First Silver Reserve Inc. Quick Quote: T.FSR (no quote)
2001 Nine Month Results
11/30/01
FIRST SILVER RESERVE INC ("FSR-T") - 2001 Nine Month Results
First Silver Reserve Inc. announced its third quarter 2001 financial results. All amounts are expressed in United States dollars.
In the nine month period ended September 30, 2001, First Silver Reserve Inc. produced 1,767,015 ounces of silver (2000 - 1,730,466 ounces) and 3,505 ounces of gold (2000 - 2,127 ounces) from the Company's wholly owned San Martin Silver Mine in Jalisco State, Mexico. For the three months ending September 30, 2001, silver production was 605,461 ounces (2000 - 576,851 ounces) and gold production was 940 ounces (2000 - 764 ounces). Total mill throughput for the nine month period was 193,527 tonnes (2000 - 194,908 tonnes), as compared to 64,220 tonnes (2000 - 64,449 tonnes) in the three months ending September 30. In the nine month period, the mill head grade was 325 g/tonne silver (2000 - 308 g/tonne) and the mill recovery rate was 87.30% (2000 - 89.74%) as compared to a grade of 337 g/tonne (2000 - 308 g/tonne) and a recovery rate of 86.70% (2000- 89.32%) for the three months ended September 30, 2001.
Revenue for the nine month period was US $8.11 million compared with US $9.00 million for the same period in 2000, reflecting substantially lower prices for silver in 2001. Revenue for the three month period ending September 30 was US $2.59 million compared with US $3.05 million for the same period in 2000. Net loss for the three months ending September 30 was US $0.22 million or ($0.00) per share compared with net earnings of US $0.05 million or ($0.00) per share for the same period in 2000. Net loss for the nine months ending September 30 was US $0.84 million or ($0.02) per share compared with net earnings of US $0.15 million or (0.00) per share for the same period in 2000. The increased loss was a direct result of slightly higher costs and a lower realized silver price in 2001. The average price of silver during the first 9 months of 2001 was $4.40 per ounce and has trended lower thereafter. This silver price represents a multi-decade low in constant dollar terms.
Cost of sales were $7.39 million for the nine month period, as compared to $6.94 million for the year earlier period. General and administrative expenses were $0.75 million for the period as compared to $1.03 million in the first nine months of 2000. Depreciation was $0.83 million for the period, as compared to $0.74 million in the year earlier period as the Company continued to take depreciation on development costs capitalized in prior years. Cost of sales were $2.25 million for the three months ending September 30, 2001, as compared to $2.51 million for the year earlier period. General and administrative expenses were $0.24 million for the period as compared to $0.27 million in the third quarter of 2000. Depreciation was $0.29 million for the three month period, as compared to $0.25 million in the year earlier period. Cash costs, net of gold credits, were $4.18 per ounce of silver in the nine months ending September 30, 2001, as compared to $4.27 per ounce of silver in the year earlier period. Total costs, net of gold credits, were $4.61 per ounce of silver in the nine months ending September 30, 2001, as compared to $4.68 per ounce of silver in the year earlier period. Cash costs, net of gold credits, were $3.82 per ounce of silver in the three months ending September 30, 2001, as compared to $4.34 per ounce of silver in the year earlier period. Total costs, net of gold credits, were $4.26 per ounce of silver in the three months ending September 30, 2001, as compared to $4.74 per ounce of silver in the year earlier period.
Liquidity and Capital Resources
During the period the Company did not issue any share capital. Cash and short-term investments amounted to $0.37 million at September 30, 2001 as compared to $0.32 million at December 31, 2000. Working capital decreased to $0.36 million at September 30, 2001, as compared to $0.97 million at December 31, 2000. The Company does not currently have a line of credit with any financial institution.
Risks and Uncertainties
The Company's success depends on a number of factors which have been identified in the Management Discussion accompanying the Company's 2000 Annual Audited Financial Statements and which remain unchanged as at the date of this report.
As a primary silver producer, First Silver's revenues are dependent upon the price of silver. At September 30, 2001, the average London afternoon price for silver for the first nine months of 2001 was US$4.40 per ounce, as compared to US$5.03 at September 30, 2000. At the present time the Company has no hedging in place and therefore is fully exposed to market fluctuations in the price of silver. If silver prices were to remain at current levels for a sustained period, the mine's viability could be affected however Management is endeavouring to reduce costs and maintain the operation. Management believes that the strong fundamentals of the world silver market bode well for at least a modest rise in silver prices in the next few years. Therefore, the Company intends to continue to remain unhedged in the future so shareholders can benefit from any upward movement in the price of silver.
Underground Exploration
Progress on the El Banco exploration drift and a new haulage adit have been suspended while the Company awaits an increase in silver prices. Mine development work is being conducted to exploit several economic zones located in the El Banco exploration tunnel.
Banca Cremi Litigation Update
In 1992, the Company's wholly owned Mexican subsidiary, Minera El Pilon S.A. de C.V. ("El Pilon") entered into a contract with Banca Cremi S.A. de C.V. ("Banca Cremi") whereby Banca Cremi committed to advance a cash payment to El Pilon in exchange for 1,040,027 ounces of silver to be delivered in future installments. Banca Cremi did not advance the agreed upon amount and El Pilon therefore refused to deliver any silver.
In 1994, El Pilon sued the bank for breach of contract. In March, 2001, the Supreme Court of the State of Jalisco, Mexico, ruled in favour of El Pilon and condemned Banca Cremi to pay El Pilon a total award of approximately US$14.8 million dollars. Banca Cremi has appealed this decision and the Company has formally responded to the appeal. Due to Mexican court holidays, a Supreme Court of Mexico judgement on the appeal is now expected in the spring of 2002.
First Silver Reserve is a company focused on expanding reserves and production of silver from it's San Martin Mine.
First Silver Reserve Inc.
Consolidated Balance Sheets
(expressed in U.S. dollars)
September 30, December 31,
2001 2000
$ $
Assets
Current assets
Cash and cash equivalents 366,986 320,479
Accounts receivable 720,637 982,157
Inventories 1,020,285 1,104,922
Prepaid expenses 138,832 59,452
2,246,740 2,467,010
Resource assets 6,156,091 6,365,452
8,402,831 8,832,462
Liabilities
Current liabilities
Accounts payable and accrued liabilities 1,060,129 720,506
Employee profit sharing payable - 1,238
Other taxes payable 830,219 773,672
1,890,348 1,495,416
Future income taxes 1,422,258 930,578
Other long-term liabilities 2,844,207 3,028,046
6,156,813 5,454,040
Shareholders' Equity
Capital stock 820,053 820,053
Retained earnings 1,425,965 2,558,369
2,246,018 3,378,422
8,895,131 8,832,462
Nature of operations and going concern (note 1)
Approved by the Board of Directors
"Hector Davila Santos" Director "Len Brownlie" Director
The accompanying notes are an integral part of these
consolidated financial statements
First Silver Reserve Inc.
Consolidated Statements of Earnings and Retained Earnings
For the nine months ended September 30, 2001 and 2000
(expressed in U.S. dollars)
For The Three For The Three For The Nine For The Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
$ $ $ $
Revenue
Sales 2,578,859 2,864,346 8,075,843 8,710,900
Other 10,169 182,694 36,812 289,049
2,589,028 3,047,040 8,112,655 8,999,949
Cost and
expenses
Cost of sales 2,250,409 2,510,359 7,387,577 6,936,451
General and
administrative 243,042 273,261 751,294 1,033,481
Employee profit
sharing - (6,346) - 10,447
Depreciation
and depletion 288,348 248,057 827,309 744,300
Foreign exchange
(gain) loss 14,037 (44,240) (32,534) (15,527)
2,795,836 2,981,091 8,933,646 8,709,152
Earnings (loss)
before income
taxes (206,808) 65,949 (820,991) 290,797
Provision for
(recovery of)
income taxes
Current - (22,210) - 36,565
Future 8,706 41,839 20,649 108,752
8,706 19,629 20,649 145,317
Net earnings
(loss) for
the period (215,514) (46,320) (841,640) 145,480
Retained
earnings -
Beginning
of period 1,641,479 2,138,315 2,672,009 2,039,155
Retained
earnings -
End of period 1,425,965 2,184,635 1,425,965 2,184,635
Earnings
(loss)
per share (0.00) (0.00) (0.02) (0.00)
Weighted
average
number of
shares
outstanding 36,671,921 36,671,921 36,671,921 36,671,921
The accompanying notes are an integral part of these
consolidated financial statements.
First Silver Reserve Inc.
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2001 and 2000
(expressed in U.S. dollars)
For The Three For The Three For The Nine For The Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
$ $ $ $
Cash flows
from operating
activities
Net earnings
(loss) for
the period (215,514) 46,320 (841,640) 145,480
Items not
affecting
cash
Depreciation
and
depletion 288,348 248,057 827,309 744,300
Future
income
taxes (16,784) 38,308 491,680 108,752
56,050 332,685 477,349 998,532
Changes in
non-cash
working
capital
items 52,278 262,587 370,945 227,857
108,328 595,272 848,294 1,226,389
Cash flows
from financing
activities
Increase
(Reduction)
in long term
debt 9,702 34,830 (183,839) 183,839
Cash flows from
investing
activities
Resource asset
expenditures (150,789) (317,025) (617,948) (1,078,663)
Increase
(Decrease) in
cash and cash
equivalents (32,759) 313,077 46,507 331,565
Cash and cash
equivalents -
Beginning of
period 399,745 448,160 320,479 429,672
Cash and cash
equivalents -
End of period 366,986 761,237 366,986 761,237
The accompanying notes are an integral part of these
consolidated financial statements.
First Silver Reserve Inc.
Notes to Consolidated Statements
For the nine months ended September 30, 2001 and 2000
Basis of presentation
These consolidated financial statements include the accounts of First Silver Reserve Inc. (the company), and its wholly owned subsidiary Minera El Pilon S.A. de C.V. (El Pilon), which owns the San Martin silver mine and adjacent properties in Jalisco State, Mexico. El Pilon.
These interim period consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles. These consolidated financial statements are based on accounting principles and practices consistent with those used in the preparation of the Company's annual consolidated financial statements. Certain information and footnote disclosure normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These interim period statements should be read together with the audited consolidated financial statements and the accompanying notes included in the Company's latest annual report.
Capital stock
Authorized
100,000,000 common shares without par value
Issued and outstanding
Number of shares $
Balance - September 30, 2001 36,671,921 849,654
Stock options outstanding
The company does not have a formal stock option plan. Options and terms are granted by the directors at their discretion. The following table summarizes information about the options at September 30, 2001 and the changes for the three months then ended:
2001 2000
Number of Weighted Number of Weighted
shares average shares average
exercise exercise
price price
Cdn. $ Cdn. $
Options outstanding -
Beginning and end
of period 1,530,000 0.55 1,530,000 0.55
TEL: (604) 602-9973 First Silver Reserve Inc. FAX: (604) 681-5910 TEL: 1-888-377-6676 Internet: firstsilver.com E-mail: info@firstsilver.com
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