| Inter-Rock Minerals Inc Due Diligence
Based on Financial report and management discussion, ending June 30th 2015
Symbl: IRO.V
Price: $0.02
Common Shares: 22,617,811
Insider Holdings: 3,369,000(15%) As per www.sedi.ca
From MD&A: Inter-Rock owns MIN-AD, Inc. (“MINAD”), Mill Creek Dolomite, LLC (“Mill Creek”), and Secret Pass Gold, Inc. (“Secret Pass”). MIN-AD and Mill Creek are both engaged in the production and marketing of high purity dolomite for specialty markets. Secret Pass carries out some minor mineral exploration activity in the western United States.
IRO main website-> Inter Rock Minerals Inc.
MIN-AD Website-> Min-Ad :: Adds Nutritional Advantages
Mill Creek Dolomite -> Mill Creek Dolomite
Secret Pass Gold Inc Claims-> Secret Pass Gold Incorporated | U.S. Mining Claims | The Diggingsâ?¢
Financial Results (Ending June 30th 2015 and in US Dollars)
All numbers are in U.S. dollars and should be converted to Canadian dollars for accurate value.
ASSETS
Cash: $75K
Accounts Receivable: $1.412M
Inventory: $750K
Prepaid Expenses: $179K
Goodwill: $1
Dolomite Properties & Equipment: $4.812M
Mineral Properties: $254K
Total Assets: $7.454M
LIABILITIES
Accounts Payable: $1.175M
Long-term debt: $1.621M
Equipment Financing: $413K
Asset Retirement Obligation: $102K
Series A preferred shares: $3.417M
Total Liabilities: $6.728M
Sales for three months ending June 30th
Revenue: $2.857M
Gross Profit: $660K
G&A costs: $561K
Finance cost:$36K
Net Income: $63K or $0.003c EPS
Sales for six months
Revenue: $5.555M
Gross Profit: $1.211M
G&A costs: $1.153M
Finance cost: $67K
Net Loss for 6 months: -$9K.
MD&A Highlights
Inter-Rock recorded income of $63,000 in the second quarter as compared with a loss of $237,000 in the second quarter of 2014. Cash provided by operating activities was $288,000. Second quarter Standardized EBITDA was $288,000 compared to $26,000 in the second quarter of 2014. The main financing activity was debt service. Inter-Rock had $75,000 cash on hand on June 30. Inter-Rock expects to generate sufficient cash to meet all operating requirements, including capital expenditures and debt service obligations, during 2015. Capital expenditures during 2015 are anticipated to be around $300,000.
Business of Mill Creek
The acquisition of Mill Creek gave Inter-Rock access to specialty markets for dolomite, principally the glass, roofing materials, and aglime markets. Mill Creek, located approximately half way between Dallas, TX and Oklahoma City, OK, is ideally located to serve the large concentration of glass and asphalt shingle manufacturers in Texas, Oklahoma, and eastern Kansas. Most of Mill Creek’s customers are located in Oklahoma, Texas, Kansas, and Missouri.
Mill Creek produces a uniform composition, low decrepitation dolomite for glass furnaces where it serves as a flux, which assists melting and adjusts the melt viscosity, and a source of magnesium and calcium. Dolomite is used mainly by the flat and fiberglass segments of the glass industry. About 65% of Mill Creek’s sales volume is to the glass industry. The plant produces five different glass grade products.
Mill Creek’s net product revenue for the first quarter increased 3.3% to $1,050,000. Combined operating and G&A expenses increased 9%. There was net loss of $8,000 as compared to a loss of $42,000 in the second quarter of 2014. EBITDA decreased to $65,000 from $89,000.
Mining and plant operations at Mill Creek had difficulties throughout the quarter due to severe thunderstorms and heavy rains. Mill Creek had to declare force majeure on its contracts on June 18th due to a twelve inch rainfall event; the force majeure condition lasted several days. No MSHA reportable accidents occurred during the quarter.
Total second quarter sales volumes were 2% higher than the corresponding period in 2014. Revenue increased 6% to $1,050,000. Second quarter glass industry sales increased 25% because all of Mill Creek’s glass customers were running at close to full capacity and Mill Creek added a new large float glass customer toward the end of the first quarter. Roofing filler sales decreased by 20% while aglime and oil and gas industry sales were minor due to the very heavy rains and decline in drilling activity. Second quarter selling and G&A expenses decreased from $288,000 to $268,000.
The goals for 2015 are as follows: i) incorporate 2014 drilling data into the deposit model ii) develop a 5 year mine plan and ore blending schedule that incorporates the projected higher glass sales volumes iii) hire a mechanic/welder iv) install proper controls on the rotary dryer v) continue an engineering study of different dryer fuels (propane and natural gas) vi) continue the dust control projects, including a review of the wet scrubber vii) obtain financing for new haul trucks and an in-pit mobile crusher viii) increase stockpile inventories
Business of MIN-AD
MIN-AD mines, processes, and markets a specialty dolomite for the beef and dairy cattle feed industry. The dolomite is used as a source of magnesium and calcium and as a rumen acid buffer. MIN-AD produces three product lines: Standard has a broad particle size distribution for dry supplements, Fines is a finely ground product sold to liquid feed manufacturers, and Granular is a dust free coarse product for cattle on pasture. Approximately 97% of sales are to the United States, while the other 4% are to Alberta and British Columbia. In addition, MIN-AD has some minor sales to the construction and filler markets. MIN-AD’s quarry and grinding plant are located in northern Nevada near the town of Winnemucca.
MIN-AD’s gross product revenue for the first quarter increased 11% to $1,807,000. Combined operating and G&A expenses decreased 5%. MIN-AD reported income of $159,000 as compared with a loss of $57,000 in the second quarter of 2014. EBITDA increased from $47,000 to $311,000.
Second quarter feed sales volume for MIN-AD was 12% higher than the same period last year. Volume was up in the Plains, Midwest, and Northeast and down slightly in the Western and Canadian regions. MIN-AD’s Granular product continues to be well received; sales volume increased 67% in second quarter over the second quarter of 2014. Selling and G&A costs decreased 1%.
Operating costs decreased from $1,338,000 to $1,291,000, or 4%. Unit operating costs decreased 14%.
The main projects for 2015 will be i) Close monitoring of expenses and sales volumes ii) Continued strong marketing of the Granular product for range and pasture applications iii) Marketing of dolomite as a lime substitute to northern Nevada gold mines and other non-feed industries.
Mineral Exploration
MIN-AD holds claims for two zeolite deposits in northern Nevada; these will be dropped in 2015. In addition, Secret Pass holds two claim groups in historic mining districts of northern Nevada. Sentinel The Sentinel gold property is located in Humboldt County and consists of 22 claims covering 440 acres. No royalties or lease payments are associated with the property. An 8-hole drill program over a small part of the property was completed several years ago; the results were sufficiently encouraging to warrant further exploration of the property. A plan has been developed for some further geophysical and drilling work, but it has not been determined when this will be carried out. Varyville The Company holds a group of 8 claims in an historic gold mining district of northwest Nevada. There are no associated royalties or lease payments. The Company entered into a Lease and Option to Purchase Agreement on these claims with Paradigm Minerals USA. Under the terms of the Agreement, Paradigm is required to make annual lease payments of $25,000, however, the lease payment was waived in 2015. |
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