Pacific Rim six-month financial review
Pacific Rim Mining Corp PFG
Shares issued 21,615,370 Jan 24 close $3.70
Tue 25 Jan 2000 Company Review
Mr. David De Witt reviews the company
Financial results for the second quarter ended Oct. 31, 1999, were as
follows:
Pacific Rim focused all of its exploration efforts during this quarter on
its newly acquired Luicho gold project in Peru. The project hosts a
low-sulphidation epithermal gold prospect marked by highly anomalous gold
mineralization that outcrops on surface over a broad area. This target has
the potential to host a low cost, multimillion ounce gold deposit. The
following events were reported on by Pacific Rim during and subsequent to
the second quarter of fiscal 2000.
Luicho project, Peru
On Sept. 16, 1999, Pacific Rim acquired an option to earn a 100-per-cent
interest in the Santiago III claim, which hosts the Luicho gold project in
Southern Peru. The option calls for Pacific Rim to make payments totalling
$25.82-million (U.S.) over a three-year period, with the bulk of the
payment ($24.22-million (U.S.)) due on the third anniversary of regulatory
approval of the agreement. The acquisition is also subject to a sliding
scale royalty of 2.5 per cent to 3.5 per cent depending on the price of
gold. The agreement was formally recorded in the Mining Registry in Lima,
Peru, in late November, 1999, completing the registration process, and was
approved by the Toronto Stock Exchange on Nov. 25, 1999, which is the
effective date for subsequent option payments.
Pacific Rim has to date collected 1,600 continuous rock chip surface
samples from the Luicho target. The average grade of all 1,600 of these
samples is 2.06 grams per tonne gold. Most were collected from a 250-metre
wide north to northeast trending structural corridor that is related to a
complex series of strike slip faults. These faults have fractured the host
rocks and structurally prepared them for the deposition of gold
mineralization. The structural corridor is now known to host mineralization
over a strike length of 1,500 metres.
The primary host rock for gold mineralization at Luicho is an approximately
400-metre-thick series of sandstone horizons. These units are overlain by a
shale unit that the company believes may have acted as an impermeable cap
to the hydrothermal fluids that deposited gold in the sandstones beneath.
The shales have been largely eroded away, with only local scabs remaining
in the main target area. This indicates that little, if any, of the
mineralized sandstones have been eroded away. The vertical topographic
relief along the structural corridor is 350 metres, and mineralization has
been identified over a true stratigraphic thickness of approximately 200
metres.
The structural corridor has been divided into three zones based on the
degree of faulting and brecciation of the sandstones and the intensity of
mineralization. Of the 1,600 samples collected to date, 672 are from the
Central zone (550 metres long by 250 metres wide), 486 are from the
Northeast zone (700 metres long by 400 metres wide) and 19 are from the
South zone (300 metres long by 250 metres wide). The remaining samples were
collected from outside the structural corridor. This target remains open in
all directions.
The results of the sampling conducted to date in each zone are summarized
in the table below.
% of Average
Samples Grade of
Average Exceeding Samples
No. of Grade 0.31 Exceeding
Samples of g/t Au 0.31
in Total Cutoff g/t Au
Zone Total Samples (%) Cutoff
Northeast 486 1.05 65 1.54
Central 672 3.66 73 4.99
South 19 8.97 100 8.97
Total for
structural
corridor 1,177 2.67 70 3.75
Pacific Rim intends to continue its extensive surface sampling program at
Luicho in order to fill in and expand the target prior to drilling.
Negotiations to acquire surface fights to the Santiago III and surrounding
claims are currently under way with the local community. Once an agreement
is finalized (current estimates are for early in the new year), the company
will commence construction of a 6.5-kilometre access road to the site. This
road will provide access for the mobilization of heavy machinery to conduct
trenching on the Luicho target, and of two reverse circulation drills which
will be used to complete the planned 12,000-metre phase I drill program.
The company's best estimate for commencement of drilling is in the spring
of 2000. This will allow sufficient time to complete the surface sampling
as well as a detailed geologic map of the target, which will aid in the
company's understanding of the controls on gold mineralization. Lastly,
reconnaissance prospecting of the remainder of the Santiago III claim, as
well as Pacific Rim's 6,000 hectares of 100-per-cent-owned claims is being
undertaken in an effort to identify additional mineralized centres.
San Francisco project, Argentina
Pacific Rim is currently conducting a review of the data generated during
its 13-hole 2,000-metre reverse circulation drill program on the San
Francisco project. This extensive data evaluation will be used to gain a
greater understanding of the controls on gold, silver and base metal
mineralization, and will use geophysical results as well as trace element
geochemistry in order to better model the target. Pacific Rim's modest,
though successful drill campaign at San Francisco moved the prospect
several steps forward in defining the target, and the results (reported on
in the company's first quarterly report for fiscal 2000) clearly indicate
that additional drilling is warranted.
Cofradia project, Peru
On Sept. 23, 1999, Pacific Rim informed SMRL La Capilla that it would be
terminating the purchase option on the Cofradia project in Southern Peru
and would not be making any further payments for the property.
Pacific Rim's decision not to go forward with the Cofradia project was
based on the results of a 6,000-metre drill program completed by the
company between July and September, 1999. Significant mineralization was
identified in only one of 21 reverse circulation holes completed at
Cofradia.
Corporate update
In Stockwatch Aug. 19, 1999, Pacific Rim announced that it had adopted a
shareholder rights plan, which was subsequently ratified by the
shareholders of the company at Pacific Rim's annual general meeting, held
in Vancouver on Oct. 14, 1999. This plan was implemented in order to
achieve full and fair value for the company's shareholders in the event of
an unsolicited takeover bid for the company.
Financial
The cash balance decreased from $7,592,577 at April 30, 1999, to $3,759,242
at Oct. 31, 1999, a difference of $3,833,335. In the prior year the cash
balance decreased from $9,833,276 at April 30, 1998, to $8,008,969 at Oct.
31, 1998, a difference of $1,824,307.
Operations
Loss from operations increased from $2,099,200 in 1998 to $3,065,695 in
1999. However, if the write-off of mineral property costs ($2,679,277 in
1999 and $1,800,481 in 1998) is excluded, the loss from operations for 1999
has increased from $298,719 in 1998 to $386,418 in 1999. Write-offs in 1998
included $1,345,341 of property costs for the Cerro Blanco property in
Argentina, and in 1999 write-offs include $248,598 of property costs for
the Fantasma property in Argentina and $2,058,015 of property costs for the
Cofradia project in Peru.
Interest income decreased from $207,054 in 1998 to $124,195 in 1999,
because of the decrease in cash for short-term investments. Foreign
exchange loss increased from a gain of $65,368 in 1998 to a loss of $45,147
in 1999 because of the exchange rate of Canadian to U.S. dollars. Wages and
employee benefits decreased from $258,830 in 1998 to $175,270 in 1999,
primarily because of a decrease in administration staff.
Investment and financing
Total expenditures on properties increased from $1,482,783 in 1998 to
$3,504,927 in 1999. Expenditures on the Cofradia and La Espina claims in
Peru increased from $398,515 in 1998 to $1,523,449 in 1999. Expenditures on
the San Francisco claims in Argentina increased from $8,889 in 1998 to
$758,222 in 1999. Expenditures on the Luicho project in Peru increased from
nil in 1998 to $622,900 in 1999. Investigative exploration costs decreased
from $455,142 in 1998 to $346,890 in 1999.
CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended Oct. 31
1999 1998
Operating
expenses
Write-off of
mineral property
costs $ 2,679,277 $ 1,800,481
Wages and
employee benefits 175,270 258,830
Office, secretarial
and bookkeeping 89,004 93,949
Shareholder
information 54,573 51,799
Foreign exchange
loss (gain) 45,147 (65,368)
Professional fees 45,044 67,272
Rent 33,107 40,202
Audit and
accounting 24,889 28,785
Travel 16,386 17,000
Transfer agent
fees 10,445 2,915
Amortization 8,612 10,389
Listing and
filing fees 8,136 0
Interest and bank
charges -- net (124,195) (207,054)
----------- -----------
Income (loss) for
the period $(3,065,695) $(2,099,200)
=========== ===========
Income (loss)
per share (14 cents) (10 cents)
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