2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Gold Hawk Resources Inc.: Q2-2007 Financial Results
AUG 29, 2007 - 20:10 ET VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 29, 2007) - Gold Hawk Resources Inc. ("Gold Hawk" or the "Company") (TSX VENTURE:CGK) is pleased to announce the Company's unaudited financial results for the three and six months ended June 30, 2007. For complete details of the June 30, 2007 Interim unaudited Financial Statements and Management's Discussion and Analysis please see the Company's filings on SEDAR (www.sedar.com).
During the second quarter of 2007, production of lead and zinc concentrates began at the Company's Coricancha Mine in Peru. The Biox® circuit was also in operation with preliminary results indicating that the plant performance is meeting designed gold recovery. The first full gold pour was made in June, and shipped to the refinery in July.
Production ramp up was slower than anticipated due primarily to delays in the delivery of new mining equipment; nonetheless, over 20,000 tonnes of ore were mined and processed in the second quarter. The installation and commissioning of the underground ore handling system is now complete and operating satisfactorily and the new mine mobile equipment has arrived and been placed into operation.
During and subsequent to the second quarter, exploration and development work on the 3140 meter level of its Coricancha Mine, encountered what is believed to be the downward extension of the Constancia Vein. Based on assay results, geological projections and mineralization characteristics, there is a high probability that the Constancia Vein extends at least 320 meters below the 3460 level, which is currently the lowest working level of the mine. No development or mining has yet been conducted on the Constancia Vein between the 3460 level and the 3140 level, and no reserves or resources for this potential mineralized zone have been included in the Company's latest 43-101 Technical Report (dated April 16, 2007 and available on SEDAR, www.sedar.com).
Assays conducted on channel samples by ALS Chemex Laboratory in Lima, Peru over the 1.26 meter vein width encountered on the 3140 level averaged 2.54% copper, 3.34% lead, 4.20% zinc, 554 grams per tonne silver and 4.85 grams per tonne gold. The widths and average grades encountered to date are significantly higher than those encountered in the upper working levels of this vein. Due to the high copper content of this zone, the Company is planning on refurbishing the existing copper recovery circuit at the plant and place it into operation.
To the end of July, 2007, approximately 55 meters of the Constancia Vein has been exposed on the 3140 meter level and an equal amount of development has been completed on a sub-level above the 3140 meter level. Projecting this vein southward to the property boundary could provide approximately another 2,000 meters of potential strike length to be developed. With a vertical extent of 320 meters and the potential strike length of 2,000 meters, there is the potential to significantly increase the total resources in the Constancia Vein between the 3140 and 3460 meter levels while also remaining open at depth below the 3140 meter level.
Mr. Rodney Lamond, P. Eng., has reviewed and approved the technical information contained above, and is the Qualified Person as defined by National Instrument 43-1-101 for this technical information.
Operations Results - Quarter 2, 2007
Revenue of $50,235 in the quarter ended June 30, 2007 was interest earned on cash deposited with Scotiabank Canada, in guaranteed investment accounts. Revenue of $39,682 in the comparable 2006 period was also interest earned on bank guaranteed investments. The Company has no exposure to asset backed commercial paper.
The Company recorded a net loss of $4,795,153 ($0.03 basic and diluted loss per share) as compared with a net loss of $5,583,085 ($0.05 basic and diluted loss per share) for the same period in 2006. The loss was primarily due to an unrealized foreign exchange loss on the Company's US dollar advances to its self sustaining foreign subsidiary of $1,658,095 (Q2, 2006 $37,982), and to an unrealized loss on the Company's lead and zinc derivative instruments of $1,540,008 (Q2, 2006 Nil). This latter loss is a result of a mark to market adjustment as at June 30, 2007, as the Company's derivative undertakings do not qualify for 'hedge accounting' treatment under Canadian GAAP. The Company entered these derivatives with the intent of minimizing price risks associated with fluctuating metal commodity prices.
The comparable loss in 2006 was primarily the result of a write down of the Company's Machacala exploration property, not applicable in the current quarter.
Other contributing factors to the current quarter's loss were stock-based compensation expense of $529,000 (Q2, 2006 $420,250); accretion expense on asset retirement obligations of $271,282 not applicable in the prior year; and, to increased general and administration expenses $466,648 (Q2, 2006 $193,182). General and administration expenses for the period have increased significantly as the Company strengthened its management team and incurred additional expenditures while actively pursuing its growth strategy.
As at June 30, 2007 the Company had unrestricted cash of $2,715,944 and a working capital deficiency of $1,740,950 compared to cash of $12,441,295 and working capital of $9,112,352 at December 31, 2006. The decrease in cash and working capital was due to the ongoing expenditures made since January 1, 2007 relating to the development of the Coricancha Mine. In addition, on March 29, 2007 the Company paid the final purchase price payment of US$1.5 million dollars related to the 2006 mine acquisition.
Subsequent to June 30, 2007, the Company closed a brokered private placement for 16,761,100 common shares at a price of $0.60 per share, for gross proceeds of $10,056,660. With this financing arranged, the Company believes that it has sufficient funds to complete the development of the Coricancha mine required to achieve commercial production.
The Company's future liquidity will depend upon on its ability to generate future positive operating cash flow, or upon its ability to arrange additional debt or equity financing. While the Company has been successful in raising funds in the past, there is no assurance that it will continue to do so in the future.
Steady progress is being made in attaining the rated capacity of 600 tonnes per day ("tpd") at the Coricancha Mine and management is confident that with the arrival and commissioning of the new mining equipment in August 2007, the Company expects it will achieve full production status during the fourth quarter.
Development on the 3140 meter level is expected to continue to expose more ore in the near term and is scheduled as a priority project. It is planned to develop and install an internal shaft between the 3140 meter level and the upper mine levels. This shaft will allow access over the 320 meters of vertical extent for additional exploration and development as well as improve mine efficiencies. It is also planned to drill exploration holes to test the down dip extension of the Constancia Vein below the 3140 meter level. This development plan has the potential to significantly increase the total resources in the Constancia Vein.
Looking beyond 2007, Gold Hawk has significant organic growth opportunities. In 2008, the Company will benefit by a full year of production as compared to a partial year in 2007. In addition, with minimal modifications to the concentrator and with the DMS plant operational, management plans to increase the mining rate from 600 tpd in fourth quarter 2007 to 900 tpd by 2009. In view of the large resource base and excellent exploration potential, management has undertaken a scoping study to evaluate the feasibility of further increasing the mining rate to 1500 tpd. In addition to organic growth, it is managements' objective to grow the Company and build value for shareholders by aggressively pursuing external growth opportunities.
This press release includes "forward looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Such risks and uncertainties include, but are not limited to, risks associated with the mining industry (including operational risks in exploration development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainties involved in the discovery and delineation of mineral deposits, resources; the uncertainty of resource estimates and the ability to economically exploit resources; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of Gold Hawk to obtain all permits, consents or authorizations required for its operations and activities; and health and safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the ability of Gold Hawk to fund the capital and operating expenses necessary to achieve the business objectives of Gold Hawk, the uncertainty associated with commercial negotiations and negotiating with foreign governments and risks associated with international business activities, as well as those risks described in public disclosure documents filed by Gold Hawk. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of Gold Hawk should not place undue reliance on these forward-looking statements.
Readers are cautioned that the foregoing lists of risks, uncertainties and other factors are not exhaustive. The forward-looking statements contained in this press release are made as of the date hereof and Gold Hawk undertakes no obligation to update publicly or revise any forward-looking statements contained in this press release or in any other documents filed with Canadian securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Gold Hawk Resources Inc.
Mr. Gordon F. Bub
Gold Hawk Resources Inc.
Mr. Larry Taddei, CA
Chief Financial Officer
Gold Hawk Resources Inc.
Mr. Kevin Drover
President and CEO