Nord Resources Reports 2011 Third-Quarter Results

  • Performance continues to reflect July 2010 action to suspend mining of new ore pending debt restructuring and new financing
  • Company continues producing copper by leaching ore previously placed on pads - third-quarter 2011 net sales of $3.8 million
  • Net loss of $1.7 million in 2011 third quarter, reduced from $3.9 million in 2010 period
  • Company is recognized by MSHA for its outstanding 2010 safety record

TUCSON, AZ, Nov. 15, 2011 /CNW/ - Nord Resources Corporation (OTC Pink Market: NRDS), which is producing copper at its Johnson Camp Mine in Arizona, today announced its unaudited financial results for the third quarter ended September 30, 2011.  The condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles and all currency amounts are in U.S. dollars.

"Since July 2010, when we suspended mining new ore in order to reduce our expenses and maximize cash flow, we have been producing copper by leaching the ore previously placed on our three pads and processing it through the Johnson Camp Mine's SX-EW plant," said Wayne Morrison, Chief Executive and Chief Financial Officer.

"Our financial results through the first nine months of 2011 reflect our control of operating expenses given the expected slow decline in copper production from the leaching process. We have been working on obtaining new financing that would enable us both to restructure our debt and to resume mining and processing new ore. While we have made progress on this, we have not completed an agreement and cannot be certain of success until that is accomplished," Mr. Morrison continued.

"A key part of our operating strategy going forward remains our previously announced plan to build a new leach pad that will enable us to achieve our target production rate of 25 million pounds of copper per year.  The new pad will require an estimated capital investment of approximately $18 million. We have made progress toward obtaining the required permit to build and operate this new pad, and believe it is likely that we will be able to proceed with it within months, subject to completing a financing agreement," said Mr. Morrison.

"On behalf of our operating team, I am proud to report that the United States Department of Labor, Mine Safety and Health Administration recognized our Johnson Camp Mine with its Certificate of Achievement in Safety for 2010 for having gone 84,150 employee hours without a loss of workday injury. The Johnson Camp Mine ranked second nationally and number one in Arizona for the Large Open Pit Group category," Mr. Morrison said.

Financial Highlights

  • Third-quarter 2011 net sales were $3,845,199 (including $11,398 in amortization of deferred revenue) from the sale of 960,864 pounds of copper; nine-month 2011 net sales were $11,985,373 (including $36,448 in amortization of deferred revenue) from the sale of 2,861,378 pounds of copper. The average realized price of copper sold during the three and nine-month periods was $4.00 and $4.19 per pound, respectively.

    For the 2010 third quarter, net sales were $7,896,253 (including $31,548 in amortization of deferred revenue) from the sale of 2,393,591 pounds of copper; nine-month 2010 net sales were $22,604,645 (including losses of ($1,866,237) from the settlement of copper hedges and $99,441 in amortization of deferred revenue) from the sale of 7,544,721 pounds of copper.  The average realized price of copper sold during the three and nine month periods ending September 30, 2010 was $3.29 and $2.99 per pound, respectively.  The average realized price of copper sold during the three and nine month periods ending September 30, 2010 would have been $3.29 and $3.24 per pound, respectively, if the effective copper hedges in place during the first three months of 2010 were not classified as cash flow hedges.

    Costs applicable to sales in the 2011 third quarter amounted to $4,480,918 (including $3,038,489 in abnormal production costs due to the underutilization of plant capacity). For the first nine months of 2011, Nord incurred $13,142,763 (including $9,012,899 in abnormal production costs due to the underutilization of plant capacity) of costs applicable to sales.  The average cost per pound of copper sold during the third quarter and first nine months of 2011 was $4.66 and $4.59 per pound, respectively. The average cost per pound of copper sold during the third quarter and first nine months of 2011 excluding abnormal production costs was $1.50 and $1.44 per pound, respectively.

    For the 2010 third quarter, Nord incurred $5,676,743 (including $2,849,091 in abnormal production costs due to the underutilization of plant capacity) of costs applicable to sales from the sale of copper. For the first nine months of 2010, the company incurred $13,345,989 (including $4,675,851 in abnormal production costs due to the underutilization of plant capacity) of costs applicable to sales from the sale of copper. The average cost per pound of copper sold during the third quarter and first nine months of 2010 was $2.37 and $1.77 per pound, respectively. The average cost per pound of copper sold excluding abnormal production costs was $1.18 and $1.15 per pound, respectively, during the same periods.

    The increase in the average cost per pound of copper sold during the 2011 three and nine-month periods versus the same periods in 2010 is primarily due to the absorption of increased abnormal production costs resulting from the underutilization of plant capacity.

  • General and administrative (G&A) expenses increased to $534,959 for the 2011 third quarter, compared with $326,505 for the 2010 period. The increase was primarily due to a $292,351 write-off of accrued bonuses resulting in lower than normal wages in the 2010 quarter. The increase was partially offset by a decrease of $111,215 in wages and salaries from $246,128 in the 2010 third quarter to $134,913 in the current-year period. For the nine-month 2011 period, G&A expenses increased to $1,729,415, compared with $1,572,901 for the first nine months of 2010.  The increase was primarily due to a $292,351 write-off of accrued bonuses in the 2010 period, resulting in lower than normal wages. Amortization of stock options also increased from $71,847 to $159,206 for the nine-month 2010 and 2011 periods, respectively. These increases were partially offset by a decrease in wages and salaries from $659,547 to $428,596 for the respective 2010 and 2011 periods.

  • Depreciation, depletion, and amortization (DD&A) expenses decreased to $253,161 in the 2011 third quarter from $470,321 in the 2010 period. For the first nine months of 2011, DD&A amounted to $743,148, down from $1,328,262 in the 2010 period. The decrease was primarily due to the reduction in the amount of tons mined and of copper produced as a result of halting the mining and crushing of new ore in July 2010.

  • Loss from operations was ($1,423,839) in the 2011 third quarter, compared with income from operations of $1,422,684 in the 2010 period.  For the first nine months of 2011, the loss from operations amounted to ($3,629,953), compared with income from operations of $6,357,493 in the first nine months of 2010.

  • Other income (expense) for the 2011 third quarter amounted to ($310,886), compared with ($5,353,811) in the 2010 period. The improvement reflected interest expense in the 2011 third quarter of ($925,312), partially offset by a gain on derivatives classified as trading securities amounting to $602,402. In the 2010 third quarter, the company incurred interest expense of ($874,497), an unrealized loss on the de-designation of cash flow hedges of ($319,542), and a loss on derivatives classified as trading securities of ($4,165,463).

    For the 2011 nine-month period, other income (expense) amounted to ($3,455,570), compared with ($16,442,469) in the comparative 2010 period. In the first nine months of 2011, Nord recorded interest expense of ($2,734,798), a loss on derivatives classified as trading securities of ($788,807); the 2010 nine-month interest expense totaled ($2,360,840), and the company recorded an unrealized loss on the de-designation of cash flow hedges of ($13,712,395) and a loss on derivatives classified as trading securities of ($226,852).

  • Primarily as the result of the factors discussed above, Nord recorded a net loss of ($1,734,725) for the 2011 third quarter, or ($0.02) per basic and diluted common share, compared with a net loss of ($3,931,127) for the 2010 period, or ($0.04) per basic and diluted common share. The net loss for the first nine months of 2011 amounted to ($7,085,523), or ($0.06) per basic and diluted common share, compared with a net loss of ($10,084,976), or ($0.09) per basic and diluted common share in the comparative 2010 period.

Liquidity and Cash Flow

As noted, Nord's copper production in 2010 and through the first half of 2011 was significantly below earlier expectations for the reasons previously disclosed as well as the July 2010 decision to suspend mining and crushing new ore.  This shortfall adversely affected the company's working capital and cash flow causing Nord to be unable to meet some of its debt obligations in 2010 and 2011.

As announced on May 14, 2010, Nedbank Limited (Nedbank), the company's senior lender, declined to extend a forbearance agreement regarding the scheduled principal and interest payments that were due between March 31, 2010 and September 30, 2011 under Nord's $25 million secured term-loan facility. Accordingly, the company has been in default of its obligations under the Credit Agreement with Nedbank since May 14, 2010, and the full amount of the outstanding principal of $23,257,826 must now be included in the company's current liabilities. As at September 30, 2011, the company has reclassified $3,566,742 of senior long-term debt to current liabilities within the condensed consolidated balance sheet.

During the nine months ended September 30, 2011, Nord's senior lender required the company to reclassify $829,768 of interest payments previously credited to accrued interest to the company's copper-hedge settlement payable account. Accordingly, total accrued interest related to the Credit Agreement was $4,009,392 and $1,689,181 as at September 30, 2011 and December 31, 2010, respectively, and is included within accrued interest on the condensed consolidated balance sheets.

Nedbank Capital also declined to extend the forbearance agreement regarding the company's failure to make the timely monthly settlement payments beginning in March of 2010 through September 30, 2011 under the copper hedge agreement. As of September 30, 2011, the amount due to Nedbank Capital related to these settlements is $14,093,847 and is included in current liabilities within the copper derivatives settlement payable line item. The remaining derivative contracts under this agreement settle in 2011 and are therefore included in current liabilities as at September 30, 2011.

As previously disclosed, given this default, Nedbank has full authority to exercise its rights under the Credit Agreement, including the acceleration of the full amount due and the institution of foreclosure proceedings against the Johnson Camp Mine. In accordance with the Credit Agreement, upon an event of default, the interest rate on the outstanding debt and unpaid accrued interest is increased by 3.00% to the three-month United States Dollar London Interbank Offered Rate plus 9.06% (9.33% at September 30, 2011).

  • At the end of the 2011 third quarter, the company had cash reserves of $0.3 million, excluding $0.7 million in restricted marketable securities being held in conjunction with two letters of credit. The working capital deficiency of ($49.8) million includes current liabilities of $1.8 million in current maturities of derivative contracts, $19.7 million in the current portion of senior long-term debt, $14.1 million in copper derivatives settlement payable, and $3.6 million of senior long-term debt that was classified as current liabilities due to the company's default on the underlying agreements. As at December 31, 2010, cash reserves were $1.1 million and the working capital deficiency amounted to ($39.8) million, including current liabilities of $8.7 million in current maturities of derivative contracts, $14.3 million in current portion of senior long-term debt, $7.7 million in copper derivatives settlement payable, and $8.9 million of senior long-term debt that was accelerated to current liabilities due to the company's default on the underlying agreements.

  • Cash flows from operating activities during the first nine months of 2011 and 2010 were $159,681 and $1,765,878, respectively.  The company recognized net losses of ($7,085,523) and ($10,084,976) for the respective 2011 and 2010 periods. Cash provided (used) in the mining and processing of inventory amounted to $3,481,895 and $(9,402,057) during the 2011 and 2010 nine-month periods, respectively. Total increases in accounts payable, accrued expenses, including accrued interest, and copper derivatives settlement payable generated $9,302,302 and $9,863,541 of cash flow from operations during the nine month periods ended September 30, 2011 and 2010, respectively.  These increases were offset by the unrealized gains on derivatives classified as trading securities of $(6,859,481) and $(3,902,204) for the nine month periods ended September 30, 2011 and 2010, respectively.  Cash flows from operations were materially impacted during the nine month period ended September 30, 2010 by the unrealized loss on the de-designation of derivatives as cash flow hedges of $13,712,395.

  • Cash flows from financing activities during the first nine months of 2011 were ($313,706) compared with ($1,039,987) for the same period in 2010.  The change in the net cash used by financing activities is primarily due to the $301,068 in principal payments made on the Fisher Promissory Note during the 2011 nine-month period versus the payments made on the Note of $876,413 in the comparable 2010 period.

About Nord Resources

Nord Resources Corporation is producing copper at the Johnson Camp Mine, the company's primary asset, which is located approximately 65 miles east of Tucson, Arizona. For further information, please visit our website at nordresources.com.

Forward-Looking Statements

All statements in this release, other than those of historical facts, may be considered to be "forward-looking".

Nord's continuation as a going concern is dependent upon its ability to refinance the obligations under its Credit Agreement with Nedbank and the Copper Hedge Agreement with Nedbank Capital, raise additional capital, and on its ability to produce copper to sell at a level where the company becomes profitable and generates cash flows from operations. To succeed, Nord must be able to proceed with its plans to build additional leach pad capacity, resume full operations, and achieve its operating plan. If management cannot achieve its operating plan because of the company's inability to obtain the required financing, or because of sales shortfalls, a reduction in copper prices, or other unfavorable events, the company may find it necessary to dispose of assets, or undertake other actions as may be appropriate.

Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, Nord's ability to refinance the company, the market price of copper, general economic, market, and business conditions, the company's ability to reach full production rates, and other factors that may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. In addition, Nord's business and operations are subject to the risk factors set forth in Nord's most recent Form 10-K and other SEC filings which are available through EDGAR at www.sec.gov, and in Nord's prospectus and other filings with the British Columbia and Ontario Securities Commissions, which are available through SEDAR at www.sedar.com. Nord assumes no obligation to update the forward-looking statements except as may be required by law.

                       
NORD RESOURCES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
                       
              September 30,
2011
      December 31,
2010
              (Unaudited)        
ASSETS                      
                       
Current Assets:                      
  Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses and other assets















$
 
 
 
338,386
467,943
3,775,877
296,710






$
 
 
 
1,120,023
442,403
4,685,599
146,534
                       
    Total Current Assets             4,878,916       6,394,559
                       
Property and Equipment, at cost:                      
  Property and equipment
Less accumulated depreciation, depletion and amortization





 
 
50,397,687
(6,038,933)


 
 
51,096,100
(5,639,197)
                       
    Net Property and Equipment             44,358,754       45,456,903
                       
Other Assets:                      
  Deposits
Restricted marketable securities
Stockpiles and ore on leach pads
Debt issuance costs, net of accumulated amortization















 
 
 
 
123,093
686,476
7,312,890
455,176






 
 
 
 
123,093
686,476
10,228,475
714,653
                       
    Total Other Assets              8,577,635       11,752,697
                       
    Total Assets           $ 57,815,305     $ 63,604,159
                       
                       

NORD RESOURCES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
(Continued)
                       
              September 30,
2011
      December 31,
2010
              (Unaudited)        
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                      
                       
Current Liabilities:                      
  Accounts payable
Accrued expenses
Accrued interest
Copper derivatives settlement payable
Current maturities of long-term debt
Current maturities of senior long-term debt
Current maturities of derivative contracts, at fair value
Senior long-term debt accelerated due to default
Other current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 
 
 
 
 
 
 
 
4,454,673
577,982
4,194,605
14,093,847
6,194,360
19,691,084
1,818,445
3,566,742
53,729
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 
 
 
 
 
 
 
 
3,915,011
894,389
1,762,709
7,660,508
-
14,320,788
8,677,926
8,937,038
55,856
                       
    Total Current Liabilities             54,645,467       46,224,225
                       
Long-Term Liabilities:                      
  Long-term debt
Deferred revenue, less current portion
Accrued reclamation costs
Other long-term liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-
4,656,618
3,111,081
111,073
 
 
 
 
 
 
 
 
 
 
 
 
6,495,428
4,690,940
3,932,966
133,505
                       
    Total Long-Term Liabilities             7,878,772       15,252,839
                       
    Total Liabilities             62,524,239       61,477,064
                       
Commitments and contingencies                      
                       
Stockholders' Equity (Deficit):                      
  Common stock: $.01 par value, 400,000,000 and 200,000,000
 shares authorized, 112,177,627 and 111,814,852  shares
 issued and outstanding as of  September 30, 2011 and
 December 31, 2010, respectively
Additional paid-in-capital
Accumulated deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,121,777
122,081,000
(127,911,711)
 
 
 
 
 
 
 
 
 
1,118,149
121,835,134
(120,826,188)
                       
    Total Stockholders' Equity (Deficit)             (4,708,934)       2,127,095
                       
    Total Liabilities and Stockholders' Equity (Deficit)           $ 57,815,305     $ 63,604,159
                       

NORD RESOURCES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(Unaudited)
                       
              2011       2010
                       
Net sales           $ 11,985,373     $ 22,604,645
                       
Costs applicable to sales (exclusive of depreciation, depletion
and amortization shown separately below)
            13,142,763       13,345,989
General and administrative expenses (includes stock based
compensation of $237,956 and $216,950, respectively)
            1,729,415       1,572,901
Depreciation, depletion and amortization             743,148       1,328,262
                       
    Income (loss) from operations             (3,629,953)       6,357,493
                       
Other income (expense):                      
  Interest expense
Unrealized loss on de-designation of cash flow hedges
Losses on derivatives classified as trading securities
Miscellaneous income (expense)















 
 
 
 
(2,734,798)
-
(788,807)
68,035






 
 
 
 
(2,360,840)
(13,712,395)
(226,852)
(142,382)
                       
    Total other income (expense)             (3,455,570)       (16,442,469)
                       
Loss before income taxes             (7,085,523)       (10,084,976)
                       
Provision for income taxes             -       -
                       
Net loss           $ (7,085,523)     $ (10,084,976)
                       
Net loss per basic and diluted share of common stock:                      
                       
    Weighted average number of basic and diluted common
shares outstanding
            113,491,342       111,720,671
    Basic and diluted loss per share of common stock           $ (0.06)     $ (0.09)
                       

NORD RESOURCES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(Unaudited)
                       
              2011       2010
                       
Net sales           $ 3,845,199     $ 7,896,253
                       
Costs applicable to sales (exclusive of depreciation, depletion
and amortization shown separately below)
            4,480,918       5,676,743
General and administrative expenses (includes stock based
compensation of $81,761 and $102,303, respectively)
            534,959       326,505
Depreciation, depletion and amortization             253,161       470,321
                       
    Income (loss) from operations             (1,423,839)       1,422,684
                       
Other income (expense):                      
  Interest expense
Unrealized loss on de-designation of cash flow hedges
Gains (losses) on derivatives classified as trading securities
Miscellaneous income (expense)















 
 
 
 
(925,312)
-
602,402
12,024






 
 
 
 
(874,497)
(319,542)
(4,165,463)
5,691
                       
    Total other income (expense)             (310,886)       (5,353,811)
                       
Loss before income taxes             (1,734,725)       (3,931,127)
                       
Provision for income taxes             -       -
                       
Net loss           $ (1,734,725)     $ (3,931,127)
                       
Net loss per basic and diluted share of common stock:                      
                       
    Weighted average number of basic and diluted common
shares outstanding
            113,678,970       112,290,583
    Basic and diluted loss per share of common stock           $ (0.02)     $ (0.04)
                       

NORD RESOURCES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(Unaudited)
                       
              2011       2010
Cash Flows From Operating Activities:                      
Net loss           $ (7,085,523)     $ (10,084,976)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
                     
  Depreciation, depletion and amortization
Accretion expense on accrued reclamation costs
Amortization of debt issuance costs
Issuance of stock options for services rendered
Issuance of common stock for services rendered
Issuance of deferred stock units for services rendered
Loss on write-off of mineral lease option
Unrealized loss on de-designation of copper derivatives as cash flow hedges
Changes in assets and liabilities:








































 
 
 
 
 
 
 
 
 
743,148
290,886
259,477
159,206
-
78,750
10,980
-
 
















 
 
 
 
 
 
 
 
 
1,328,262
6,650
203,671
71,847
53,853
91,250
-
13,712,395
 
    Accounts receivable
Inventories, stockpiles and ore on leach pads
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Accrued interest
Copper derivatives settlement payable
Derivative contracts, at fair value
Deferred revenue
Other liabilities













































 
 
 
 
 
 
 
 
 
 
(25,540)
3,481,895
(150,176)
753,474
(316,407)
2,431,896
6,433,339
(6,859,481)
(36,448)
(9,795)


















 
 
 
 
 
 
 
 
 
 
166,767
(9,402,057)
(232,524)
4,152,121
(49,864)
1,606,434
4,154,852
(3,902,204)
(99,441)
(11,158)
      Net Cash Provided By Operating Activities             159,681       1,765,878
                       
Cash Flows From Investing Activities:                      
  Capital expenditures             (627,612)       (747,308)
      Net Cash Used By Investing Activities             (627,612)       (747,308)
                       
Cash Flows From Financing Activities:                      
  Debt issuance costs
Proceeds from exercise of options
Principal payments on long-term debt
Principal payments on capital lease















 
 
 
 
-
-
(301,068)
(12,638)






 
 
 
 
(191,333)
40,650
(876,413)
(12,891)
      Net Cash Used By Financing Activities             (313,706)       (1,039,987)
                       
      Net Decrease in Cash and Cash Equivalents             (781,637)       (21,417)
                       
      Cash and Cash Equivalents at Beginning of Period             1,120,023       1,297,138
                       
      Cash and Cash Equivalents at End of Period           $ 338,386     $ 1,276,721
                       
Supplemental Disclosure of Cash Flow Information:                      
  Cash paid during the period for:                      
    Interest
Income taxes





$
 
453,011
-


$
 
186,584
-

 

 

For further information:

Wayne Morrison
Chief Executive Officer and Chief Financial Officer
Nord Resources Corporation
(520) 292-0266
www.nordresources.com

Investor and Media Relations
Richard Wertheim
Wertheim + Company Inc.
(416) 594-1600 ext.223
or
(416) 518-8479 (cell)
or by email at wertheim@wertheim.ca

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Nord Resources Corporation

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