Mr. Scott Nelson reports
TITANIUM CORPORATION REPORTS THIRD QUARTER ENDED SEPTEMBER 30, 2019
Titanium Corp. Inc. has released its results for the three- and nine-month periods ended Sept. 30, 2019.
The company has continued to make progress on commercialization of its CVW technology with Canadian Natural Resources Ltd. at its Horizon oil sands site. Work continues with Canadian Natural on preliminary planning and analysis for the next phase of the CVW project. The company is also meeting with government funding agencies regarding the contracts required by each program and updates on progress toward the next phase of the project.
"Our team is focused on achieving a joint decision to move forward with the commercial project and associated government funding agreements," commented Scott Nelson, Titanium's president and chief executive officer. "With the elections over, there is now more clarity on government priorities and programs, including those with potential to support our project."
Highlights for the three- and nine-month periods ended Sept. 30, 2019, and recent months include:
The company continues to investigate additional grant and financing opportunities from government programs. In its 2020 budget, the Alberta government recently announced the creation of the technology innovation and emissions reduction (TIER) program, whereby large industry emitters may pay carbon levies into the TIER fund. The TIER fund will be used, in part, to develop and implement technologies that reduce greenhouse gas emissions over time. The budget forecasts that funding for innovation and technology will amount to $228-million in 2020 and a total of $808-million over the next four years.
In the third quarter, the company provided mineral test samples to a number of potential customers and is now working with these firms during its testing and analysis, including visits to customer sites. The company is also attending annual mineral industry conferences, which include meetings with potential customers during the third and fourth quarters.
On Aug. 1, 2019, the company announced receipt of the final payment of $991,000 related to the $5.0-million grant from Emissions Reduction Alberta (ERA) for partial funding 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 $5.0-million of grant funding from ERA with the company financing $1.4-million and Canadian Natural financing $3.5-million. 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 mineral 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. The net proceeds of $4,056,475 are being 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 government 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. Emissions Reduction Alberta (ERA) awarded $5-million from its 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 funding 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 its 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. 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 composed of research and development (R&D) project costs, recovery of project costs, and general and administrative (G&A) expenditures.
Net (income) loss: For the three-month period ended Sept. 30, 2019, the company reported net income of $272,000 or 0.3 cent per share. The net income of $272,000 was primarily the result of receipt of ERA's 20-per-cent holdback of $991,000 and, to a lesser extent, the receipt of $71,000 of an SR&ED ( scientific research and experimental development) refundable tax credit. R&D (research and development) recoveries of $1,062,000 exceeded the combined R&D and G&A costs of $811,000 for the three-month period ended Sept. 30 ,2019. For the comparable three-month period ended Sept. 30, 2018, the company recorded a loss of $1,951,000 or two cents per share as project costs were being incurred and the recovery of ERA and Canadian Natural contributions occurred in subsequent quarters. For the nine-month period ended Sept. 30, 2019, the company had net income of $750,000 compared with a loss of $6,551,000 for the comparative period ended Sept. 30, 2018. The recovery of FEED project contributions of $3,475,800 for the nine-month period ended Sept. 30, 2019, exceeded total R&D costs of $1,247,000 and $1,587,000 in G&A expenses. For a development-stage company, and the timing of FEED project contributions, the net income reported was in line with expectations.
Research and development: R&D spending in the current quarter of $329,000 consisted primarily of post-FEED project activities related to mineral testing and compensation for technical staff. R&D had a net recovery of $732,000 for the three-month period ended Sept. 30, 2019, due to the $991,000 recovery of ERA's 20-per-cent holdback noted herein. Project costs were lower by $2.92-million for the three-month period ended Sept. 30, 2019, compared with the same period in 2018 due to the completion of the project on Feb. 28, 2019. For the nine-month period ended Sept. 30, 2019, a net recovery of R&D costs was $2.3-million compared with a net R&D cost of $4.89-million for the nine-month period ended Sept. 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 mineral evaluation program for the new Horizon south mining area, expected to be mined in the time frame that a potential CVW project would be commissioned.
General and administrative: G&A expenses for the three-month period ended Sept. 30, 2019, were $482,000 compared with $520,000 for the three-month period ended Sept. 30, 2018, a $38,000 decrease. The decrease relates primarily to a reduction in investor relations and regulatory costs offset by an increase in travel and consulting and professional fees. 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 Sept. 30, 2019, related to market development work with potential customers for future minerals offtake agreements with customers in international markets. For the nine-month period ended Sept. 30, 2019, G&A costs were $1,587,000 compared with $1,701,000 for the comparative nine-month period in 2018. As noted, the decrease in G&A costs relates primarily to investor relations expenses being lower.
Cash position: The company had an aggregate of $5.5-million in cash consisting of $3.5-million in interest-bearing cash accounts and a $2.0-million 30-day cashable GIC at Sept. 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 the collection of $3.5-million in FEED project contributions during the nine-month period ended Sept. 30, 2019. The company closed a 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.
To view the company's management's discussion and analysis and interim unaudited financial statements for the three- and nine-month period ended Sept. 30, 2019, please visit the company's website or SEDAR.
About Titanium Corp. Inc.
Titanium Corp.'s CVW technology provides sustainable solutions to reduce the environmental footprint of the oil sands industry. The company's 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 mineral industry would be created commencing with the production and export of zircon, an essential ingredient in ceramics.
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