VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov 21, 2013) - Formation Metals Inc. (FCO.TO) ("Formation" or the "Company") is providing today a corporate update and review for its stakeholders. The update includes a summary of the activities on the Company's 100% owned Idaho Cobalt Project ("ICP") and its current status, additional information regarding the Sunshine Precious Metals Refinery (the "Refinery") formerly owned by Formation and a summary of the austerity measures undertaken by management and its Board of Directors.
Significant progress on pre-development work on the ICP has been made, including obtaining all necessary environmental permits. A total of $16.5 million has been spent on the procurement of long lead time items, including but not limited to such items as the crusher, ball mill, and flotation cells that have been secured in a Company owned warehouse and a leased staging area. Stage I construction commenced in July of 2010, and consisted primarily of 125 acres of timber clearing for the tailings and waste rock storage facility, the soil stockpile, site roads, and mill and concentrator pads. Stage II construction commenced in the summer of 2011, after successfully concluding an $80.0 million financing in March of that year and continued into 2012. Stage II construction consisted of the mobilization of heavy equipment for the transportation route upgrades and the establishment of a crusher facility to produce aggregate required for these upgrades, the installation and upgrade of required powerlines, portal bench geotechnical drilling and major earthworks were completed. Earthworks consisted of pad construction for the crusher, concentrator, water treatment plant, maintenance shop and storage area, aerial tram unloading terminal, tailings and waste rock storage facility, soil stockpile, water management ponds, portal bench and the establishment of a ground water capture system. Additionally, a new access and haul road was constructed that provides further access between the mine portal and mill apart from the proposed tram line and eliminates two miles of existing haul road dedicated to mine traffic between the portal bench and mill. This new road is expected to have a positive impact on the cost per ton to process the ICP ore. An updated Google Earth image from September of 2013 and posted on the Company's website provides an overview of the extent of the earthworks completed to date: http://www.formationmetals.com/s/ConstructionGallery.asp. Stage III construction would have consisted of the initiation of underground development and the assembly of the crushing and milling facilities and ancillary buildings and will only commence upon the successful conclusion of final mine financing.
Subsequent to the Company's news release dated May 2, 2013 announcing the decision to defer underground development of the ICP, activities have focused on maintaining the project in good standing with the various permitting agencies to ensure the retention of all development and mining permits. Seasonal closeout included seeding fertilizing and mulching of all areas with exposed soil and re-surfacing of access roads to reduce sedimentation. Ongoing care and maintenance operations include sampling and monitoring of water wells, preparing updates for various permits and conducting site reviews with the associated agencies. The purpose of these activities is to ensure that construction of the project can recommence in a timely and unobstructed manner once market conditions improve and mine financing has been secured.
The latest available financial statements for the second fiscal quarter ended August 31, 2013, prior to the conclusion of the sale of the Refinery, demonstrate a cash position of $7.9 million and a convertible debenture debt of $5.7 million. The statements also show a loss of $3.5 million for the six month period ended August 31, 2013 which includes a $0.8 million loss from the Refinery operations. During the period, the Company expensed $2.7 million of deferred financing cost related to bonds redeemed on May 9, 2013, and write down of inventory to fair market value and impairment of mineral property of $0.8 million. For the previous fiscal year ended February 28, 2013 the refinery operations reported a loss of $1.6 million with an additional write down of inventory of $0.6 million. The Refinery was a successful business venture overall, although due to industry changes in the silver refining business it reported recent losses which were not sustainable and the Board of Directors made the decision to monetize the Refinery, a non-core asset, for US$12.0 million and paid off the $5.7 million debenture in full (see Company News Release dated October 11, 2013). The Company initially purchased the Refinery in 2002 for US$1.3 million, and an associated tailings pond was subsequently sold to a nearby mining operation for US$4.6 million. Additionally, over the course of the Refinery's commercial production under Formation's management, it realized an overall profit of almost $3.0 million apart from the sale of the tailings pond. As part of the sale, Formation retained a 16 acre package of industrially zoned land suitable for future placement of the Cobalt Production Facility to process ICP concentrates. The Company is also looking at other sites that could provide substantial operational cost savings.
Recent activities related to the Refinery focused on completing post-sale closing obligations and the processing and preparation for shipment to other refineries of various precious and other metals bearing materials owned by Formation that were not included in the sale of the Refinery, the removal of certain equipment and materials not included in the sale, and the closing out of records and equipment from the administrative offices. Two staff members are expected to remain to assist in the post-sale closing shipment of various metalliferous materials. The administrative office is scheduled to close on November 30, 2013.
Austerity measures have also been implemented to conserve cash. Austerity measures put in place prior to the sale of the Refinery include downsizing the Company's head office both in office size and staff, 6 positions were eliminated at the Salmon, Idaho operations office due to the deferral of ICP development, and 6 hourly employee positions were eliminated at the Refinery. As a result of the sale of the Refinery, an additional 24 hourly and 6 salaried positions were eliminated. In addition, many outsourced contracts were terminated or renegotiated to further reduce expenditures. The sale of the Refinery and deferred development of the ICP has reduced risk exposures that resulted in significantly lower insurance premiums. Management continues to optimize its resources and seek additional opportunities to conserve cash in the future.
The Company is now debt free with a strong cash position and greatly reduced monthly expenditures. Management is pursuing additional opportunities with potential for near term cash flow. These efforts ensure the Company's strong financial position to withstand the poor financial market conditions and take advantage of undervalued opportunities that would enhance shareholder value.
Formation is a well-established mineral exploration and development company that owns 100% of a fully permitted primary cobalt deposit located in Idaho which has been prepared for the commencement of underground development, pending final mine financing. Formation has additional interests in base, precious metal and uranium projects in Canada, the United States and Mexico. Formation is dedicated to the principles of environmentally sound mining and refining practices, and believes that environmental stewardship and mining can co-exist. The Company trades on the Toronto Stock Exchange under the symbol FCO.
Formation Metals Inc.
Mari-Ann Green, CEO
This news release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on the Company is available at www.sedar.com.
The statements contained in this news release in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.'s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to the parties as of such date. It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.