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Attention Business/Financial Editors:
GREENSTONE RESOURCES LTD. - 1998 SECOND QUARTER REPORT
TORONTO, Aug. 27 /CNW/ -
Greenstone Resources Ltd.
Highlights achieved during the quarter
ended June 30, 1998 were as follows:
- 2nd consecutive quarter of positive earnings
- Successful installation of intermediate leaching system at Cerro Mojon
- High grade discovery at Santa Elena, La Libertad
- Record quarterly gold production of 15,058 ounces at Santa Rosa
Stock Listings:
The Toronto Stock Exchange, GRE
The Nasdaq Stock Market, GRERF
<<
1998 Production Performance
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Ore Gold
Project Tonnes Grade Production Cash Costs
Processed (g/T) (ozs) ($/oz)
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Santa Rosa, Panama
1st Quarter 511,000 1.3 14,484 219
2nd Quarter 659,000 1.4 15,058 238
----------------------------------------------
Total 1,170,000 1.4 29,542 229
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Cerro Mojon, Nicaragua
1st Quarter 498,000 1.9 13,345 164
2nd Quarter 409,000 1.6 11,478 176
----------------------------------------------
Total 907,000 1.8 24,823 170
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Bonanza, Nicaragua
1st Quarter 27,000 4.3 3,324 280
2nd Quarter 9,000 4.5 1,162 281
----------------------------------------------
Total 36,000 4.4 4,486 280
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All Projects
1st Quarter 1,036,000 1.7 31,153 202
2nd Quarter 1,077,000 1.5 27,698 214
----------------------------------------------
Total 2,113,000 1.6 58,851 208
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Project Highlights
------------------
During the 2nd quarter Greenstone produced 27,698 ounces of gold at a
cash cost of $214 per ounce compared to a budget forecast of 50,000 ounces at
$200. The shortfall was due to the unexpected temporary shut down of the
Bonanza mine caused by insufficient rainfall and the engineering changes at
Cerro Mojon as described in the 1st quarter report and reviewed below. The
Company had expected to exit the 2nd quarter at a production rate of slightly
more than 18,000 ounces of gold per month. We now expect to reach this level
in October, a delay of approximately four months.
As set out in our conference call with shareholders in December 1997, the
Company established the following operating objectives for 1998: (1)
commission Phase III capacity at Cerro Mojon; (2) complete construction and
commissioning of the San Andres mine; (3) complete rehabilitation of the
Bonanza mine; and (4) attain steady-state production at Santa Rosa. During the
2nd quarter, substantial progress was made toward achieving each of these
objectives.
Gold production at the Cerro Mojon project in Nicaragua during the 2nd
quarter was 11,478 ounces at a cash operating cost of $176 per ounce. During
the quarter 409,000 tonnes of ore grading 1.6 grams of gold per tonne were
stacked on the leach pad. Ore and gold production were adversely affected by
the down time associated with the installation of the intermediate leaching
system and changes to the agglomerator. As explained in the 1st quarter
report, these initiatives were necessary to ensure that Phase III production
levels would be reached prior to year end. The intermediate leaching system
and modifications to the agglomerator were completed by the end of June. As a
result of these changes, recoveries from the material placed on the pads
during July are exceeding feasibility standards. A new equipment fleet was
also purchased for the off-loading of spent ore to Phase III specifications.
Now in process is the final task necessary to complete Phase III capacity, the
installation of the jaw crusher to supplement capacity at the sizing plant.
Completion of Phase III capacity is expected during the current quarter, and
the Company now anticipates smooth build-up to the 400 ounce per day level.
The intermediate leaching system introduced in the 1st quarter allowed
the Santa Rosa project in Panama to improve the grade of pregnant solution,
despite the heavy rainfall experienced during the 2nd quarter. During the 2nd
quarter, 659,000 tonnes of ore grading 1.4 grams of gold per tonne were placed
on the leach pad, resulting in gold production of 15,058 ounces, the highest
quarterly production ever achieved at Santa Rosa. Total gold production for
the first six months of 1998 was 29,542 ounces at a cash operating cost of
$229 per ounce, both figures exceeding budget expectations. Metallurgical
recoveries from the new east leach pad are now exceeding feasibility estimates
due to a lower five metre lift height, the use of polymer during agglomeration
and a higher cyanide concentration during leaching. The first five metre lift
will be completed on the east pad during the current quarter. Based on daily
production levels now being achieved at Santa Rosa during the rain season, a
6,000 ounces per month production rate is well within reach by year end 1998.
The San Andres project in Honduras has now entered the commissioning
stage. Overliner material is being placed on the leach pad. The relocation of
the townsite has been completed and mining of the Water Tank Hill deposit has
commenced. The crushing and conveying system are expected to be operational by
the end of August, after which leaching activities will commence. Factored
into the design and construction of San Andres are the combined knowledge and
experience gained at Santa Rosa and Cerro Mojon including an oversized
crushing and conveying system, a drum agglomerator and an intermediate
leaching system. Consequently, Greenstone expects a smoother commissioning
than experienced at its previous two start-ups. In August, Mr. Bret Boster
joined Greenstone as Project Manager for San Andres. Prior to Greenstone, Mr.
Boster was process manager at the Florida Canyon mine in Nevada, a 10 million
ton per year heap leach mine.
As reported in the 1st quarter report, milling operations at the Bonanza
mine in Nicaragua were suspended in early May due to the effects of a severe
drought caused by El Nino.
All work crews were released in mid-June and did not return to work until
July 21, after rain had provided sufficient hydro-electric power to resume
both milling and mining operations. Accordingly, during the 2nd quarter only
1,162 ounces of gold were produced at Bonanza. Prior to underground operations
shutting down, 20,108 tonnes of ore grading 6.7 grams of gold per tonne were
mined and stockpiled. In late July, milling resumed and production rates are
now exceeding 2,000 ounces per month.
Exploration
-----------
During the quarter, drilling continued to define reserves within the
''super-pit'' area at La Libertad, focusing on the south leg zones including
Esmeralda, Victoria, Populares and Santa Maria. Ground geophysics also
identified blind targets between the north and south legs, as well as
continued strike extensions on the northeast projection of the Cerro Mojon
trend named Santa Elena. The first nine holes into the initial 250 metres of
strike length at Santa Elena had a weighted average (uncut) intercept of 16.5
metres at 15.4 grams of gold per tonne. The last of these nine holes, SE98-9,
intersected 16.5 metres at 91.4 grams of gold per tonne, including 4.5 metres
at 315.9 grams of gold per tonne, representing the best hole drilled at La
Libertad up to that time.
The results obtained at Santa Elena changed the exploration strategy at
La Libertad for the balance of 1998. By the end of June, drilling activities
had been completed on the north and south legs of the super-pit. The next
phase of drilling was to determine the density of mineralized structures
situated between these legs in hopes of incorporating all zones into one open
pit. Based on the Santa Elena results, exploration priorities for the balance
of 1998 will focus on extending the Santa Elena zone which could support a
stand-alone milling operation consistent with the higher grade material.
Other exploration activities during the quarter focused on reserve
definition at the Twin Hills deposit at San Andres and a follow-up drilling
program at the Rosita prospect within the HEMCO concession.
Financial Results
-----------------
For the six month period ended June 30, 1998 Greenstone reported earnings
of $834,000 ($0.01 per share) compared to a net loss of $769,000 ($0.01 loss
per share) for the previous year's six month reporting period. Cash flow,
before changes in working capital and long-term assets, improved to $3,107,000
($0.05 per share) compared to $488,000 ($0.01 per share) in 1997.
Mining revenue of $17,403,000 was significantly higher than the
$8,699,000 reported last period as a result of the increased production
associated with the Company's mines. The average realized gold price during
the six month reporting period was $344 per ounce compared to an average spot
price of $297.
The higher realized gold price reflects the $46 per ounce premium on
50,469 ounces ''locked'' into for the first six months of 1998 when Greenstone
monetized its outstanding hedge position in October 1997. During 1998
Greenstone will realize a $46 premium over spot on approximately 105,000
ounces of gold.
Gold production for the reporting period was 58,851 ounces (30,815 ounces
in 1997) and gold sales included in mining revenue were 50,655 ounces (21,490
ounces in 1997). For accounting purposes, cash production costs per ounce were
$230, compared to $320 during the first six months of 1997. As a result of the
increased production, and lower cash operating costs, operating margin
improved to $5,735,000, compared to $1,805,000 in 1997.
A foreign exchange gain of $1,214,000 was attributable to the continued
weakening of the Canadian dollar, as well as the strength of the U.S. dollar
versus the Nicaraguan Cordoba and the Honduran Lempira. Inventory levels were
higher due to the start-up of the Cerro Mojon mine, as well as increased
activities at the Company's other operating mines. The increase in accounts
payable reflects ongoing construction work at the San Andres project and Phase
III installation at Cerro Mojon.
On August 17, 1998 Greenstone accepted a $13 million bought deal
financing from an underwriting group for the purchase of 5.5 million common
shares at C$2.10 per share and US$5.35 million of five year, 12.5% unsecured
notes. The offering is subject to regulatory approval, including clearing a
short-form prospectus. Closing is expected on or about September 3, 1998.
Although the Company was reluctant to accept the financing, it felt compelled
to do so because of liquidity concerns expressed by shareholders. This
financing should put these concerns to rest. Although this financing amounts
to a 10% dilution to Greenstone's shareholders, it should be reassuring that
the Company can raise new funding in a very difficult market.
(signed)
Rudi P. Fronk
President and Chief Executive Officer
August 26, 1998
Toronto, Ontario, Canada
<<
INTERIM (UNAUDITED) CONSOLIDATED BALANCE SHEETS
As at June 30, 1998 and 1997
Expressed in thousands of United States dollars
1998 1997
-------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term investments $ 9,242 $ 27,137
Accounts receivable 3,167 1,462
Inventory 25,934 21,594
Prepaids and other 1,117 473
---------- ----------
39,460 50,666
Inventory 10,465 4,713
Mining interests 214,979 143,563
Deferred financing costs 2,284 2,815
Investments, at cost 4,028 525
Other 46 399
---------- ----------
$ 271,262 $ 202,681
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 10,000 $ ---
Accounts payable and accrued liabilities 17,220 8,403
Deferred revenue 5,181 ---
Current portion of long-term debt 2,030 2,166
---------- ----------
34,431 10,569
Long-term debt 67,430 71,497
Convertible debentures --- 2,711
Deferred revenue 2,294 ---
---------- ----------
104,155 84,777
Deferred foreign exchange gain 2,498 578
Shareholders' equity:
Share capital 197,250 147,404
Warrants 5,782 5,781
Deficit (38,423) (35,859)
---------- ----------
164,609 117,326
---------- ----------
$ 271,262 $ 202,681
---------- ----------
---------- ----------
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INTERIM (UNAUDITED) CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the six months ended June 30, 1998, 1997 and 1996
Expressed in thousands of United States dollars,
except share and per share amounts
1998 1997 1996
-------------------------------------------------------------------------
Mining revenue 17,403 8,699 3,650
Production costs 11,668 6,894 2,226
-------- -------- --------
5,735 1,805 1,424
General administration costs 3,098 2,448 1,353
Depreciation, depletion and amortization 2,312 1,257 222
Foreign exchange gain (1,214) (4) 79
Interest expense 1,137 --- 400
Interest and other income (432) (1,127) (178)
-------- -------- --------
4,901 2,574 1,876
Earnings (loss) before undernoted items 834 (769) (452)
Provision for income taxes --- --- (51)
Minority interest --- --- 43
-------- -------- --------
Net earnings (loss) $ 834 $ (769) $ (460)
Deficit, beginning of period 39,257 35,090 30,603
-------- -------- --------
Deficit, end of period $ 38,423 $ 35,859 $ 31,063
-------- -------- --------
Net earnings (loss) per share $ 0.01 $ (0.01) $ (0.01)
-------- -------- --------
Weighted average number of shares
outstanding (000s) 63,612 55,904 46,715
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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
CHANGES IN FINANCIAL POSITION
For the six months ended June 30, 1998, 1997, 1996
Expressed in thousands of United States dollars
1998 1997 1996
------------------------------------------------------------------------
Cash provided by (used in):
OPERATING ACTIVITIES:
Net earnings (loss) $ 834 $ (769) $ (460)
Items not affecting cash-
Depreciation, depletion
and amortization 2,312 1,257 222
Other (39) --- ---
Minority interest --- --- (43)
-------- -------- ----------
3,107 488 (281)
Change in long term inventory (184) 388 (2,359)
Change in long term deferred revenue (2,693) --- ---
Net change in non-cash
working capital (1,910) (4,356) (2,315)
-------- -------- ----------
(1,680) (3,480) (4,955)
INVESTING ACTIVITIES:
Mining interests, net (38,493) (31,272) (13,000)
Acquisition of Hemco --- --- (4,203)
Acquisition of minority
interest in Copan --- --- (5,829)
Other --- (38) ---
-------- -------- ----------
(38,493) (31,310) (23,032)
-------- -------- ----------
FINANCING ACTIVITIES:
Short-term borrowings (repayments) 10,000 (1,500) (6,630)
Long-term debt (611) 40,223 17,396
Financing receivable --- --- (12,143)
Conversion of convertible debentures --- --- (1,500)
Issue of share capital 445 654 33,535
Issues of warrants, net of issue costs --- 5,781 ---
Other 2 (306) (236)
9,836 44,852 30,422
-------- -------- ----------
Net cash increase (decrease) $(30,337) $ 10,062 $ 2,435
-------- -------- ----------
Cash and short-term investments,
beginning of period 39,579 17,075 1,892
-------- -------- ----------
Cash and short-term investments,
end of period $ 9,242 $ 27,137 $ 4,327
-------- -------- ----------
>>
-30-
For further information: Greenstone Resources Ltd., 26 Wellington Street
East, Suite 910, Toronto, Ontario, Canada, M5E 1S2, Telephone (416) 862-7300,
Facsimile: (416) 862-7604, greenston
Still feel this company is on track to becoming a large producer, if the POG turns around we will be sorry for not buying more at this prices.(imho)
Todd,
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