May 30, 2002
Listing: TSX, symbol “FT”
Issued Capital: 17,586,669
NEWS RELEASE
FORTUNE MINERALS ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
Fortune Minerals is pleased to present its first quarter report, together with unaudited interim financial statements for the period ended March 31, 2002. During the first part of the year, the Company has been active on a number of projects. Fortune recently announced an agreement to acquire, through a wholly-owned subsidiary, the Mount Klappan anthracite coal project near Stewart, British Columbia from Conoco Canada Resources Limited. Completion of this transaction is subject to conditions, including due-diligence evaluation of the project. The Company has retained Marston & Marston Inc. and Roscoe Postle Associates Inc. for geological and engineering advice. Both are independent consulting companies with expertise in coal projects. Mount Klappan contains substantial resources as well as mineable reserves of very high quality anthracite. We look forward to closing the transaction and working toward development of this exciting project.
Fortune recently announced results of its mineral resource estimate and scoping level economic assessment of the NICO cobalt-gold-bismuth deposit in the Northwest Territories by Strathcona Mineral Services Limited. As a result, we now have a much better understanding of the grade distribution in the deposit and its metallurgical properties. Further work will focus on an underground bulk mining approach toward extraction of the gold-rich higher-grade core, supplemented by smaller pits at the deposit ends to access near-surface mineralization.
Fortune staked 2,069 hectares on the south shore of the East Arm of Great Slave Lake, 9km from the community of Reliance, Northwest Territories. The claims cover a number of copper-gold showings that were trenched and drilled during the 1960’s. This work partly delineated a 30m wide mineralized zone and drill intersections included 45m, grading 0.58% copper and 28m, grading 0.69% copper. Narrow intervals within this zone returned impressive gold grades, including 4.44 ounces/ton (138g/t) over 0.6m and 0.32 ounces/ton (9.95g/t) over 1.52m as well as silver credits. Fortune is planning reconnaissance work on the claims this summer.
During the first quarter of 2002, Fortune had a net loss of $22,274 compared to net income of $11,746 for the same period in 2001. This is primarily due to a decrease in interest revenue as a result of lower interest rates in the first quarter of 2002 as compared to 2001. Overall, expenses remained consistent with the prior period. Deferred exploration expenses for the quarter were $68,549, up from $44,618 the prior period. As at March 31, 2002, Fortune had working capital in the amount of $3,711,866, which in addition to funds currently being raised by Fortune by way of private placement is expected by management to be sufficient for operations currently planned.
Fortune Minerals is a diversified natural resource company listed for trading on The Toronto Stock Exchange under the symbol, “FT”. Upon completion of the transaction with Conoco, the Mount Klappan anthracite coal project will augment Fortune’s diverse portfolio of deposits and exploration projects in Canada. They include the NICO cobalt-gold-bismuth deposit and the Sue-Dianne copper-silver deposit, as well as other base and precious metals and diamond exploration projects in the Northwest Territories. Fortune is also the operating partner in and a significant shareholder of Formosa Environmental Aggregates Ltd., an industrial mineral company developing the Greenock high calcium limestone quarry in Ontario.
CONSOLIDATED BALANCE SHEETS
Unaudited
As at March 31, December 31,
2002 2001
$ $
ASSETS
Current assets
Cash and cash equivalents 2,740,731 2,845,904
Short-term investments 949,940 949,940
Accounts receivable 114,991 100,879
3,805,662 3,896,723
Investment in and advances to affiliated company 353,046 348,523
Capital assets 7,376 9,164
Interests in mining properties 30,164 30,164
Deferred exploration expenditures 7,440,570 7,371,827
11,636,818 11,656,401
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 54,523 44,832
Income taxes payable 39,273 46,273
Total current liabilities 93,796 91,105
Future income taxes 2,396,000 2,396,000
Total liabilities 2,489,796 2,487,105
SHAREHOLDERS' EQUITY
Share capital
Authorized
Unlimited number of common shares
Issued
17,586,669 common shares 8,849,299 8,849,299
Retained earnings 297,723 319,997
9,147,022 9,169,296
11,636,818 11,656,401
See accompanying notes
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND RETAINED EARNINGS
For the three month period ended March 31
2002 2001
$ $
[Restated]
REVENUE
Interest and other income 20,054 67,317
EXPENSES
Exploration expenses 5,298 6,628
Administrative expenses 31,144 36,753
Public relations 11,292 3,036
Amortization 1,594 1,594
49,328 48,011
Income (loss) before income taxes (29,274) 19,306
Provision for (recovery of) income taxes - current (7,000) 7,560
Net income (loss) for the period (22,274) 11,746
Retained earnings, beginning of period 319,997 477,997
Retained earnings, end of period 297,723 489,743
Basic and diluted earnings per common share - -
See accompanying notes
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three month period ended March 31
2002 2001
$ $
OPERATING ACTIVITIES
Net income (loss) for the year (22,274) 11,746
Add items not involving cash
Amortization 1,594 1,594
(20,680) 13,340
Changes in non-cash working capital items
Accounts receivable (14,112) 162,941
Accounts payable and accrued liabilities 9,691 (36,348)
Taxes payable/recoverable (7,000) (6,298)
Cash provided by (used in) operating activities (32,101) 133,635
INVESTING ACTIVITIES
Advances to affiliated company (4,523) (1,033)
Net decrease in short-term investments - 608,978
Purchase of capital assets - (507)
Increase in deferred exploration expenditures (68,549) (44,618)
Cash provided by (used in) investing activities (73,072) 562,820
Increase (decrease) in cash and cash equivalents (105,173) 696,455
Cash and cash equivalents, beginning of period 2,845,904 1,236,855
Cash and cash equivalents, end of period 2,740,731 1,933,310
See accompanying notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICY
These interim consolidated financial statements follow the same significant accounting policies and methods summarized in the most recent annual financial statements, except for the accounting of stock-based compensation and other stock-based payments as further mentioned in note 1[a].
[a] Stock-based compensation
On January 1, 2002, the Company adopted the recommendations in Handbook Section 3870 (“Section 3870”), Stock-Based Compensation and Other Stock-Based Payments, issued by The Canadian Institute of Chartered Accountants. The new recommendations are generally applicable only to awards granted after the date of adoption. The adoption of the new recommendations did not impact the financial statements.
Stock options and warrants awarded to non-employees are accounted for using the fair value method. No compensation expense for stock options granted to employees is recognized, but pro forma disclosure of net income and earnings per share is provided as if these awards were accounted for using the fair value method. Consideration paid on the exercise of stock options and warrants is credited to share capital.
The pro forma disclosure of net income and earnings per share is required only for awards granted after the date of adoption. Since the Company has not granted any awards subsequent to January 1, 2002, pro forma net income and earnings per share have not been presented.
2. RESTATEMENT OF PRIOR PERIOD
Effective January 1, 2001, the Company adopted Accounting Guideline 11, Enterprises in the Development Stage. The Company's interpretation of the Guideline was that it must be probable that exploration expenditures will be recovered from future operations in order to be capitalized. The effect of this interpretation was to decrease exploration expenditures by $2,245,493, decrease future tax liabilities by $950,000 and decrease retained earnings by $1,295,493 as of January 1, 2001.
Subsequently, the Emerging Issues Committee ("EIC") of the Canadian Institute of Chartered Accountants issued EIC-126, Accounting by Mining Enterprises For Exploration Costs which clarified certain interpretations of the Guideline. More specifically, EIC-126 does not require that
it be probable that exploration expenditures be recovered from future operations in order to be capitalized. The consensus reached in EIC-126 is that exploration costs related to mining properties may be initially capitalized under Canadian generally accepted accounting principles if a company considers that such costs have the characteristics of property, plant and equipment and that capitalization is appropriate to its circumstances.
As a result of the EIC developments, the Company reversed the accounting policy change adopted effective January 1, 2001 for purposes of preparing the audited financial statements for the year ended December 31, 2001 and the comparative figures presented in these quarterly financial statements.
Further information can be obtained from Fortune Minerals at: Tel: 519-858-8188, Fax: 519-858-8155, Email: info@fortuneminerals.com, and Website:www.fortuneminerals.com |
