Consolidated Net Income Increased 45% to
$7.4 million Attributable EBITDA Increased 26% to $13.5
million
Global Atomic Corporation (“Global Atomic” or the “Company”),
(TSX-V: GLO, FRANKFURT: G12) is pleased to announce its operating
and financial results for the fourth quarter (“Q4”) and financial
year ended December 31, 2018.
HIGHLIGHTS
Financials
- Consolidated net income for the Company was $7.4 million for
2018, up from $5.1 million in 2017.
- The Company’s working capital surplus was $7.3 million at the
end of 2018, up from a deficit of $1.0 million for 2017.
- The Company's 49% share of EBITDA of the Turkish joint venture
was $13.5 million in 2018, up from $10.7 million in 2017; the
Company's 49% share of joint venture net income was $10.5 million
in 2018, up from $6.9 million in 2017.
- The Turkish joint venture shipped 20,821 tonnes zinc
concentrate containing 31.6 million pounds zinc, compared to
shipments of 21,349 tonnes in 2017 containing 32.9 million pounds
zinc.
- The Company received dividends of $6.9 million from the Turkish
joint venture in 2018 compared to $4.5 million in 2017.
Additionally, the Company received management fees and sales
commissions of $0.9 million in each of 2018 and 2017.
Turkish Plant Modernization
- Modernization and expansion of the Turkish electric arc furnace
dust ("EAFD") plant in Iskenderun, Turkey is currently underway, at
an estimated cost of US $26 million.
- At December 31, 2018, US $4.4 million has been spent on the
Iskenderun project. Existing cash and available credit facilities
are sufficient to complete the project.
- The new plant will be fully operational in September 2019.
- The new plant will be significantly improved:
- EAFD throughput will increase from 60,000 tonnes to 110,000
tonnes
- Zinc recovery rates are expected to improve from 80% to
90%
- Zinc contained in concentrates will double from 30 million
pounds/year to 60 million pounds/year based on full
utilization
- Unit operating costs will be reduced
DASA Development and
Exploration
- Fieldwork and a 27,000 metre drill program on the DASA uranium
deposit was initiated in January 2018 and defined high grade
continuity of the mineralization.
- Near surface drilling confirmed the Company's understanding of
structure and high grade continuity at the Flank Zone at DASA.
- An updated Mineral Resource Estimate was completed on the Niger
DASA uranium project in Q2, based on 15,000 of the additional 2018
drilling, which:
- Tripled Indicated Resources from 21.4 million pounds to 64.8
million pounds and improved grade 18% from 2,608 ppm eU3O8 to 3,068
ppm eU3O8.
- Inferred Resources decreased slightly from 49.4 million pounds
grading 2,954 ppm eU3O8. increased to 48.4 million pounds
grading 2,600 ppm eU3O8.
- A Preliminary Economic Assessment ("PEA") was completed on the
DASA Uranium Project and includes two mining scenarios:
- A Stand-alone operation initially operating at 2,500 tpd and
ramping up to 3,500 tpd and producing 4 Mlb to 7 Mlb U3O8/year over
a 15 year mine life and,
- A sales agreement scenario based on the July 2017 MOU with
Orano Mining ("Orano"), including a fast track to cash flow and
significantly reduced initial capital of US$35 million to start and
no mill required.
Other Corporate Developments
- The Company received conditional listing approval from the
Toronto Stock Exchange ("TSX") on April 18, 2019.
- The Company raised $8.9 million in an equity financing in
November 2018 and a further $1.3 million in January 2019.
- Application was made to the Ministry of Mines of the Republic
of Niger for extension of the Exploration Permits and in December
2018, an extension for 24 months to January 29, 2021 was obtained
for all 6 Exploration Permits.
OUTLOOK
- The Turkish EAFD plant modernization and expansion project is
on schedule.
- On completion, the Turkish operations will again be cash flow
positive with dividend flow expected to resume in 2021, following
repayment of construction costs.
- An updated Resource Statement for the DASA deposit is in
process, which will include all drill and assay information, with
the final report available in late Q2 2019.
- Mine plans will be optimized based on the updated Resource
Statement and a feasibility study completed by year end or early
2020.
- Application for the DASA Mining Permit will be made in early
2020, with permits expected in Q3 2020.
- The Company expects to graduate to the TSX on or before May 15,
2019. The Company will continue to trade under the stock symbol:
GLO.
BASE METALS DIVISION
OPERATIONS
The BST joint venture owns and operates an EAFD
processing plant in Iskenderun, Turkey. The plant processes EAFD
containing 25% to 30% zinc that is obtained from electric arc steel
producers and produces a zinc concentrate grading 68% to 70% zinc
that is then sold to zinc smelters.
Global Atomic holds a 49% interest in the BST
joint venture and as such, the investment is accounted for using
the equity basis of accounting. Under this basis of accounting, the
Company’s share of BST’s earnings is shown as a single line in its
income statement. The following table summarizes comparative
results for 2018 and 2017 of the joint venture at 100%.
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/8b132400-6296-433b-b44a-6ad83ac5d6d7
- EBITDA is a non-IFRS measure, does not have a standardized
meaning prescribed by IFRS and may not be comparable to similar
terms and measures presented by other issuers. EBITDA comprises
earnings before income taxes, interest expense (income) and
financing expense (income), amortization expense, foreign exchange
loss (gain), and other expenses including management fees, sales
commissions; gain on sale of property, plant and equipment and
impairment charges.
The following table summarizes comparative operational metrics
of the Iskenderun facility.
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/9dd5683c-b821-462b-9760-3ca330082b65
Zinc concentrates are sold to smelters in US
dollars. Because the Turkish Lira is the functional currency of the
Turkish operations, sales are converted to Turkish Lira at the date
of the sale. When funds are subsequently received, the US dollar
receipts are translated to Turkish Lira. As a result, exchange
gains or losses will be recognized. In 2018, the average US dollar
exchange rate was 4.83 Turkish Lira, compared to 3.65 in 2017. The
Turkish Lira depreciated significantly and quickly, with the result
that a large exchange gain of $4.6 million was recognized.
BST processed 65,340 tonnes EAFD in 2018
compared to 62,385 tonnes in 2017. Production of concentrates was
19,829 dry metric tonnes (“DMT”), down 8% from 21,543 DMT in 2017.
This reflects a lower average zinc content in EAFD processed during
2018. Offsetting this was the impact of higher shipments than
production in 2018, as a result of certain 2017 year end shipments
being recognized in revenues during 2018. The zinc content of 2018
concentrate shipments was 68.9%, compared to 70.0% in 2017.
Although the average zinc price in 2018 of
$1.33/lb was similar to the $1.31/lb in 2017, revenues are impacted
by the timing of the zinc price movements and shipments. For
example, the zinc price averaged $1.41/lb in the last 6 months of
2017 and $1.48/lb during the first 6 months of 2018. However, it
was only $1.22/lb during the first 6 months of 2017 and $1.17/lb
during the last 6 months of 2018.
The combination of the foregoing factors
resulted in an increase in 2018 revenues to $43.9 million from
$38.9 million in 2017, plus a foreign exchange gain of $4.6 million
in 2018. Cost of sales also increased as a result of various higher
input costs to BST. Overall, EBITDA increased to $27.5 million in
2018 from $21.8 million in 2017.
BST made a decision in 2018 to proceed with the
modernization and expansion of the Iskenderun plant. Accordingly,
certain components of the existing plant have been removed and
scrapped. A loss on property disposition was provided for in the
2018 accounts to reflect this.
Income tax expense in 2018 was lower that the
2017 expense, reflecting the benefits of the various investment
incentives available to BST as a result of the decision to proceed
with the capital project.
The modernization and expansion of the
Iskenderun plant is estimated to cost US $26 million, of which US
$4.4 million had been paid as of year end. The contracts for the
supply and installation of the equipment are largely on an “EPC”
basis, so there is limited risk of cost overruns. BST is funding
the costs of the project with existing cash and available credit
facilities, with the result that no equity contributions are
required from the joint venture partners.
Photos accompanying this announcement are available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/b59bc559-a076-4071-a5d7-a060728b8211
http://www.globenewswire.com/NewsRoom/AttachmentNg/e339c58d-34de-4f00-9550-0bac37bc6082
The Iskenderun plant project continues to be on schedule, with
commissioning to be completed by September 2019, after which the
plant will be fully operational. The existing plant was closed in
January 2019 to facilitate the construction of the new plant.
During the shut-down period EAFD is being stored in a warehouse and
an estimated 25,000 tonnes EAFD will be available at start-up of
the new plant. The economics of the new plant will be greatly
improved as a result of the following:
- EAFD throughput increases from 60,000 tonnes to 110,000 tonnes
EAFD
- Zinc recovery rates are expected to improve from 80% to
90%
- Zinc contained in concentrate will double from 30 million
pounds/year to 60 million pounds/year based on full
utilization
- Unit operating costs will be reduced
- Dependent on utilization rates and zinc prices, EBITDA is
expected to increase by 2 to 3 times.
The Iskenderun plant will utilize the best available technology
and process EAFD in a clean, environmentally sensitive manner.
Photos accompanying this announcement are available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/972ab7f8-e952-499d-bd51-4ad4125cd1dd
http://www.globenewswire.com/NewsRoom/AttachmentNg/c35cdcb9-2d78-4b7b-ab2f-09c5c14f173f
URANIUM DIVISION OPERATIONS
Subsequent to the acquisition of GAFC, the
Company remobilized to the field and drilling began in late January
2018.
Global Atomic drilled approximately 27,000
metres at the DASA deposit during 2018. The primary objectives of
the drill program were to prove the potential for near surface
production at the Flank Zone and to assess the potential for
further discoveries and resource expansion along strike and down
dip. This program was very successful.
Drilling at the Flank Zone significantly
expanded resources and drilling along strike and down dip
identified several new zones at the Tegama Hill, Tegama Hill South,
the Northeast extensions and the Southwest Extensions (see the
image below):
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/196d56be-f032-49b5-832f-fe0c8b66b545
Near surface drilling at the Flank Zone
completed in the first half of 2018 was used as the basis for an
updated National Instrument (“NI”) 43-101 Mineral Resource Estimate
prepared by CSA Global Pty Ltd. (“CSA Global”). The updated
resource report incorporates an additional 36 drill holes totaling
approximately 15,000 metres drilled from January to June 2018.
The June 30, 2018 CSA Global report concluded on
the Mineral Resource Statement for the DASA deposit shown in the
table below:
Category |
Tonnes |
eU3O8 |
Contained metal |
Mt |
ppm |
Mlb |
Indicated – Pit Constrained |
7.08 |
3,251 |
50.8 |
Indicated – Underground |
2.5 |
2,553 |
14.1 |
Total Indicated |
9.59 |
3,068 |
64.8 |
Inferred – Pit Constrained |
0.26 |
1,135 |
0.7 |
Inferred – Underground |
8.18 |
2,647 |
47.7 |
Total Inferred |
8.44 |
2,600 |
48.4 |
* These results are based on gamma probing. Final results will
be released once chemical assaying is completed at ALS Global in
Vancouver, Canada.
- Mineral Resources are based on CIM definitions and is reported
as at 1st June 2018.
- Mineral Resources for pit constrained resources are estimated
within the limits of an ultimate pit shell
- Mineral Resources for underground resources are estimated
outside the limits of ultimate pit shell.
- A cut-off grade of 320 ppm eU3O8 has been applied for open pit
resources.
- A cut-off grade of 1200 ppm eU3O8 has been applied for
underground resources.
- A bulk density of 2.36t/m3 has been applied for all model
cells.
- Rows and columns may not add up exactly due to rounding.
Subsequent to completion of the latest Mineral
Resource Estimate, the Company continued to intersect additional
high grade mineralization in the Flank Zone. An updated Mineral
Resource Statement is currently being prepared by CSA Global,
taking into account all of the 2018 drill results and related
assays. The updated Mineral Resource Statement is expected to be
available late Q2 2019.
Preliminary Economic Assessment
(“PEA”)
On October 28, 2018 the Company announced the
results of a PEA for the DASA Uranium Project. The PEA was
completed by CSA Global with the objective of assessing the
economic and technical viability of uranium production at DASA as
an integrated operating facility to mine and recover a uranium
concentrate on the property, referred to as the DASA Stand-alone
Scenario. An on-site mill would initially operate at 2,500 tpd and
later ramp up to 3,500 tpd.
As a “value opportunity”, Global Atomic also
requested CSA Global to study the Alternative Mining Strategy,
whereby the Company could achieve positive cash flow with minimal
up front capital by selling mineralized rock directly to Orano as
per a Memorandum of Understanding the Company has with Orano. The
Company believes this represents a compelling case at current
uranium prices.
Highlights of the DASA Stand-alone Scenario
include:
- High grade 69 million lbs U3O8 grading of 2,380 ppm U3O8 over a
15 year mine life.
- Scalable production: Annual production sustained of 4 Mlb to 7
Mlb U3O8 over the 15 year mine life.
- Low cost operation: All-in sustaining cost ("AISC") of
US$28.51/lb U3O8.
- Initial CAPEX: US$320 million, including US$141 million for an
on-site mill and US$467 million over the life of mine with the
inclusion of sustaining capital and reclamation.
- Significant NPV and project return at expected long-term
uranium price:
NPV and IRR – DASA Standalone
Scenario
|
Unit |
Uranium Price (US$/lb
U3O8) |
|
$45.00 |
|
$50.00 |
|
$55.00 |
|
Pre-Tax |
|
|
|
|
NPV @ 8% |
US$ M |
$204 |
|
$357 |
|
$527 |
|
IRR (100% Equity) |
|
|
19.8 |
% |
|
27.3 |
% |
|
35.6 |
% |
Post-Tax |
|
|
|
|
NPV @ 8% |
US$ M |
$179 |
|
$306 |
|
$443 |
|
IRR (100% Equity) |
|
|
18.4 |
% |
|
25.2 |
% |
|
32.7 |
% |
Highlights of the Alternative Mining Strategy
include:
- Fast track to cash flow: Accelerated underground development
with minimal infrastructure.
- Reduced initial capital: US$35 million to start mining, no mill
required.
- High grade material: Potential to ship 360,000 tonnes annually
for the 5 year contract containing on average 2.8 million lbs U3O8
grading 3,698 ppm.
- Low cost mining: Operating costs of US$10.94 per lb U3O8 before
transport and processing, indicates this is potentially profitable
at current uranium prices.
The following shows the DASA mineralized zones
and underground conceptual mine workings as per the PEA
A photo accompanying this announcement is
available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/9299cde6-839a-4828-bd44-562b2c3b6355
Current Planning
As previously indicated, CSA Global is presently
updating the Mineral Resource Statement for DASA to incorporate all
available information. Once this is completed, several mine plans
will be evaluated to arrive at the optimal mining scenario. Any
additional studies required to support a feasibility study will be
initiated, so that a feasibility study is available late 2019. Upon
completion of the feasibility study, Global Atomic will apply for a
Mining Permit on the DASA deposit. Historically, mining permits
have been awarded within 4 to 6 months.
Global Atomic is in the second renewal period
for it Exploration Permits. Such Exploration Permits previously had
an expiry date of January 29, 2019. However, on December 17, 2018,
all six Exploration Permits were extended for 24 months to January
29, 2021. This provides sufficient time to enable the Company to
complete the feasibility study and make application to obtain its
Mining Permit for the DASA deposit.
LIQUDITY AND FINANCIAL
POSITION
The Company reported a working capital surplus
of $7.3 million at December 31, 2018 compared to a deficit of$1.0
million at December 31, 2017. In Q4, 2017, as a result of the
acquisition of GAFC, the Company assumed liabilities of GAFC, and
commenced payments for exploration activities. During 2018, the
Company spent $6.0 million on exploration and evaluation
expenditures related to its Niger uranium properties.
The cash required to support expenditures was
derived from the cash on hand at the end of 2017 and the dividend
received from BST in 2018. In 2018, the Company received a dividend
payment of $6.9 million from BST as compared to a dividend receipt
of $4.5 million in 2017.
Throughout the year, the Company receives its
share of management fees and sales commissions from the Turkish
operations, which amounts fund the various corporate costs.
In November 2018, the Company completed a
private placement of common shares for gross proceeds of $8.9
million. A further private placement of common shares for $1.3
million was completed in January 2019. These private placements
have provided the Company with the liquidity necessary to complete
its Niger feasibility study to support obtaining its Mining
Permit.
Additional exploration expenditures are largely
discretionary and the amount of exploration activity can therefore
be adjusted based on availability of equity capital.
In 2018, the Turkish joint venture initiated a
modernization and expansion program on its Iskenderun plant.
Funding for such capital costs will be derived from existing cash
and available credit facilities to the joint venture. No dividends
will be paid until after any credit facilities have been repaid.
Credit facility repayment is projected to take place in 2020, so
the Company does not expect to receive any dividends from BST until
2021.
QP Statement
George A. Flach, Vice President of Exploration,
P.Geo. is the Qualified Person (QP) as defined in NI 43-101 and has
prepared, supervised the preparation of, and approved the
scientific technical disclosure in this news release.
The PEA was completed in accordance with NI
43-101, Canadian Institute of Mining, Milling and Petroleum (“CIM”)
standards. The PEA is preliminary in nature and includes Inferred
Mineral Resources that are 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 PEA
results will be realized. Mineral Resources are not Mineral
Reserves and do not have demonstrated economic viability.
About Global Atomic
Global Atomic Corporation is a TSX Venture
listed company providing a unique combination of high grade uranium
development and cash flowing zinc concentrate production.
The Company’s Uranium Division includes six
exploration permits in the Republic of Niger covering an area of
approximately 750 km2. Uranium mineralization has been identified
on each of the permits, with the most significant discovery being
the DASA deposit situated on the Adrar Emoles III concession,
discovered in 2010 by Global Atomic geologists through grassroots
field exploration. The DASA deposit is currently undergoing a
feasibility program to study shipping mineralized material to Orano
Mining’s operations in Arlit under an MOU signed with Orano in
July, 2017.
Global Atomics’ Base Metals Division holds a 49%
interest in Befesa Silvermet Turkey, S.L. (“BST”) joint venture,
which operates a processing facility, located in Iskenderun,
Turkey, that converts Electric Arc Furnace Dust (“EAFD”) into a
high-grade zinc oxide concentrate which is sold to zinc smelters
around the world. The Company’s joint venture partner, Befesa Zinc
S.A.U. (“Befesa”, listed on the Frankfurt exchange under ‘BFSA’),
holds a 51% interest in and is the operator of the BST joint
venture. Befesa is a market leader in EAFD recycling, capturing
approximately 50% of the European EAFD market with facilities
located throughout Europe and Korea.
BST is well underway with an expansion project
to significantly modernize and expand its processing plant in
Turkey. The expansion is targeted to double annual production of
zinc from 30 million lbs to 60 million lbs and is supported by EAFD
supply currently available for processing in Turkey. The new plant
is scheduled for completion by September 2019.
Key contacts:
Stephen G. Roman
Chairman, President & CEO
Tel: +1
(416) 368-3949
Email:
sgr@globalatomiccorp.com
Merlin Marr-JohnsonExecutive VPTel: +44 7803 712
280Email: mmj@globalatomiccorp.com
The information in this release may contain
forward-looking information under applicable securities laws.
Forward-looking information includes, but is not limited to,
statements with respect to completion of any financings; Global
Atomic’s development potential and timetable of its operating,
development and exploration assets; Global Atomic’s ability to
raise additional funds necessary; the future price of uranium; the
estimation of mineral reserves and mineral resources; conclusions
of economic evaluation; the realization of mineral reserve
estimates; the timing and amount of estimated future production,
development and exploration; costs of future activities; capital
and operating expenditures; success of exploration activities;
mining or processing issues; currency exchange rates; government
regulation of mining operations; and environmental and permitting
risks. Generally, forward-looking statements can be identified by
the use of forward-looking terminology such as "plans", “targets”,
"expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or
"does not anticipate", or "believes", or variations of such words
and phrases or statements that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be
achieved". All information contained in this news release, other
than statements of current and historical fact, is forward looking
information. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of
Global Atomic to be materially different from those expressed or
implied by such forward-looking statements, including but not
limited to those risks described in the annual information form of
Global Atomic and in its public documents filed on SEDAR from time
to time.
Forward-looking statements are based on the
opinions and estimates of management as of the date such statements
are made. Although management of Global Atomic 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. Global Atomic does not
undertake to update any forward-looking statements, except in
accordance with applicable securities laws. Readers should also
review the risks and uncertainties sections of Global Atomic’s
annual and interim MD&As.
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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