TSX Venture-listed GobiMin’s financial and operating results for the third quarter of 2011 showed the diversified explorer made a handsome profit on the sale of a stake in a Chinese coal project.
GobiMin disposed of a 24.49% indirect equity interest in Balikun Coal Project for a total consideration of $30.35 million, recording a gain of $8.21 million. The unaudited interim financial statements also showed the company ended the quarter with $63 million in cash. GobiMin also announced its Sawayaerdun Gold Project has completed drilling works of about 30,100 meters with 84 drill holes and continues for further drilling aiming to maximize the project potential and that it has extended the deadline for obtaining the mining license of Yanxi Copper Deposit to January 31, 2012.
Press Release:
TORONTO, Nov. 22, 2011 /CNW/ – (TSXV:GMN) GobiMin Inc. (“GobiMin” or the “Company”) reports its financial and operating results for the third quarter of 2011. The unaudited interim consolidated financial statements along with management’s discussion and analysis have been filed with SEDAR (www.sedar.com) and are also available at the website of the Company (www.gobimin.com).
Corporate Highlights
- The Sawayaerdun Gold Project has completed drilling works of about 30,100 meters with 84 drill holes and continues for further drilling aiming to maximize the project potential
- Completed disposal of 24.49% indirect equity interest in Balikun Coal Project for a total consideration of $30.35 million, recording a gain of $8.21 million
- Extended the deadline for obtaining the mining license of Yanxi Copper Deposit to January 31, 2012
- Continuing the exploration of other mineral projects in Xinjiang, China
- Actively searching for high quality exploration and mining projects
Financial Highlights
Three months ended Twelve months ended Three months ended September 30,
2011December 31,
2010September 30,
2010Cash and cash equivalents and time deposit $63 million $37 million $46 million Cash and cash equivalents and time deposit per share(1) $1.01 $0.57 $0.68 Working capital $55.5 million $51.1 million $34.1 million Total assets $123.5 million $119.1 million $122.1 million Net assets $88.1 million $85.2 million $86.5 million Net earnings / (losses) $8.0 million ($3.4 million) ($0.8 million) LBITDA(1) ($0.2 million) ($4.6 million) ($0.8 million) Basic and diluted earnings/(losses) per share $0.126 ($0.051) ($0.012) LBITDA per share(1) ($0.004) ($0.068) ($0.012)
(1) As non-IFRS measurements, LBITDA (losses before interest income and expense, income taxes, stock based compensation, depreciation and amortization), LBITDA per share and Cash and cash equivalents and time deposit per share do not comply with IFRS and, therefore, the amounts presented in the above table may not be comparable to similar data presented by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Business Summary and Development
(a) Gold Project in Xinjiang
Through a wholly owned subsidiary, the Company owns a 70% equity interest in Xinjiang Tongyuan Minerals Ltd. to develop and operate the Sawayaerdun Gold Project in Xinjiang, China.
As at 30 September 2011, about 30,100 meters of drilling and 84 drill holes have been completed. Eight further drill holes with around 1,490 meters in the Zone IV have been completed in October 2011. GobiMin has been conducting the testing during the drilling programs and has retained Mr. Philip Jones, B App Sc, AusIMM, AIG, a Qualified Person as defined by the NI 43-101, as consultant geologist for reviewing the exploration progress. Mr. Philip Joneshas reviewed the assay results for the 23 diamond drill holes from the 92 completed drill holes program and commented that the assay results have confirmed the continuity of the mineralization at depth while preparations in support of an updated resource estimate for Zone IV is well underway and an initial resource estimate for Zone I is expected once all the remaining assays have been received, hopefully by the end of 2011.
Due to the snowing weather, the exploration works were suspended in October 2011 and will be resumed by April 2012.
(b) Coal Project in Xinjiang
GobiMin formerly owned an indirect equity interest of 24.49% in the Balikun Coal Project in Xinjiang, China. It entered into an agreement with an existing shareholder of the project to dispose of all its 24.49% indirect equity interest. GobiMin has received the total consideration of $30.35 million, which includes the proceeds of the disposal, the repayment to the Company of the loans for the Balikun Coal Project and the related interests. GobiMin has recorded a gain of about $8.21 million as a result of the disposal.
Part of the consideration received will be used for investment and development of the Sawayaerdun Gold Project in Xinjiang and the remaining will be set aside for other investment opportunities.
(c) Silver Operation
GobiMin holds an equity interest of 49% in China Precision Material Limited (“China Precision”) which engages in metal trading and processing, predominantly in silver.
The Company has made advances to China Precision from time to time solely to finance its silver inventory depending on economic and market conditions. As at September 30, 2011, amounts due from China Precision to the Company amounted to $9.4 million while China Precision has a silver stock of 12.2 tonnes with a market value of$11.7 million. The Company recorded interest income of $242,667 through advancement of funding to ChinaPrecision for the nine months ended September 30, 2011 and $31,972 for the three months ended September 30, 2011. For the three months ended September 30, 2011, China Precision has a net profit of about $1.2 million and GobiMin recorded an equity gain of $572,146 from its investment in China Precision, comparing with an equity gain of$58,452 for the three months ended September 30, 2010.
(d) Base Metal Exploration Projects in Xinjiang
(i) Four Exploration Joint Ventures
GobiMin currently owns equity interests in four exploration joint ventures in Xinjiang, China for nickel, copper, and gold. GobiMin has invested a total of $2,883,012 (RMB19,000,000) as capital in five exploration joint ventures in Xinjiang since 2007, including the investment in the joint venture which found the Yanxi Copper Property subsequently disposed. The total cost of investment for the remaining four exploration joint ventures currently held amounted to $2,276,062 (RMB15,000,000) while the equity investment up to September 30, 2011 is $1,829,514(RMB12,057,106) after sharing the pre-operating and exploration expenses of $446,548 (RMB2,942,894). GobiMin will continue to conduct pre-survey and exploration to identify potential mineralization through these exploration joint ventures. Those exploration licenses not having good prospect are relinquished by not applying for renewal or selling to third parties. During the quarter ended September 30, 2011, the joint ventures had entered into agreements to dispose to local third parties of five exploration licenses not having good enough prospect for further exploration for a total consideration of $986,293 (RMB6,500,000), which are expected to be completed by the end of the year. The joint ventures have kept exploring seven copper projects among the exploration licenses which show good indications of copper mineralization.
(ii) Yanxi Copper Property
GobiMin formerly owned a 40% indirect equity interest in another joint venture, Xinjiang Tongxing Minerals Limited (“Tongxing”), which is engaged in exploration and development of the Yanxi Copper Property in Xinjiang, China. The Company entered into a Share Transfer Agreement with China Daye Non-Ferrous Metals Mining Limited (“China Daye”) on July 14, 2010 regarding the disposal of 80% of its equity interest in Tongxing. The transaction was completed on July 22, 2010 and GobiMin has received all the cash consideration and the first lot of convertible bonds (“CB”). GobiMin currently retains an 8% indirect unlisted equity interest in the Yanxi Copper Property.
The Company has entered into a supplemental agreement with China Daye on December 30, 2010 to extend the deadline for obtaining the mining license of the Yanxi Copper Property (the “Yanxi Mining Licence”) from December 31, 2010 to August 31, 2011. In addition to applying for Yanxi Mining Licence, the Company will also be responsible for applying for a mining licence (the “New Mining Licence”) for an area which is adjacent to the Yanxi Copper Property. The New Mining Licence should be obtained on or before June 30, 2014.
Pursuant to the second supplemental agreement entered into by the Company on August 30, 2011, the deadline for obtaining the Yanxi Mining Licence has been further extended to January 31, 2012. In addition, China Daye may, at its sole discretion, extend (1) the repayment date of the CB from July 22, 2012 to June 30, 2013 without extension of the period of the related rights of conversion or (2) the maturity date of the CB from July 22, 2012 to June 30, 2013including the deadline for conversion, subject to approval of The Stock Exchange of Hong Kong Limited and shareholders of China Daye (if necessary).
The application of the Yanxi Mining License is at the final stage and GobiMin is liaising with relevant government departments to facilitate the application to meet the deadline.
It is expected that upon obtaining the Yanxi Mining Licence, the Company would realize an estimated gain of about$5.7 million for its disposal of the 32% equity interest in Tongxing, with a further potential gain to be ascertained and realized after finalizing the New Mining Licence and the related exploration work.
(e) Normal Course Issuer Bid
On January 4, 2011, GobiMin announced its intention to renew its normal course issuer bid to repurchase up to an additional 3,294,541 common shares for a further year expiring on January 31, 2012. During the quarter endedSeptember 30, 2011, a total of 294,000 common shares have been repurchased at an aggregate cost of $195,928(CAD194,675). For the period from January 2011 to November 22, 2011, the programme has been completed with a total of 3,294,541 common shares repurchased at an average price of CAD0.788. All shares repurchased were returned to treasury for cancellation. Management believes that the repurchase by the Company of its own shares can maximize shareholder value and is in the best interest of the Company and its shareholders.
A copy of the related Notice of Intention to Make a Normal Course Issuer Bid for 2011 shall be provided to shareholders upon receipt of written request to the Company at its registered office.
(f) Working Capital
As at September 30, 2011, the Company has a working capital of about $55.5 million (December 31, 2010: $51.1 million), after netting off its current liabilities of $35.4 million (December 31, 2010: $33.9 million).
Other than financing the silver stocking of China Precision and the construction costs of the Sawayaerdun Gold Project, there is no significant cash outflow expected for the remainder of the fiscal year. The working capital is sufficient to support the development of the existing projects and operations.
Certain statements contained in this press release constitute forward-looking information. Such statements are based on the current expectations of management of GobiMin. The readers are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking information. The reader should not place undue reliance on the forward-looking information included in this press release given that (i) actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and (ii) certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information could prove to be inaccurate. These statements speak only as of the date they are made, and GobiMin assumes no obligation to revise such statements as a result of any event, circumstance or otherwise, except in accordance with law.
“Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.”
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