TORONTO, July 31, 2014 /CNW/ - Labrador Iron Mines Holdings Limited ("LIM" or the "Company") (TSX: LIM) today reports its operating and financial results for the
first quarter ended June 30, 2014.
LIM did not conduct any mining operations during the fiscal first
quarter and carried out only a limited number of standby activities at
For the first quarter ended June 30, 2014, LIM reported a net loss of
$4.0 million or $0.03 per share, which included a depletion and
depreciation charge of $1.3 million or $0.01 per share.
LIM's current focus is on the development of the Houston Mine and,
subject to completion of financing, plans to be in a position to begin
production from Houston in 2015. LIM is also focusing on negotiating
the commercial terms of major contracts and seeking additional capital
investment and working capital.
The Howse exploration program has recommenced, targeting an additional
3,500 metres ("m") of drilling. The remaining $1.8 million financial
commitment for the 2014 exploration program is fully funded.
LIM is also carrying out the expansion of the Silver Yards rail siding,
which is the only capital project currently underway. The project is
fully funded by Tata Steel Minerals Canada ("TSMC").
LIM did not conduct any mining operations during the quarter ended June
30, 2014 and does not currently plan any mining or processing activity
in 2014, which is planned instead to be a development year.
Mining operations at LIM's Stage 1 deposits, including the James Mine
and related infrastructure, are being maintained on standby for the
time being, which will allow for a potential restart of Stage 1
production when economic conditions improve.
The Silver Yards wet processing facility is also being maintained on
standby with the current expectation that it will be re-commissioned to
process plant feed from Houston and potentially production from Stage 1
deposits in future years.
During the fiscal first quarter, mine site activities were limited to
dewatering, pumping and environmental monitoring and maintenance. By
the end of May, dewatering and pumping activities had ceased, which is
expected to significantly reduce site standby costs for the balance of
The only capital project currently underway is the expansion of the
Silver Yards rail siding, fully funded by TSMC, which is expected to be
completed in the second half of 2014. This expansion will facilitate
the operation of the new extended rail line from Silver Yards to TSMC's
Timmins Area plant, which was completed during the quarter and is
expected to be operational in the near future.
During calendar 2014, LIM's focus is on developing the Houston Mine and,
subject to completion of financing and negotiation of major contracts,
expects to be in a position to begin mining production from Houston in
2015. Accordingly, LIM's focus during the quarter ended June 30, 2014
was on corporate activities related to negotiating the commercial terms
of major contracts and seeking additional capital investment and
Howse Exploration Update and Joint Venture with TSMC
For the 2014 exploration season, LIM is focused on completion of the
Howse exploration program, which was suspended in the winter after
2,760 m were drilled in 21 holes. The $5.0 million exploration program
has now recommenced, targeting an additional 3,500 m of exploration
The objective of the Howse drill program is to convert the historical
resources to NI 43-101 compliant mineral resources and to collect
metallurgical, geotechnical, hydrogeological, and hydrology information
to ultimately complete a feasibility study. The resource estimate and
feasibility study are designed to support a production decision. Howse
Minerals Limited, a wholly-owned subsidiary of TSMC, the operator of
the joint venture, advises that the NI 43-101 resource estimate,
environmental impact study and a preliminary economic assessment are
expected to be completed by the end of 2014 and the feasibility study
is expected to be completed in 2015.
Project Registration Notices for the Howse Project were submitted to the
provincial and federal governments. The federal government has referred
the Project for Environmental Assessment and Environmental Impact
Statement (EIS) Guidelines were issued in June 2014.
LIM's remaining financial commitment of $1.8 million for the Howse
exploration program is fully funded. Following completion of the
exploration program, Howse Minerals Limited is required to contribute
the next $23.5 million to the joint venture and thereby increase its
participating interest in the Howse Deposit to 70%.
FIRST QUARTER FINANCIAL REVIEW
LIM did not have any shipments of iron ore during the first quarter
ended June 30, 2014. Accordingly, no net revenue was recognized from
mining operations during the period.
For the first quarter ended June 30, 2014, LIM reported a net loss of
$4.0 million, or $0.03 per share, which included a depletion and
depreciation charge of $1.3 million, or $0.01 per share.
As LIM did not conduct any mining operations during the fiscal first
quarter, the net loss is mainly attributable to site standby costs, in
particular dewatering, pumping and environmental monitoring and
maintenance costs, and corporate and administrative costs. Dewatering
and pumping activities were completed in May, which is expected to
significantly reduce site standby costs for the balance of 2014.
During the fiscal first quarter, LIM invested $0.06 million in property
plant and equipment. Capital expenditures during the quarter were
limited to essential sustaining capital activities.
As at June 30, 2014, LIM had current assets of $12.1 million, including
inventories with a carrying value of $2.0 million and accounts
receivable and prepaid expenses of $3.2 million. At June 30, 2014, LIM
had $5.0 million in unrestricted cash and cash equivalents and an
additional $1.8 million in current restricted cash.
Current liabilities, consisting of accounts payable and accrued
liabilities, finance lease obligations and rehabilitation provisions,
were in aggregate $25.1 million at June 30, 2014.
At June 30, 2014, LIM had an ending working capital deficit of $13.0
million. LIM had no current or long-term bank debt at June 30, 2014;
however, the Company had a long-term deferred revenue liability of
Iron Ore Market Conditions
The spot price of iron ore (CFR China 62% Fe basis) averaged
approximately US$131 per tonne during the 2013 operating season, an
improvement over an average of US$125 per tonne during the 2012
operating season. However, since January 2014 the price of iron ore
fell steadily in the Chinese market and the benchmark price for 62% Fe
iron ore declined to below US$90 per tonne in June 2014, a decline of
over 30%. The benchmark price for 62% Fe iron ore improved somewhat in
July 2014 and is currently about US$95 per tonne. Iron ore exports
from Australia to China have increased significantly in 2014, pushing
benchmark prices to the lowest levels since 2012 and contributed to a
growing global surplus.
The immediate market outlook for iron ore is somewhat uncertain. Chinese
steel mills and traders are being pressed to sell inventories as banks
demand loan repayments. Increased supply and lower prices will force
the closure of higher cost domestic Chinese producers. However, Chinese
steel production continues to increase and China will need to import
more iron ore to replace the shutdown of domestic production, which
should help iron ore price stability.
For budgeting purposes, LIM has assumed an average price of US$100 per
tonne during 2014 (during which no sales are anticipated) and 2015. The
Company is anticipating a foreign exchange rate of US$0.90 per Canadian
dollar for budget purposes.
Development of the Houston Mine in 2014 is subject to the availability
of new financing and completion of detailed engineering and planning.
LIM is currently negotiating various financing and off-take
arrangements to fund the planned first phase Houston development and
related transportation expenditures. There are no assurances that LIM
will be successful in obtaining the required financing and, if LIM is
unable to obtain such financing, the development of the Houston Mine
will be postponed.
LIM will need to generate additional financial resources in order to
address its current working capital deficit and meet its planned
business objectives. LIM is currently negotiating certain financing
opportunities and, subject to completing these financings, the Company
believes it will have sufficient working capital to continue to operate
over the next year. In the meantime, and pending completion of any
financing, LIM will endeavor to prudently manage its cash resources in
order to ensure the integrity of its properties and to meet all
Subject to completing these financings, LIM believes it will have
sufficient working capital to continue to operate over the next year
and continue as a going concern, which assumes that the Company will be
able to meet its obligations and continue its operations for its next
fiscal year. However, there are no assurances that LIM will be
successful in obtaining any required financing, or in obtaining
financing on a timely basis or on reasonable or acceptable terms. If
LIM is unable to obtain adequate additional financing on a timely
basis, the Company would be required to curtail all operations and
* * * * * *
This press release should be read in conjunction with LIM's Management's
Discussion and Analysis (MD&A) and unaudited financial statements for
the three months ended June 30, 2014, available on the company's
website at www.labradorironmines.ca, under the "Financials" section, or on SEDAR (www.sedar.com).
LIM will not be holding a conference call for the first quarter ended
June 30, 2014. LIM is currently negotiating certain financing
opportunities and revised terms with its major contractors. Discussions
and negotiations with various parties are ongoing. Subject to
completion of these negotiations, the Company will provide further
updates at that time.
Unless otherwise noted, all references to 'years' in this press release
are 'calendar years', all dollar amounts are stated in Canadian dollars
and all tonnes are stated in dry metric tonnes.
* * * * * *
About Labrador Iron Mines Holdings Limited (LIM)
Labrador Iron Mines (LIM) is a leader in the reactivation of the iron
ore industry in the Schefferville/Menihek region, engaged in the
mining, exploration and development of its portfolio of 20 direct
shipping (DSO) deposits located in the prolific Labrador Trough.
Initial production commenced at the James Mine and Silver Yards plant
in June 2011 and through to the end of its third operating year, the
Company has sold approximately 3.6 million dry tonnes (3.8 million wet
tonnes) in 23 shipments of iron ore into the Chinese spot market.
LIM's Silver Yards facility is connected by a direct rail link to the
Port of Sept-Îles, Québec. The operation also benefits from established
infrastructure including hydro power, the town, airport, and railway
service. The Company's current focus is to develop the long-life
Houston flagship Project and is planning for initial production
commencing in 2015.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Inferred mineral resources are considered too
speculative geologically to have economic considerations applied to
them that would enable them to be categorized as mineral reserves.
There is no certainty that mineral resources will be converted into
The terms "iron ore" and "ore" in this document are used in a
descriptive sense and should not be considered as representing current
Forward Looking Statement:
Some of the statements contained in this Press Release may be
forward-looking statements which involve known and unknown risks and
uncertainties relating to, but not limited to, LIM's expectations,
intentions, plans and beliefs. Forward-looking information can often be
identified by forward-looking words such as "anticipate", "believe",
"expect", "goal", "plan", "intend", "estimate", "may" and "will" or
similar words suggesting future outcomes, or other expectations,
beliefs, plans, objectives, assumptions, intentions or statements about
future events or performance. Forward-looking information may include
reserve and resource estimates, estimates of future production, unit
costs, costs of capital projects and timing of commencement of
operations, and is based on current expectations that involve a number
of business risks and uncertainties and assumptions regarding
financing. Factors that could cause actual results to differ materially
from any forward-looking statement include, but are not limited to,
failure to establish estimated resources and reserves, the grade and
recovery of ore which is mined varying from estimates, delays in
obtaining or failures to obtain required financing, capital and
operating costs varying significantly from estimates, delays in
obtaining or failures to obtain required governmental, environmental or
other project approvals, delays in the development of projects, changes
in exchange rates, fluctuations in commodity prices, inflation and
other factors. Forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from expected results. There can be no assurance that
LIM will be successful in maintaining any agreement with any First
Nations groups who may assert aboriginal rights or may have a claim
which affects LIM's properties or may be impacted by the Schefferville
Projects. Shareholders and prospective investors should be aware that
these statements are subject to known and unknown risks, uncertainties
and other factors that could cause actual results to differ materially
from those suggested by the forward-looking statements. Shareholders
and prospective investors are cautioned not to place undue reliance on
forward-looking information. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties, both
general and specific, that contribute to the possibility that the
predictions, forecasts, projections and various future events will not
occur. LIM undertakes no obligation to update publicly or otherwise
revise any forward-looking information whether as a result of new
information, future events or other such factors which affect this
information, except as required by law.
SOURCE: Labrador Iron Mines Holdings Limited
For further information:
please visit LIM's website at www.labradorironmines.ca or contact:
John F. Kearney
Chairman and Chief Executive Officer
Tel: (647) 728-4105
President and Chief Operating Officer
Tel: (647) 729-1287
Vice President, Investor Relations and Communications
Tel: (647) 725-0795