Greenstone Resources Ltd. 1999 Second Quarter Report Stock Listings:
The Toronto Stock Exchange, GRE OTC Bulletin Board, GRERF
TORONTO, Aug. 31 /CNW/ - INTERIM (UNAUDITED) CONSOLIDATED BALANCE SHEETS
As at June 30, 1999 and 1998
Expressed in thousands of United States dollars
1999 1998
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ASSETS Current assets:
Cash and short-term investments $ 841 $ 9,242
Accounts receivable 4,056 3,167
Inventory 7,464 25,934
Prepaids and other 236 1,117
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12,597 39,460
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Inventory --- 10,465
Mining interests 162,663 214,979
Deferred financing costs 1,659 2,284
Investments, at cost 100 4,028
Other --- 46
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$ 177,019 $ 271,262
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Short-term borrowings $ 23,391 $ 10,000
Accounts payable and accrued liabilities 24,247 17,220
Deferred revenue 2,309 5,181
Current portion of long-term debt 1,403 2,030
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51,350 34,431
Long-term debt 71,748 67,430
Future site restoration and reclamation 4,259 ---
Deferred revenue --- 2,294
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127,357 104,155
Deferred foreign exchange gain 908 2,498
Shareholders' equity:
Share capital 213,754 197,250
Warrants 6,308 5,782
Deficit (171,308) (38,423)
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48,754 164,609
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$ 177,019 $ 271,262
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INTERIM (UNAUDITED) CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the six months ended June 30, 1999, 1998 and 1997
Expressed in thousands of United States dollars, except share
and per share amounts
1999 1998 1997
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Mining revenue $ 17,183 $ 17,403 $ 8,699
Production costs 15,509 11,668 6,894
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1,674 5,735 1,805
General administration costs 2,841 3,098 2,448
Depreciation, depletion and
amortization 2,012 2,312 1,257
Gain on disposal of Hemco (3,236) --- ---
Foreign exchange loss (gain) 216 (1,214) (4)
Interest expense 2,930 1,137 ---
Interest and other income (497) (432) (1,127)
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4,266 4,901 2,574
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Net earnings (loss) $ (2,592) $ 834 $ (769)
Deficit, beginning of period (168,716) (39,257) (35,090)
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Deficit, end of period $(171,308) $ (38,423) $ (35,859)
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Net earnings (loss) per share $ (0.03) $ 0.01 $ (0.01)
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Weighted average number of
shares outstanding (000s) 80,915 63,612 55,904
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Note to Financial Statements:
1. Certain prior period figures have been reclassified to conform with
current period financial statement presentation.
INTERIM (UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOW
For the six months ended June 30, 1999, 1998 and 1997
Expressed in thousands of United States dollars
1999 1998 1997
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Cash provided by (used in): OPERATING ACTIVITIES:
Net earnings (loss) $ (2,592) $ 834 $ (769)
Items not affecting cash - Depreciation, depletion and
amortization 2,012 2,312 1,257
Deferred gains and costs (5,989) (2,693) ---
Other (400) (223) 388
Change in non-cash working capital (671) (1,910) (4,356)
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(7,640) (1,680) (3,480)
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INVESTING ACTIVITIES:
Mining interests, net (5,497) (38,493) (31,272)
Disposal of Hemco (3,236) --- ---
Other --- --- (38)
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(8,733) (38,493) (31,310)
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FINANCING ACTIVITIES:
Short-term borrowings (repayments) 6,886 10,000 (1,500)
Increase in long-term debt,
net of cost 665 (611) 40,223
Issue of share capital 9,130 445 654
Issue of warrants --- --- 5,781
Other --- 2 (306)
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16,681 9,836 44,852
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Net cash increase (decrease) $ 308 $ (30,337) $ 10,062
Cash and short-term investments,
beginning of period 533 39,579 17,075
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Cash and short-term investments,
end of period $ 841 $ 9,242 $ 27,137
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Other cash flow information:
Net interest paid 4,189 3,515 2,645
Greenstone's $18.7 million line of credit matured at the end of July and
became due and payable. This created an Event of Default under the Company's
Note Indentures dated February 27, 1997 and September 3, 1998. As a result of
the default, the bondholders elected to accelerate maturity of the Notes
resulting in Cdn$104 million and US$5.64 million of principal and accrued
interest becoming due and payable immediately. The Company does not have the
cash resources to repay the principal or make interest payments.
As a result of the maturation of the bank line of credit, the already
strained liquidity problem of the Company is now affecting Greenstone's
operations. The Management and Board of Directors of the Company are engaged
in active discussions with the Company's bondholders and lenders and are
confident that a resolution can be achieved to the benefit of allstakeholders.
Project Highlights ------------------
Greenstone's production through the second quarter of 1999 was 72,801
ounces, compared to a budget of 84,787 ounces, at a cash operating cost of
$295 per ounce. The production shortfall resulted primarily from being unable
to secure the necessary working capital for operations.
Gold production at Cerro Mojon for the first half of the year totaled
35,606 ounces, or 3,670 ounces under budget, at a cash cost of $264 per ounce.
A total of 869,775 tonnes of ore at a grade of 2.02 grams per tonne was
processed and placed on the heaps. Mining and crushing operations were
suspended on August 4th due to a lack of operating funds. Approximately 70% of
the workforce are now on vacation with a planned return date in early
September. Leaching continues on 862,000 tonnes of ore currently stacked on
the on-off leach pad. Plans for the re-start of this operation have been made,
however arrangements with a mining contractor need to be finalized.
A total of 20,201 ounces of gold was produced at San Andres since its
first gold pour in March, representing 83% of budget. Ore processed for the
first six months totaled 735,898 tonnes with grade continuing to exceed
budgeted expectations by approximately 9%. A new vibrating grizzly was
installed during August in front of the secondary crusher allowing for better
handling of wet ore. Commercial production was not achieved at San Andres
during the second quarter due to insufficient working capital making it
impossible to purchase necessary spare parts and supplies. The mine is poised
to achieve commercial production once the necessary working capital is made
available.
Minas Santa Rosa produced 6,294 ounces of gold through the second quarter
at a cash cost of $343 per ounce. This equates to 70% of budgeted production
with the shortfall attributable to the suspension of cyanide application to
the heaps due to working capital constraints. Following the cessation of
mining and placing the mine on care and maintenance in February of this year,
the mining contractor Kellogg, Brown & Root demobilized from the site.
Greenstone has been unable to resolve the outstanding indebtedness and
Kellogg, Brown & Root have now placed an attachment on certain assets of Minas
Santa Rosa in Panama. Greenstone is reviewing various alternatives for the
project in order to satisfy the outstanding indebtedness.
At the underground Bonanza mine in northeastern Nicaragua, a total of
10,700 ounces of gold was produced during the first six months at a cash cost
of $369 per ounce. This production resulted from processing 73,394 tons of ore
at a grade of 0.16 ounces per ton with a mine recovery of 89.1%. Greenstone
completed the sale of the Hemco concession, including the Bonanza mine, in
June. The transaction called for the assumption of certain liabilities by the
new owners and the repayment of certain debts by Greenstone. Due to
Greenstone's cash constraints, it may not be able to fulfill its remaining
obligations to the purchasers of Bonanza. Exploration -----------
Exploration on the Company's properties was again limited during the
second quarter. At La Libertad, early stage evaluations continued on targets
outside of Cerro Mojon. Around the mine site at Cerro Mojon, exploration work
was directed at evaluating inferred resources that could contribute to mining
plans. Exploration at San Andres was restricted to those areas near the Water
Tank Hill pit limits to prioritize inferred resources that could expand that
deposit. Work was completed on the Santa Rosa property and results are being
incorporated into a comprehensive review for decision making.
Financial Results -----------------
The net loss for the six-month period ended June 30, 1999 was $2,592,000
or $0.03 per share as compared to the 1998 net income of $834,000 or $0.01 per
share. During the current period, the Company reported a $3,236,000 gain
related to the disposition of its interest in Hemco Nicaragua, S.A.
(``Hemco'). The 1999 statement of operations and deficit reflects six months
of operation at Minisa, Hemco and Minas Santa Rosa (``MSR') whereas the 1998
results reflected four months of operation at Minisa (commercial production
restarted March 1, 1998) and six months operation at Hemco and MSR. During the
current period, MSR was placed on care and maintenance.
The 1999 revenues of $17,183,000 were based on sales of 51,369 ounces of
gold at an average selling price of $334 per ounce. The 1998 revenues of
$17,403,000 were based on sales of 50,655 at an average selling price of $344
per ounce. Greenstone will realize, for another 45,000 ounces, a $46 premium
over the spot gold price due to monetizing its hedge position in 1997.
Revenues from San Andres will be credited to capital costs until commercial
production is achieved. Since commencement of production at San Andres in
March 1999, $5,416,000 related to the sale of 18,838 ounces of gold has been
credited to capital.
Achievement of commercial production at the San Andres mine and the
ramping-up of production at Cerro Mojon combined with the disposition of Hemco
and the placing of MSR on care and maintenance should significantly reduce the
per ounce cash operating costs by the fourth quarter of 1999.
Reflecting the higher debt and less interest being capitalized to mining
interests, the interest expense increased to $2,930,000 in the first six
months of 1999 from $1,137,000 in the same period in 1998.
Reflecting the low realized gold price and the high production costs at
Hemco and MSR, the cash used in operations during the first six months of 1999
was $7,640,000. As a result of the construction phase of San Andres nearing
completion and minimal capital expenditures at Minisa, investment in mineral
properties were $5,497,000 as compared to the 1998 investing activities of
$38,493,000. With effect from June 30, 1999, the Company disposed of the Hemco
property with the purchaser assuming the majority of Hemco's debt. During the
1999 January to June time period, Greenstone raised $16,681,000 through a
combination of debt ($7,551,000) and issuance of share capital ($9,130,000).
Year 2000 ---------
The Year 2000 risks arise from the practice of computers using two digits
rather than four to indicate the year portion of the date. As a result, many
computer systems could fail and financial and operating data might beimpacted.
Due to the nature of Greenstone's business activities, information
interaction with third parties is minimal. Greenstone has identified operating
and information systems and equipment that needs to be upgraded or replaced.
It is anticipated that these will be compliant by the end of the 1999 third
quarter. The expenses associated with the Year 2000 risk are not considered to
be material and will be charged to income in the period incurred.
The Company cannot be certain that its suppliers are Year 2000 compliant.
Therefore during 1999 plans will be implemented to mitigate the risks of a
disruption of key operating supplies. (signed) R. Neil Raymond
Chairman and Chief Executive Officer (signed) J. Randy Martin
President and Chief Operating Officer August 25, 1999
Toronto, Ontario, Canada -0- 08/31/1999 |
