16mo results and Nov. 30, 1996 year end results
Chase Resource Corporation CQS
Shares issued 23,248,931 Aug 7 close $0.06
Mon 10 Aug 98 Company Review
Mr. Ian Rozier reviews the company
The primary operations of Chase Resource continue to consist of acquiring
and maintaining mineral property interests or options to acquire mineral
property interests, and conducting mineral exploration on such properties.
During the fiscal period ending March 31, 1998, a total of $7,408,572 was
used for option payments and mineral interest acquisitions. At the same
time, deferred exploration expenditures totalled $3,870,664 on the
properties. Of the amount recorded as mineral property acquisition costs,
$4,221,935 represents the actual expenditures associated with the
acquisition of the company's interest in the Cikondang gold project in
Indonesia. The balance of this figure arises from the amalgamation with
Delta Gold Mining Corp. where shares of the company were issued for the net
assets of Delta. The largest component of the deferred exploration
expenditures ($1,803,981) was on the Cikondang project. The remainder was
scattered over a number of projects in the Philippines.
During the previous fiscal year ending Nov. 30, 1996 a total of $268,941
was used for option payments and mineral interest acquisitions. Deferred
exploration expenditures totalling $3,777,832 were focused primarily on the
company's Taysan project in the Philippines, an airborne geophysics survey
over the Batangas FTAA, which surrounds the Taysan project, and drilling of
prospects within the FTAA.
The company incurred general and administrative expenses of $1,248,980
during the period which covered 16 months, compared with $1,470,667 in the
preceding year. The reduction arises primarily from reduced overheads and
the termination of an investor relations contract that was in place the
previous year.
Revenue from interest and dividends fell to $146,241 during the period,
down from $350,204 mainly because less capital was available for
investment. Losses on sale of short-term investments amount to $155,674,
compared with a gain of $259,085 the previous year due to sharp downturns
in resource stocks which the company was invested in over the past 16
months. All short-term investments were liquidated prior to March 31, 1998.
Amounts written off on mineral properties and deferred exploration costs
increased substantially during the period to $14,695,653 from $2,716,570 in
1996. This arises from management's decision to substantially reduce the
company's exposure to early stage exploration projects in the Philippines
and to allow unexercised options to acquire further shares in Taysan
Copper, to expire.
Factors contributing to this decision include poor capital markets for
exploration companies (especially in the wake of the Bre-X scandal), weak
metal prices, a pull back in exploration and acquisitions worldwide by
major mineral industry companies, and poor progress in the Philippines
toward the implementation of reforms allowing foreign investment in mineral
resource development in that country.
In early 1997, the company finally received all approvals for the
acquisition of the Cikondang project after two years of effort, and
consequently committed an investment in the project within weeks of the
collapse of investor interest in the area following the Bre-X revelations,
and then followed by economic and political turmoil in Indonesia. Around
the same time, Australian major BHP, which is the company's largest
shareholder, commenced a major retrenchment program that included
withdrawal from Southeast Asia, and termination of its options with the
company to finance work in the Philippines.
Under the circumstances, management of the company has been taking drastic
steps to curtail expenditures on its exploration properties. One project in
Chile and several in the Philippines where payments to underlying claim
owners were required, have been dropped. The company retains the interests
it has already earned or acquired in the Cikondang project, the Taysan
project and several other Philippine properties where no major obligations
are faced by the company. Staffing and overhead obligations have been
reduced accordingly.
With the company's exposure in Southeast Asia, a substantial foreign
exchange loss of $2,176,414 has been recognized during the period, compared
to a gain of $19,491 in 1996. Since most of the company's assets and
capitalized expenditures are in Indonesian rupiah and Philippine pesos,
both of which have been substantially devalued in the past year, the
resulting exchange loss was unavoidable.
At March 31, 1998, cash and short-term investments totalled $203,441
compared with $5,663,691 at Nov. 30, 1996. As noted above, most of this
decline can be attributed to the acquisition of the Cikondang project and
exploration expenditures. Current liabilities also have declined to
$161,520 from $361,641, mainly due to decreased activity by the company,
especially in the Philippines.
Long-term debts of $264,170 and minority interest of $20,233 recorded in
the accounts at Nov. 30, 1996 were attributable to Taysan Copper, which was
consolidated with the accounts of the company at that time. Elimination of
the consolidation has resulted in the elimination of these long-term
obligations at March 31, 1998.
Other sources of cash during the period were the sale of the company's
investment in shares of Delta for $750,000 and the sale of short-term
investments for $754,391.
In the near term, it is expected that financial support for mineral
exploration in general will remain weak. Capital raising by the company in
this environment would be excessively dilutive. While the company's
prospects in Indonesia and the Philippines remain promising, expenditures
on these cannot be justified at this time. A few properties in the
Philippines have been joint ventured to other parties and further farm-out
arrangements are planned in the hope those will generate some cash for the
company and further development on the mineral properties.
Political turmoil in Indonesia and regulatory foot-dragging in the
Philippines remain problems - but the flip side is that both countries have
become cheaper to operate in.
It is expected that the outlook for the company, and the industry in
general, will not substantially improve until the fundamentals underlying
the industry, namely the supply, demand and prices of mineral commodities,
stage a pronounced turnaround.
STATEMENT OF EARNINGS
16mo 12mo
ended ended
March 31, Nov. 30,
1998 1996
Revenue
Interest $ 34,769 $ 301,599
Dividend 111,472 48,605
---------- ----------
146,241 350,204
Total expenses 1,248,980 1,470,667
---------- ----------
(Loss) before
other items (1,102,739) (1,120,463)
---------- ----------
Other items
Writeoff of
mineral
properties (5,157,614) (1,133,895)
Writeoff of
deferred
exploration
costs (9,538,039) (1,583,675)
Gain (loss) on
sale of short-
term investments (155,674) 259,085
(Loss) on
disposal of
capital assets - (3,694)
Other revenue 99,888 6,751
Foreign exchange
(loss) gain (2,176,414) 19,491
---------- ----------
(16,927,853) (2,435,937)
---------- ----------
Net (loss) ($18,030,592) ($3,556,400)
========== ==========
(Loss) per
share (cents) (87) (22)
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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