,000 at Dec. 31, 2018. The increase in cash related primarily to the closing of the private placement in May of 2019 and collection of $2.5-million in Feed project cost contributions during the six-month period ended June 30, 2019. The company closed the private placement in two tranches with the issuance of 6,089,485 units (70 cents per share) for net aggregate proceeds of $4.1-million net of share issue costs. With the completion of the Feed project, collection of partner contributions, receipt of the holdback of $1-million in July, 2019, and the closing of the private placement, the company's cash position was $5.6-million as of July 31, 2019.
To view the company's management discussion and analysis, and interim unaudited financial statements for the three- and six-month period ended June 30, 2019, please visit the company's website or SEDAR.
About Titanium Corp. Inc.
Titanium's CVW technology provides sustainable solutions to reduce the environmental footprint of the oil sands industry. Its technology reduces the environmental impact of oil sands froth treatment tailings while economically recovering valuable products that would otherwise be lost. CVW recovers bitumen, solvents, heavy minerals and water from tailings, preventing these commodities from entering tailings ponds and the atmosphere: volatile organic compound and greenhouse gas emissions are materially reduced; hot tailings water is improved in quality for recycling; and residual tailings can be thickened more readily. A new minerals industry would be created commencing with the production and export of zircon, an essential ingredient in ceramics.
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