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Message: Reports Second Quarter 2014 Results
|August 7, 2014 - 4:44 PM EDT||
Mercator Minerals Reports Second Quarter 2014 Results
(All US$ unless otherwise specified)
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug 7, 2014) - Mercator Minerals Ltd (TSX: ML) ("Mercator" or the "Company") today announced its financial and operating results for the three months and six months ended June 30, 2014. During the second quarter 2014 ("Q2 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 $0.01 per share, basic) or an adjusted net income* of $5.2 million (adjusted earnings of $0.02 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 CEO 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."
Q2 2014 HIGHLIGHTS AND OTHER SIGNIFICANT ITEMS
- Copper equivalent** production of 19.4 million pounds, comprised 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 Q2 2014 were 8.9 million pounds and 2.5 million pounds, respectively, which generated revenues of $69.8 million, or 9% higher than in Q2 2013. Despite the lower metal sale volumes, the primary reason for the higher revenues were the higher molybdenum prices realized ($16.00 per pound) and higher copper prices realized ($3.27 per pound) in Q2 2014 as compared to Q2 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 Q2 2014 than in Q2 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 Q2 2014 was $2.43 per pound of total copper produced and $12.66 per pound of molybdenum produced as compared to $2.75 per pound of copper produced and $10.46 per pound of molybdenum produced in Q2 2013.
- Cash flow from operating activities was $8.4 million (the highest since Q3 2011), with $11.0 million from Mineral Park as a stand-alone operation.
- Unrestricted cash at June 30, 2014 was $9.2 million.
|$ millions, unless otherwise noted||Three months||Six months|
|ended, June 30||ended, June 30|
|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)|
|Production (million pounds)|
|- Copper equivalent**||19.4||22.7||35.6||43.1|
|Throughput (tons per day)||41,601||45,177||38,808||43,964|
|On-site operating costs ($/ ton milled)||11.62||10.75||12.06||10.95|
|Cash costs* on a co-product basis ($/lb)|
|Average realized prices ($/lb)|
|- Copper (excluding hedges)||3.27||3.05||3.12||3.27|
Revenues were 9% higher in Q2 2014 than in Q2 2013, primarily due to prices realized for copper being 7% higher and for molybdenum being 50% higher, which more than offset the 18% lower copper and 11% lower molybdenum sales. The 7% increase in realized copper prices is due primarily to mark-to-market adjustments on the Company's unsettled copper concentrate sales. The 50% increase in realized molybdenum prices is primarily due to a 30% 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 Q2 2014 to Q2 2013, on a co-product accounting basis, were 12% lower for copper and 21% higher for molybdenum. On-site operating costs of $11.62 per ton milled in Q2 2014 were 8% 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 above noted operating factors, gross profit was $10.8 million in Q2 2014, as compared to a loss of $4.3 million in Q2 2013. In addition to the impact of the mining operations, variations in net income achieved in Q2 2014 of $11.6 million, as compared to Q2 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 December 23, 2013 press release), Mineral Park has improved operations month over month throughout the first half of 2014 ("1H 2014") with Q2 2014 better than Q1 2014 operations. Total copper production in Q2 2014 was 8.8 million pounds, which was 23% higher than in Q1 2014, with June 2014 total copper production of 3.6 million pounds. Likewise, molybdenum production in Q2 2014 was 2.6 million pounds which was 18% higher than in Q1 2014, with May and June 2014 molybdenum production totaling 2.0 million pounds.
Total tons mined of 7.7 million in Q2 2014 were 35% higher than in Q1 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% with molybdenum grades mined slightly higher than prior quarters at 0.045%.
The average throughput rate in the mill in Q2 204 was 41,601 tpd, with June 2014 mill throughput rate of 43,217 tpd (despite both SAG mills having taken downtime to be re-lined during the month). The increased throughput was achieved despite the harder than expected ore mined, and is a result of several productivity initiatives underway (including grinding circuit optimizations and an on-site contract pebble crusher). Recoveries of 80.4% and 75.2%, for copper and molybdenum, respectively, in Q2 2014 continue to be above mill design rates.
Although guidance has not been provided for H2 2014, the Company believes the production increase reflected in the H1 2014 results are sustainable and 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 Q4 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; and
- On-site contract pebble crusher to improve grinding capacity.
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 August 15, 2014 (see August 1, 2014 press release), the Company, with the support of its financial advisor, BMO Capital Markets, is fully considering its strategic 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, a strategic investment in the Company or any combination thereof.
At present, there can be no assurance as to what, if any, strategic alternatives might be pursued by the Company. The Company does not intend to disclose further details with respect to its evaluation of its strategic 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 ongoing strategic process, management will not be hosting a webcast/conference call to discuss Q2 2014 financial results, nor will the Company be providing production guidance.
Financial Statements and Management Discussion & Analysis (MD&A)
This news release should be read in conjunction with the MD&A and Financial Statements for the three and six month period ended June 30, 2014 which has been posted on Mercator's website (www.mercatorminerals.com/s/FinancialStatements.asp) and on SEDAR (www.sedar.com) under the Company's profile.
* Alternative Performance Measures
This press release refers to "cash costs" and "adjusted net income (loss)" which are not performance measures recognized as having a standardized meaning under IFRS. The Company discloses these performance measures, which have been derived from the financial statements on a consistent basis, because the Company believes they are of assistance in understanding the results of Mercator's operations and financial position, and are meant to provide further information about the Company's financial results to the investors. These performance measures may not be comparable to similar data presented by other mining companies. This information should not be considered in isolation or as a substitute for measure of performance prepared in accordance with IFRS. Readers should refer to "Alternative Performance Measures" section of the Q2 2014 MD&A for additional information.
** Copper equivalent production
All references to 2014 copper equivalent production is calculated using a molybdenum/copper ratio of 4.15 (based on the Company's estimated 2014 beginning of year metal prices) and 4.65 for 2013 copper equivalent production (based on the Company's estimated 2013 beginning of year metal prices). All calculations include adjustments for the Company's copper forward sales program.
Quality Assurance/Quality Control
Gary Simmerman, BSc Mining Eng, FAusIMM, a consultant to the Company and a Qualified Person as defined by National Instrument 43-101, supervised the preparation of and verified the technical information contained in this news release.
About Mercator Minerals Ltd.
Mercator Minerals Ltd., a TSX listed base metals mining company, operates the wholly‐owned copper/molybdenum/silver Mineral Park Mine in Arizona, USA. Mercator also wholly‐owns two development projects in Sonora, Mexico: the copper heap leach El Pilar project and the molybdenum/copper El Creston project.
For further information please visit www.mercatorminerals.com.
On Behalf of the Board of Directors
MERCATOR MINERALS LTD.
D. Bruce McLeod, P.Eng, President and CEO
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