Vancouver — The second quarter of 2003 proved to be a stellar one for LionOre Mining International (LIM-T).
The nickel-gold miner earned US$11.1 million, or $0.07 per share in the three months ended June 30, compared with a loss of US$600,000, or $0.01 per share in the corresponding period of 2002. Revenue jumped to US$71.2 million, from the US$10.4 million tallied last year, while cash flow from operations rocketed to US$22.4 million from US$2.2 million tallied in the same period one year ago.
“Our strong financial results are the product of exceeding our production and other operational goals,” says company President, Colin Steyn. “The higher than anticipated nickel prices had a positive effect on our results but only partially offset the adverse effects of the strengthening currencies in the countries where we operate.”
Driving the stellar profit growth was the company’s 85% held Tati Nickel operation, which runs the Phoenix open pit nickel mine 80 km east of Francistown in North-Eastern Botswana. Earnings before non-controlling interest came in at US$7 million for the quarter, compared to a loss of US$800,000 in the second quarter of 2002.
Tati Nickel delivered 3,252 tonnes of payable nickel during the quarter at a cash cost of US$2.24 per lb. Nickel concentrate stockpile at the end of the quarter was 14,184 tonnes, down from 19,436 tonnes at the end of the first quarter. After-tax profit inherent in the stockpile is US$1.6 million.
The company’s Australian operations also continued to perform well by contributed US$6.7 million for the three months. This marks a significant increase over the US$700,000 profit put in last year. .
In the Lake Johnston greenstone belt of Western Australia, the Emily Ann underground mine contributed 2,112 tonnes of nickel in the first quarter at a cash cost of US$1.80 per lb.
Development of the nearby Maggie Hays nickel deposit, which is expected to ramp up Australian nickel production for the junior to between 10,000 and 12,000 tonnes per year by the end of 2004, is progressing.
Located only 3-km south of its wholly owned Emily Ann operation, the larger Maggie Hays deposit was giving the green light for a US$13 million development program based on the completion of a feasibility study on the main massive sulphide zone, which contains an indicated resource of 633,000 tonnes grading 3.55% nickel.
The company envisions mining the lower massive sulphide zone (probable reserve of 475,000 tonnes at 3.55%), while evaluating a small high-grade section at the upper part of the massive sulphide zone by decline drilling. LionOre Mining believes that incremental production from the high-grade section could be achieved by the second half of the year, with production from the lower zone coming in the third quarter of 2004.
Using a US$3.25 per lb. nickel price, average cash operating costs ring in at US$170 per lb., generating some US$15 million is cash flow for LionOre Mining. Underground development costs, expected to hit US$13 million, will be funded using existing cash. Nickel concentrates will be sold to Inco (
In anticipation of the go ahead, underground development at the Emily Ann mine has been ramped up with production rising to 350,000 tonnes per year by the second quarter of 2003, from the 250,000 tonnes currently.
The high-grade section of the Maggie Hays deposit was discovered in 1993, and despite hosting an overall resource of 11 million tonnes grading 1.5% nickel, advancement of the project has been delayed by a complex ownership structure. In May of 2002, LionOre Mining secured a 9-month exclusive option agreement with the BHP Billiton (BHP-N) group to acquire the latter’s 69% interest in Maggie Hays and its 67% interest in the surrounding exploration tenements. The price tag to move to 100% ownership of Maggie Hays is A$16.7 million, with A$6 million already paid in April, and the remainder due over the next 5 years.
Overall, the deposit is 1.4 km long and has a maximum down-dip extension of 500 metres. Mineralization comprises mainly pyrrhotite and pentlandite, with lesser amounts of pyrite and chalcopyrite. The Main zone hosts disseminated mineralization up to 40 metres thick, stratigraphically underlain by a massive sulphide zone up to 7 metres wide. The disseminated mineralization contains 15-20% sulphides, while the basal massive sulphide contains around 80% sulphides.
A complex tabular zone of stringer and massive sulphides, hosted by felsic volcanics marks the Maggie Hays North zone. The mineralization ranges from 3 to 8 metres wide and is controlled by a shear zone that dips 60 to the east. The combined indicated resource of the two zones is about 3 million tonnes grading 2.4% nickel.
Moving over to the Northeastern gold fields of Western Australia, the company’s 60% owned Thunderbox gold mine cranked out 65,845 oz of gold at a cash cost of US$111 per oz, compared with 62,878 oz produced at a cash cost of US$106 per oz in the first quarter, the mines first full quarter of production.
On June 3, LionOre and Aussie-listed Dalrymple Resources, which holds the remaining 40% stake in Thunderbox, entered into an agreement to merge. Under the deal, Dalrymple shareholders will receive one LionOre share for every 2.92 Dalrymple shares. The merger is expected to be completed during the fourth quarter.
Exploration around the Thunderbox operation discovered a new zone of primary gold mineralization immediately north of the existing pit. Dubbed Zone D, reconnaissance holes returned up to 2.84 grams gold over 98.7 metres. Drilling is continuing to outline the extent of the mineralization.
At June 30, LionOre had working capital of US$24.8 million, up from US$5.9 million at the end of 2002 and debt of US$55.1 million, down from US$86.7 million at the end of 2002.
“We remain well funded to support our strategic growth plan,” adds Steyn. “with increasingly robust operations and a solid balance sheet we are strongly positioned to grow through exploration and development of our existing properties and by potential corporate activity.”
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