Greenstone Resources Ltd. TORONTO, Nov. 29 /CNW/ - Corporate Highlights
Since Greenstone's banking syndicate caused its line of credit to mature
on July 28, 1999, the Company has been forced into crisis management. The
Company was stripped of substantially all its cash and continues to function
on insufficient financial resources. The Company is operating primarily using
the inadequate revenues generated from its gold sales, supplemented somewhat
with money that has been made available from bank lines which were supported
by the bondholder group.
As a result of the Company's strained financial position, difficult
operational decisions have had to be made. As reported previously, mining and
crushing operations were suspended in August at the Cerro Mojon mine in
Nicaragua while the leaching of the remaining ore has continued. Although
currently operating, mining at the San Andres mine in Honduras has been
suspended periodically since July 28th because of insufficient workingcapital.
In September, the Company initiated a lawsuit against its banking
syndicate for various causes of action. Greenstone is hopeful that this
litigation can be settled amicably as part of a comprehensive restructuring of
its balance sheet.
Over the last few months, Greenstone has been in discussions with many of
its stakeholders. As a result of these discussions, Pincock, Allen & Holt have
been engaged to perform a detailed technical review of Greenstone's projects
while KPMG has been engaged to perform specific financial audit procedures.
This independent due diligence is ongoing and the results are expected to form
the basis for achieving an agreement with all stakeholders with respect to a
comprehensive recapitalization of the Company.
In the absence of an agreement with its major creditors, Greenstone will
continue to be financially strained and has persevered because of the hard
work and dedication of its Management and the cooperation and patience of many
of its suppliers. Greenstone's Board of Directors and Management remain
hopeful that an agreement with its creditors can be finalized in the nearfuture.
Project Highlights
Production has suffered as a result of being unable to secure the
necessary working capital for operations. Through the third quarter, including
San Andres, 92,653 ounces of gold were produced at a cash operating cost of
$286 per ounce.
Over the first nine months of the year, Cerro Mojon produced 43,859
ounces at a cash cost of $297 per ounce. A total of 1,023,203 tonnes of ore,
at a grade of 2.13 grams per tonne, was processed and placed on the heaps.
However, no ore processing has occurred since suspension of mining on August
4th. Leaching continues but is unlikely to be sustained much beyond November.
The re-start of this operation is dependent upon a corporate reorganization
and recapitalization.
Mining and leaching continues at San Andres. From its first gold pour at
the end of March through September 30, 1999, a total of 32,197 ounces of gold
has been produced at a cash cost of $233 per ounce. Ore processed during this
period totaled 1,303,344 tonnes at a grade of 1.81 grams per tonne. While
leaching has generally been uninterrupted, management has been forced to
suspend mining at San Andres from time to time over the last few months due to
insufficient funding. The mine is currently fully operational and production
is increasing. However, without the purchase of certain critical supplies,
mining will likely cease and continued leaching is unlikely.
The Minas Santa Rosa ("MSR") mine in Panama produced 6,294 ounces of
gold, through the third quarter. Mining operations were suspended in February
and the mine is now on care and maintenance. The Company announced on November
18, 1999 that it has entered into an agreement to sell all the shares of its
Panamanian subsidiary in return for the assumption of substantially all the
liabilities of MSR. The sale is subject to (i) additional due diligence
focusing on metallurgical test work, (ii) obtaining letters from the Company's
banking syndicate and bondholders agreeing to release MSR as a borrower and
guarantor under the bank credit facility and note indentures respectively, and
(iii) the purchaser reaching acceptable terms with MSR creditors in
restructuring certain liabilities. This is an important step in Greenstone's
restructuring as it allows Management to focus more of its time and resources
on the Company's two core assets, San Andres and Cerro Mojon. When finalized,
the sale will result in a gain of approximately $5.2 million and removes
liabilities in excess of $10 million, including accrued holding and
reclamation costs, from Greenstone's consolidated balance sheet.
Although Hemco Nicaragua, S.A. ("Hemco"), and its Bonanza mine, was sold
in June, there remain certain financial obligations that Greenstone has not
been able to fulfill. Greenstone's bondholders had previously approved the
sale and released Hemco as a guarantor under the Note Indentures. Greenstone's
banking syndicate, while approving of the sale, has yet to release Hemco as a
guarantor under the bank credit facility. Greenstone's inability to fulfill
its financial obligations and secure the release from the banking syndicate
may result in a reversal of the sale. Exploration
There is still much work that needs to be completed at La Libertad and
San Andres. Greenstone's exploration team has targets identified for
exploration work dedicated primarily at expanding current deposits and which
could contribute to mining plans. However, with limited cash resources,
exploration has been discontinued on all Greenstone properties. Key
exploration personnel have been retained for future programs.
Financial Results
The nine months ended September 30, 1999 produced a net loss of
$7,877,000 or $0.10 per share compared to 1998 net earnings of $691,000 or
$0.01 per share. The 1999 results include a gain of $3,236,000 related to the
June 1999 sale of Hemco Nicaragua, S.A. The Santa Rosa Mine was placed on care
and maintenance in February 1999 while mining and crushing operations were
suspended at Cerro Mojon in August due to insufficient funding.
Through September 30, 1999, the Company recorded revenues from the sale
of 59,480 ounces of gold (1998 - 79,798 ounces) resulting in revenues of
$22,647,000 (1998 - $27,067,000) or almost $381 per ounce (1998 - $339)
including hedge gains. The gain from monetizing its hedge position in 1997 has
now been fully recognized. Gold sold by San Andres still is not being
reflected in the statement of operations since commercial production has yet
to be achieved. Realizing commercial production is dependent upon securing the
cash resources needed to sustain operations. Since commencement of production
in March 1999, San Andres sold 30,499 ounces of gold and generated sales of
$8,342,000. Revenues and costs from San Andres will continue to be applied to
mining interests until commercial production is attained. The achievement of
commercial production at San Andres and the recommencement of production at
Cerro Mojon will significantly reduce the per ounce cash operating costs of
these mines.
Interest expense for the first nine months of 1999 was $5,927,000
compared to $2,479,000 for the same period in 1998. The increase is a
reflection of higher debt levels year-over-year as well a reduction of
interest being capitalized to mining interests. 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 expected that these will all be compliant before the end of the year. In
the event that the operations are not fully Year 2000 compliant, the Company's
contingency plan includes the implementation of manual procedures. The
expenses associated with the Year 2000 risk are not considered to be material
and are charged to income in the period incurred.
The Company cannot be certain that its suppliers are Year 2000 compliant
and plans have been 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 Toronto, Ontario, Canada
INTERIM (UNAUDITED) CONSOLIDATED BALANCE SHEETS
As at September 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 $ 373 $ 8,559
Accounts receivable 2,731 2,968
Inventory 6,014 24,574
Prepaids and other 132 654
---------- ----------
9,250 36,755
---------- ----------
Inventory --- 10,888
Mining interests 164,985 233,006
Deferred financing costs 279 2,352
Investments, at cost 100 4,028
Other --- 93
---------- ----------
$ 174,614 $ 287,122
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued liabilities $ 28,164 $ 18,430
Short-term borrowings 19,933 12,722
Current portion of long-term debt 1,761 3,476
Deferred revenue 1,188 5,086
---------- ----------
51,046 39,714
Long-term debt 74,664 69,678
Future site restoration and reclamation 4,274 ---
Deferred revenue --- 1,174
---------- ----------
129,984 110,566
Deferred foreign exchange gain 1,161 4,192
Shareholders' equity:
Share capital 213,754 204,617
Warrants 6,308 6,313
Deficit (176,593) (38,566)
---------- ----------
43,469 172,364
---------- ----------
$ 174,614 $ 287,122
---------- ----------
INTERIM (UNAUDITED) CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the nine months ended September 30, 1999, 1998 and 1997
Expressed in thousands of United States dollars, except share and per
share amounts
1999 1998 1997
-------------------------------------------------------------------------
Mining revenue $ 22,647 $ 27,067 $ 14,965
Production costs 19,621 18,677 10,656
----------- ---------- ---------
3,026 8,390 4,309
General administration costs 3,726 4,797 3,892
Depreciation, depletion and amortization 4,123 3,973 2,059
Gain on disposal of Hemco (3,236) --- ---
Foreign exchange loss (gain) 493 (3,116) 328
Interest expense 5,927 2,479 ---
Interest and other income (130) (434) (898)
----------- ---------- ----------
10,903 7,699 5,381
----------- ---------- ----------
Net earnings (loss) $ (7,877) $ 691 $ (1,072)
Deficit, beginning of period (168,716) (39,257) 35,090
----------- ---------- ----------
Deficit, end of period $(176,593) $ 38,566 $ 36,162
----------- ---------- ----------
Net earnings (loss) per share $ (0.10) $ 0.01 $ (0.02)
----------- ---------- ----------
Weighted average number of shares
outstanding (000s) 81,655 64,219 55,981
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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 nine months ended September 30, 1999, 1998 and 1997
Expressed in thousands of United States dollars
1999 1998 1997
-------------------------------------------------------------------------
Cash provided by (used in): OPERATING ACTIVITIES:
Net earnings (loss) $ (7,877) $ 691 $ (1,072)
Items not affecting cash - Depreciation, depletion and
amortization 4,123 3,973 2,059
Deferred gains and costs (6,382) (3,813) ---
Other 616 (646) (7,700)
Change in non-cash working capital 4,788 1,227 (3,962)
----------- ---------- ----------
(4,732) 1,432 (10,675)
----------- ---------- ----------
INVESTING ACTIVITIES:
Mining interests, net (9,930) (58,181) (45,631)
Disposal of Hemco (3,236) --- ---
Other --- --- (256)
----------- ---------- ----------
(13,166) (58,181) (45,887)
----------- ---------- ----------
FINANCING ACTIVITIES:
Short-term borrowings 3,972 12,722 8,500
Increase in long-term debt, net of cost 4,636 4,709 39,874
Issue of share capital 9,130 7,812 931
Issue of warrants --- 531 5,782
Other --- (45) 70
----------- ---------- ----------
17,738 25,729 55,157
----------- ---------- ----------
Net cash decrease $ (160) $ (31,020) $ (1,405)
Cash and short-term investments,
beginning of period 533 39,579 17,075
----------- ---------- ----------
Cash and short-term investments,
end of period $ 373 $ 8,559 $ 15,670
----------- ---------- ----------
Other cash flow information:
Net interest paid 4,626 6,622 3,528
-0- 11/29/1999
For further information: Neil Raymond, Chairman and Chief executive Officer,
(416) 862-7300 |
