Business & Finance
Business and Finance
Business and Finance
Fri, February 6, 2009 FNX Mining Company Inc.: FNX Issues 2009 Guidance
TORONTO, ONTARIO--(Marketwire - Feb. 6, 2009) - FNX Mining Company Inc. (TSX:FNX) ("FNX" or "the Company") announces its guidance for fiscal 2009. The Company recognizes that the current unprecedented capital market distress and low commodity prices require decisive and prudent actions and ongoing adjustments to current economic realities. As such the Company, subsequent to the suspension of nickel production from its Levack and McCreedy West mines in late 2008, has dramatically reduced its 2009 production plans from previous guidance.
The 2009 budget and plan are based on preserving the Company's strong balance sheet through significant decreases in production levels, prudent cash cost controls, minimum stay-in-business capital expenditures and focusing on advancing the development of the Levack Footwall Deposit ("LFD") towards production as quickly as possible.
As at December 31, 2008, the Company had an unaudited cash balance of $129.5 million, approximately $148 million in securities (including $50 million in shares to be received in 2010), zero debt and has cancelled its US$100 million line of credit (see below).
FNX has limited 2009 production to deposits which can generate sufficient cash flow at budgeted commodity prices to cover their operating costs and sustainable capital expenditures. This includes McCreedy West's PM and 700 copper-precious metal deposits, the Levack Rob's nickel-copper-precious metal deposit and Podolsky's 2000 copper-precious metal deposit. Each operation will be continuously and closely monitored throughout the year to ensure that it continues to make a positive contribution.
The Company's annual production forecast for 2009 totals 679,000 tons of shipped ore from its Sudbury Operations, yielding 3.7 million pounds of payable nickel, 35.2 million pounds of payable copper and 58,000 ounces of payable platinum, palladium and gold. Annual production will consist of 372,000 tons from the Podolsky Mine, 280,000 tons from the McCreedy West PM and 700 deposits and 27,000 tons from the Levack Rob's deposit. Current plans also call for production of an additional 50,000 tons of low to medium grade development ore from the top of the LFD in late 2009. Pre-production revenues from the LFD in 2009 will be credited against capital development costs and the LFD payable metals are not included in the above forecast numbers.
The Company continues to reduce operating costs at its Sudbury operations, where possible, and will continue to review further cost reduction opportunities throughout the year. Guidance for the average production cost is forecast at $146 per ton of ore shipped with mining costs forecast to average $75 per ton and processing costs forecast to average $71 per ton. Processing costs per ton of ore shipped vary widely from orebody to orebody due to the various types of mineralization, the metal grades and the amount of recovered metal treated. Mining costs also vary depending on the mining methods utilized. Processing costs and revenues are denominated in US$ and are directly impacted by changes in the Canadian-US dollar exchange rate.
Table 1: 2009 Annual Production Forecast(1)
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Levack Complex Podolsky 2009 Total
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Tons 307,000 372,000 679,000
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Payable Metal
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Nickel (Mlbs) 1.9 1.8 3.7
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Copper (Mlbs) 6.7 28.5 35.2
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Platinum (ozs) 9,700 12,300 22,000
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Palladium (ozs) 15,300 11,300 26,600
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Gold (ozs) 5,700 3,700 9,400
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(1) Assumes a nickel price equals US$4.50 per pound, copper price equals
US$1.50 per pound, platinum price equals US$800 per ounce, palladium
price equals US$175 per ounce, gold price equals US$750 per ounce and
US$ equals C$1.15.
Capital expenditures for 2009, excluding the LFD pre-production costs and credits which are expected to be offsetting, are forecast to be $64.2 million. This compares to an original 2008 budget for capex of $237 million reduced during 2008 to an unaudited actual capex of under $170 million. The 2009 capital budget priorities include a net $38.9 million for development of the LFD to the initial production stage, $11.3 million to complete development of the Podolsky Mine and $3.8 million of sustainable capital at McCreedy West. The exploration budget in 2009 is forecast at $10.2 million, compared to $20.7 million in 2008, and will focus on definition drilling and expansion of the known mineralization at the LFD and on the discovery of new ore deposits. The Company's G&A costs are forecast at $10 million, a reduction from 2008.
Table 2: 2009 Capital Budget ($M)(1)
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Mining Exploration
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McCreedy West 3.8 -
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Levack - 0.6
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Podolsky 11.3 3.4
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LFD(1) 38.9 5.4
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Other Properties/DMC - 0.8
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Total 54.0 10.2
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(1) Excludes LFD preproduction costs and credits
Financial Condition
As at December 31, 2008, the Company had an unaudited cash balance of $129.6 million and zero debt. The Company has sufficient cash on hand to develop the LFD to the initial production stage, complete development of the Podolsky Mine and support all anticipated corporate activities for 2009. The Company expects to exit the year with a strong cash balance.
As a result of the current global credit crisis, the cost of borrowing money has increased dramatically from that of April 1, 2008, the date when FNX entered into its US$100 million line of credit facility ("LOC") with a group of lenders. The terms of the LOC required FNX to notify the lenders by January 31, 2009 of the Company's intention to renew the LOC for another year. Market conditions beyond FNX's control indicate that there would be significant costs to renew the LOC, including material extension fees and increases in both the standby fees and interest rates. Given the Company's strong balance sheet and the budgeted expenditure level for the year, FNX determined that the Company does not have a requirement to borrow any funds under its LOC to achieve its operating plan and budget for 2009. Accordingly, FNX has elected not to renew and has cancelled the LOC.
FNX's metal sales do not have provisional cash payments as all cash payments received by FNX for its payable metal are final and not subject to any subsequent cash adjustments. For accounting purposes FNX does, however, utilize provisional pricing for the metal it delivers to third party processors with changes in metal prices subsequent to the period of sale adjusted through revenues and receivables.
FNX reduced staffing levels and suspended unprofitable operations in the second half of 2008 and will test these and all of its other Sudbury operational assets for possible impairments during its 2008 year end financial reporting process.
The Company continues to have a strong balance sheet and has imposed severe controls on capital and operating expenditures in order to bring the LFD Deposit to production during the 2009-10 period. Due to its high grade, the LFD is expected to provide strong operating margins even at today's commodity prices and will position the Company to weather the current downturn and succeed in the next recovery.
Forward-Looking Statement
This news release contains certain forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict, which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. In this news release, statements about ore and metal production forecasts, capital budget projections, possible future cash balances and future operating margins are examples of forward-looking statements. There is no guarantee that the production or cost forecasts will be accurate or that deposits will be viable. Forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to publicly update any such statement or reflect new information or the occurrence of future events or circumstances, except where required by securities regulations. Accordingly, readers should not place undue reliance on forward-looking statements.
