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| | Wed Dec 24, 2008
ROCA Reports Annual Results
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| | Vancouver, British Columbia: Roca Mines Inc. (ROK: TSX-V) ("Roca" or "the Company") has released its financial results for the annual period ended August 31, 2008, including production and sales from the MAX molybdenum mine located in British Columbia, Canada. All dollar amounts are stated in Canadian dollars unless otherwise indicated.
Overview and highlights:
- Revenues of $18.8 million since reaching commercial production as of April 12, 2008;
- The Company reported a net loss of $2.5 million or 3 cents per share;
- The Company reported cash flows from operations of $7.8 million or 10 cents per share;
- Molybdenum production during the year was 1,027,907 pounds (including pre-commercial production).
- Phase II progress at MAX including the 1,400 meter #2 adit, installation of a third primary ball mill, and significant underground ventilation upgrades are complete or nearing completion.
- Exploration results from diamond drill programs conducted below the MAX molybdenum deposit confirm resource expansion potential and have extended high grade zones within the known resource.
- Metal prices declined sharply post year-end and the Company has taken action to minimize costs at the MAX mine and throughout the organization.
MAX Molybdenum Mine - Production Results and Concentrate Sales
The Company announced that it had achieved its commercial production targets on April 12, 2008 at its MAX molybdenum mine located in British Columbia, Canada. The mine became British Columbia's first new metal mine in a decade and the newest primary molybdenum mine in Canada.
Production during the Phase I commissioning prior to April 12, 2008 was facilitated utilizing stockpiled development material to run mill tests and optimize circuits, in addition to variably graded ore from stope development. As a result, head grades and concentrate production during this period were generally lower than current levels. After April 12, 2008 delivery and processing of ore directly from mine stopes to the mill commenced. Head grades from the initial stopes were lower than anticipated due to mine dilution. Mine dilution occurs as a result of diluting higher grade material with lower grade rock and can occur for a number of reasons. Lack of previous exposure in the high-grade zone and inexperience with geological controls on mineralization in general are believed to have caused the lower overall head grades to the mill.
Opportunities to run continuous milling operations were also hampered due to availability and unscheduled maintenance requirements of on-site generator sets. These primary power sources impacted production capacity and therefore concentrate produced during the year.
During the pre-production period, the Company produced approximately 412,000 lbs of molybdenum contained in concentrates processing a blend of ore grade material and variably mineralized development and waste rock. Pre-commercial concentrate proceeds of approximately $10.1 million were used for mill completion costs and underground development. For accounting purposes, these pre-commercial revenues are recorded as an offset to mine development costs. Revenues of $18.8 million for the year ended August 31, 2008 result from sales that occurred after the commencement of commercial production on April 12, 2008. Concentrate inventory at August 31, 2008 was 11,394 lbs of molybdenum contained.
The table below is a summary of the operating statistics from commercial production start to August 31, 2008:
MAX Mine |
|
|
APR 13-30 '08 |
MAY '08 |
JUN '08 |
JUL '08 |
AUG '08 |
|
Molybdenum Produced (lbs) 1 |
77,056 |
150,502 |
112,255 |
138,125 |
137,330 |
|
Average Head Grade (% Mo) |
0.755 |
0.732 |
0.473 |
0.584 |
0.757 |
|
Molybdenum Recovery (%) |
93.8 |
94.3 |
94.1 |
93.6 |
94.1 |
|
Mill Availability (%) |
82 |
82 |
81 |
94 |
100 |
|
Average Daily Throughput (tpd) |
280 |
335 |
399 |
388 |
292 |
|
Note 1 - molybdenum (Mo) in concentrate
Cash costs of production during the fourth quarter were significantly higher than in the third quarter ended May 31, 2008 largely because of lower average grades received at the mill during June and July. Cash costs averaged approximately Cdn$13 per lb of molybdenum during the post commercial production period from April 13, 2008 through August 31, 2008. Management believes that its grade control programs and underground infrastructure improvements will dramatically reduce the average production costs going forward into 2009. Post year-end 2008, in September through November, molybdenum in concentrate production averaged 226,566 lbs per month which will lead directly to lower average cash costs/lb due to economies of scale.
On December 4, 2008, a rockfall occurred underground at the mine which has impacted the availability of production ore. The rockfall was localized to the stope development area of the 875 m level. No workers were present on the level at the time and no one was harmed. The rockfall poses no threat to other working areas of the mine, but does impact the immediate production schedule. A maintenance break originally scheduled between December 12 and December 29, 2008, will now be extended until January 19, 2009.
MAX Mine/Mill Expansion
Initial production at MAX is focusing on the "HG" Zone, including an estimated 280,000 tonnes of ("measured + indicated") ore grading 1.95% MoS2. Expansion of the mine and mill is being guided by prevailing molybdenum prices and an assessment of ongoing operating costs throughout 2009.
During the year ended August 31, 2008, the Company completed significant development work on the #2 Adit and subsequent to year-end, completed the installation of an upgraded ventilation system including bulkheads and underground fans. The Company has also completed the foundations on a mill base for a third ball mill acquired in 2007. The installation of this mill will allow for greater production flexibility and will provide for a nominal capacity of more than 1,000 tonnes per day.
The Company plans to seek graduated permitting to increase the production of the mine over time including the Phase II mine. Under current requirements, a permit to operate at the as-built capacity will be required in late 2009. The application for this increase in production rate will be submitted after environmental and water quality data is collected and compiled. The information will demonstrate that the mine is working well within its compliance requirements and with minimal impact to the environment.
As a result of recent global economic uncertainty and declining commodity prices, management of the Company has undertaken several initiatives to cut costs at the MAX molybdenum mine while continuing to operate under its Phase I mine plan. Grade control through detailed geological mapping and modifications to material handling will contribute to lower cash costs going forward. Phase II expansion plans, including completing capital spending for that expansion, are being minimized.
MAX Molybdenum Exploration
The Company has previously reported the results from underground and surface diamond drill programs focused on the exploration for new molybdenite mineralization both at depth below the known MAX resource and in areas previously unexplored areas within the MAX property boundary.
The Company's underground exploration drilling has thus far intersected strong hydrothermal alteration, indications of several intrusive phases, and significant multiple episodes of mineralization below the MAX deposit. Detailed petrographic studies by previous workers also concluded that there are at least four intrusive pulses, and a highly repetitive mineralizing event at MAX. The size of the inferred system is also significant. It is estimated that a pluton at depth could have a diameter of roughly 1,000 m, based on the width of the contact metamorphic aureole on surface, whereas the intrusion at the centre of the deposit is roughly 200 m in diameter. This suggests that the known deposit may have other zones and/or other deposits that are not yet discovered. Additional exploration drilling will be collared from new locations within the mine workings in the future.
The North molybdenum biogeochemical anomaly has a surface footprint of 150 metres (m) X 350 m and is centered approximately 200 m north of Adit #2. Two initial holes intersected a wide zone (over 100 m) of intense silicification, hornfelsing, locally strong quartz veining and pervasive sericite alteration with trace molybdenite throughout. Further diamond drilling is planned from the Adit #2 area to test for a separate molybdenum deposit on the east side of the Z Fault, or a faulted extension of the MAX deposit itself.
While economically significant molybdenum values were not intersected the geologic and near-surface expression of this new zone is reminiscent of the MAX resource itself where the extent of a relatively minor molybdenite mineralized zone on surface lies atop a large-scale mineralized deposit currently being mined.
MAX Tungsten Exploration
The Company's initial drill program tested the size and potential of the Ridge and Upper Ridge tungsten zones located approximately 1.2 kilometres southwest of the MAX mine portal area. Surface diamond-drilling conducted on the southern portion of the Ridge Tungsten Zone intersected significant intervals and grades of tungsten mineralization. Combined with past work, the recent results suggest great potential for a new tungsten resource to be defined at MAX based on the exceptional continuity observed. The mineralization was intersected above and in close proximity to the producing MAX Mine. At their lowest point, the tungsten intervals are located approximately 650 metres (m) above the Main Haulage Adit 960 level of the MAX Mine. Existing infrastructure at the MAX Mine is well suited to the potential development of a tungsten resource.
Foremore VMS-Gold Project
The Company holds a 100% interest in the Foremore VMS-Gold project situated in the "Golden Triangle" one of the most active mining and exploration areas in north-western British Columbia. The property comprises 65 contiguous mineral claims totaling 23,609 hectares in the Liard Mining Division. Significant operations in the area include Barrick Gold's legendary Eskay Creek Mine, Cominco's historic Snip Mine and NovaGold and Teck Cominco's Galore Creek Project. Foremore has been the focus of the Company's exploration efforts dating back to the summer of 2002 and was the focus of exploration by Cominco Limited between 1989 and 1996.
While relatively inactive at Foremore during the two prior fiscal years, the Company has recently completed an extensive program at Foremore including gridding in four areas totaling 78.0 line km. A total of 52.6 line km of Induced Polarization (IP) surveys and 57.7 line km of Total Field Ground Magnetometer surveys were completed. In addition, 3,299.4 m of core drilling was completed in 13 holes from which 890 samples were submitted for analytical work. During the course of geological mapping a total of 301 rock and 197 soil samples were submitted for chemical analysis. One of the primary objectives of the 2008 work program was to explore for a potential bedrock source for the sulphide-rich boulders and blocks of the South Boulder Field (SBF).
The drilling program was significantly smaller in scope than that originally planned, due to a shortage of drill equipment and to the short season remaining once the drill arrived on the property. Consequently there remain a number of excellent untested drill targets on the property, including the Ryder NW, Westmore, H.Valley/SBF, SG VMS Horizon, Antler and Zig Zag Areas.
In the Antler area the Company completed 20.6 line km of grid (17 lines). The grid was mapped, a Ground Magnetometer survey and 3.0 km of Induced Polarization completed. Exploration targeted a north trending, locally pyrite-rich felsic intrusion 2.5 km long and 200 m thick where historical rock sampling by the Company yielded extremely anomalous arsenic values. No drilling was completed in the Antler Area during 2008. Massive sulphide boulders have been discovered in adjacent Rumble Cr, as well as west of the Antler Grid.
In the SBF/Hanging Valley area 43.2 line km of grid (29 lines) were completed. The grid was mapped, Ground Magnetometer surveys and 35.7 km of Induced Polarization were completed. Exploration targeted an area where historical soil sampling by the Company defined a multi-element soil anomaly, a potential source of, and proximal to the South Boulder Field, comprised of more than 900 polymetallic massive sulphide boulders. Five drill holes, totaling 822.5 m, tested several high chargeability anomalies but intersected mainly pyrite. A number of intermediate anomalies remain to be tested and these may be indicative of less conductive sphalerite/galena mineralization. Further work is planned.
In the Westmore area 8.5 line km of grid (13 lines) were completed. The grid was mapped and 8.3 km of Induced Polarization completed. Exploration in this area targeted the prospective, altered rhyolite unit host to the Ryder VMS mineralization located some 3 km to the northeast. Two drill holes, totaling 396.0 m, tested a high chargeability anomaly associated with the altered rhyolite but failed to intersect significant base or precious metal values.
Subsequent geophysical interpretations suggest that the drill holes may have been collared updip from the anomaly & further work is planned here. In addition, a total of 21 samples were taken on one contoured soil line to follow up on several historical soil samples which yielded high Au values. The line was about 600 m long and sample stations varied between 25 and 50 m apart. Only one sample yielded an anomalous value of 216.6 ppb Au.
In the Ryder/BRT area 5.7 line km of grid (5 lines) and 5.6 km of Induced Polarization were completed. Exploration in this area targeted the prospective, altered rhyolite unit host to the Ryder and BRT VMS mineralization. Six drill holes, totaling 2,081.9 m, tested several chargeability anomalies associated with the altered rhyolite. Four of these drill holes intersected VMS mineralization for which selected intercepts are tabulated below:
Hole ID |
Area |
From (m) |
To
(m) |
Width (m) |
Cu
% |
Pb
% |
Zn
% |
Ag
(g/t) |
Au
(g/t) |
FM08-43 |
Ryder |
229.82 |
234.00 |
4.18 |
0.036 |
0.039 |
0.797 |
1.6 |
<0.1 |
|
|
240.65 |
242.15 |
1.50 |
0.091 |
0.190 |
2.47 |
6.1 |
<0.1 |
FM08-46 |
BRT |
128.05 |
130.10 |
2.05 |
0.006 |
0.013 |
0.04 |
9.7 |
0.34 |
FM08-53 |
Ryder |
30.00 |
43.50 |
13.50 |
0.346 |
0.021 |
0.305 |
13.0 |
0.5 |
|
Including |
41.90 |
42.50 |
0.60 |
1.497 |
0.104 |
3.660 |
195.2 |
1.1 |
FM08-54 |
Ryder |
24.00 |
27.00 |
3.00 |
0.131 |
0.117 |
0.575 |
3.4 |
<0.1 |
|
|
42.43 |
43.35 |
0.92 |
0.045 |
0.011 |
0.404 |
4.6 |
0.3 |
|
|
48.73 |
51.00 |
2.27 |
0.180 |
0.038 |
0.509 |
3.0 |
<0.1 |
|
|
55.50 |
64.50 |
9.00 |
0.214 |
0.030 |
0.428 |
6.3 |
0.1 |
|
Including |
60.88 |
62.37 |
1.49 |
0.923 |
0.120 |
1.100 |
22.2 |
0.6 |
|
|
73.50 |
81.00 |
7.50 |
0.380 |
0.053 |
0.600 |
6.1 |
0.1 |
|
Including |
75.00 |
77.30 |
2.30 |
0.954 |
0.093 |
1.420 |
13.7 |
0.2 |
|
|
89.20 |
99.15 |
9.95 |
0.163 |
0.059 |
0.328 |
4.5 |
<0.1 |
|
|
106.50 |
108.00 |
1.50 |
0.092 |
0.021 |
0.235 |
5.8 |
0.1 |
|
|
115.50 |
124.50 |
9.00 |
0.088 |
0.023 |
0.184 |
2.2 |
<0.1 |
|
|
154.50 |
177.00 |
22.50 |
0.132 |
0.009 |
0.198 |
2.9 |
<0.1 |
|
Including |
159.00 |
160.80 |
1.80 |
0.194 |
0.010 |
1.270 |
3.8 |
<0.1 |
|
|
181.50 |
202.50 |
21.00 |
0.066 |
0.038 |
0.440 |
3.1 |
<0.1 |
|
Including |
186.00 |
187.50 |
1.50 |
0.034 |
0.070 |
1.200 |
3.9 |
<0.1 |
|
|
212.15 |
217.50 |
5.35 |
0.152 |
0.026 |
0.107 |
3.3 |
<0.1 |
|
|
223.50 |
228.00 |
4.50 |
0.065 |
0.025 |
0.160 |
3.0 |
<0.1 |
|
|
237.00 |
243.00 |
6.00 |
0.128 |
0.009 |
0.094 |
3.4 |
<0.1 |
|
|
249.00 |
252.00 |
3.00 |
0.073 |
0.016 |
0.176 |
1.6 |
<0.1 |
|
|
259.50 |
265.50 |
6.00 |
0.166 |
0.016 |
0.451 |
2.3 |
<0.1 |
|
|
24.00 |
265.50 |
241.50 |
0.076 |
0.017 |
0.170 |
2.3 |
<0.1 |
The last hole, FM08-54, intersected a thick (>250m) altered, dominantly felsic sequence, highly anomalous in base & precious metals, indicating that the VMS mineralizing system remains open to the northwest. Drilling was curtailed due to the onset of winter conditions, and additional work is planned to test the extension of the Ryder in this direction. Additional Chargeability anomalies remain to be tested.
In addition, three contoured soil lines (197 samples) were completed In the Ryder area along the northwest facing mountain slope where the prospective rhyolite stratigraphy is covered with overburden and vegetation. The 2008 soil sampling survey defined a multi-element anomaly overlying altered rhyolite associated with the Ryder mineralized system. The anomaly is elongate towards the NNE, up to 500 m long and 200 m wide and defined by elevated concentrations of Zn, Cu, Pb, As, Au, and Ag. This anomaly remains to be tested by drilling.
Expenditures on the Foremore Project during the fiscal year ended August 31, 2008 were $1,374,824 and at August 31, 2008 totaled $5,548,509 including $452,113 in acquisition, staking costs and advance royalties.
SeaGold Property
The Company holds a 50% interest in the SeaGold Project, comprising 8 claim blocks of 4,000 hectares, centered on a number of gold and copper occurrences approximately 35 km north of Barrick Gold's Eskay Creek gold/silver mine in British Columbia. The balance of the property interest is now held by Romios Gold Resources Inc., which serves as the operator of a 50:50 joint venture on the SeaGold project. Results are pending from this fieldwork.
Lardeau Properties
A 2006 exploration program by the Company reviewed potential targets within a 100 km radius of the MAX Molybdenum Mine. This work resulted in the optioning of a 100% interest in four projects in the historic Lardeau Mining Camp covering an area of approximately 5,600 hectares. The Company has recently conducted exploratory prospecting and limited diamond drill programs on these four properties.
In 2007, the Company acquired by staking a 100% interest in the Butters Peak Molybdenum Property, located approximately 25 km northeast of the MAX Mine. Covering approximately 1,650 hectares, the property was originally discovered by tracing highly anomalous regional silt geochemical results to molybdenite float. The Company conducted limited prospecting and reconnaissance on the property in 2008.
In light of current economic conditions, management considers it unlikely that it will continue exploration on these early-stage prospects in order to focus on its more advanced mining and exploration projects in 2009. Therefore the Company has taken an impairment charge of the total $1,244,873 in expenditures incurred on these projects through August 31, 2008
Share Capital
In May of 2008, the Company received approval to repurchase up to a maximum of 4,078,500 outstanding common shares in the Company through the facilities of the TSX Venture Exchange (the "Exchange") until June 1, 2009. Pursuant to the policies of the Exchange, the Company is permitted to repurchase through open market purchases, up to 2 per cent of its outstanding common shares in any given 30-day period. The Company did not repurchase any shares during the year ended August 31, 2008. Subsequent to August 31, 2008 the Company purchased through the facilities of the TSX Venture Exchange, and subsequently cancelled a total of 1,460,700 common shares under its normal course issuer bid. Also subsequent to August 31, 2008 a total of 8,354,978 warrants and 121,000 options expired unexercised and 246,000 options were exercised for proceeds of $49,200. The Company had 80,755,628 common shares outstanding, 90,172,378 on a full-diluted basis as at the date of this report.
Outlook
As a result of recent global economic uncertainty and rapidly declining commodity prices, management has decisively cut costs at the MAX Molybdenum mine while continuing to operate under its Phase I mine plan. Phase II expansion plans, including completion capital spending for that expansion, are being minimized. Similarly, exploration work at the Company's projects, including the MAX property, will be limited to definition drilling where required. Management will continue to operate the mine while it generates positive cash flow, recognizing that the MAX Molybdenum Mine was originally designed to operate at historic prices. Significant gains have also been realized from the recent Canada-USA exchange rate and fuel cost reductions.
It remains management's belief that molybdenum prices should remain significantly greater than historic values for the foreseeable future due to i) production problems globally, ii) the reduction of by-product production related to copper mines and iii) the inability of new mines to achieve financing. In real terms, recent events have seriously eroded the global supply of molybdenum and management believes that a realization of supply and demand fundamentals in the medium-term will result in positive changes to pricing. It is therefore Management's goal to remain in operation and preserve the value of the resource and the opportunity to produce molybdenite concentrate in a rapidly appreciating environment.
In the interim, production at the MAX Molybdenum Mine will be limited to current target levels in an effort to preserve the molybdenum resource, and the mine will be readied, with minimal additional cost, for a rapid response to periods when greater margins on sales can be realized. Few other producers will have similar ability to ramp-up production.
Management has observed that experience with the geological controls on mineralization, its grade control program, and underground infrastructure improvements have dramatically reduced the average production costs and anticipate lower cash costs going forward.
Financial Results
The information in this news release and the selected financial information should be read in conjunction with the audited consolidated financial statements, and management discussion and analysis, for the year ended August 31, 2008, which will be available at Roca's website at www.rocamines.com.
For the year ended August 31, 2008, the Company reported a loss of $2,493,151 and an accumulated deficit of $4,909,947 at that date. Total assets were $60,462,014 and cash and cash equivalents were $2,497,077 at August 31, 2008. While the Company had cash flow from operations of $7,795,318 for the year ended August 31, 2008, a recent decline in the price for molybdenite concentrates has significantly reduced cash operating margins. The ability of the Company to continue as a going concern is dependent upon its ability to reduce costs and improve operating margins or to continue to raise adequate financing. Management has implemented a series of cost cutting measures and contingency plans for future financing should economic conditions deteriorate. There is no assurance that these initiatives will be successful in the future.
Summary Consolidated Statements of Operations and Loss
|
Year ended
August 31, 2008
Cdn$ |
Total Revenues |
18,785,083 |
Cost of sales |
(7,872,063) |
Depletion, amortization, accretion |
(12,472,155) |
Mining Loss |
(1,559,135) |
G&A, Stock-based comp., write-offs |
(3,800,186) |
Loss from Operations |
(5,359,321) |
Other income (expenses) |
74,161 |
Income and mining tax provision (recovery) |
(2,792,009) |
Net Loss for the Year |
(2,493,151) |
Loss per Share -- Basic and Diluted |
(0.03) |
Scott E. Broughton, P.Eng, is the qualified person responsible for the preparation of this news release under National Instrument 43-101.
ROCA MINES INC.
"Scott Broughton"
Scott E. Broughton, P.Eng. - President & CEO
For further information contact:
Investor Relations
Tel: 604-684-2900
Fax: 604-684-2902
Email: [email protected]
Web: www.rocamines.com
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. |
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