Revett Minerals Inc., Spokane Valley, Washington (TSX-RVM) (“Revett” or the “Company”) reports on its operating and financial performance for the three and nine months ended September 30, 2008. All currency in this report is in United States dollars unless otherwise indicated

 

 

 

For the three months ended September 30, 2008, Revett reported a net loss of $3.0 million or $0.04 per share on revenue of $7.4 million. This compared to a net loss of $0.1 million or $0.00 per share during the three months ended September 30, 2007 on revenues of $9.1 million. Net income for the third quarter of 2008 was negatively effected by three significant factors; (i) in the third quarter, revenues were reduced by $3.0 million because of falling metal prices and the impact of these falling prices on the fair value of accounts receivable and forward contracts for which final settlement has not yet occurred; (ii) there was approximately $0.5 million of legal expenses relating to Rock Creek; and (iii) general and administrative costs increased significantly because of the accrual of severance costs of $0.9 million due to the termination of a member of the senior management team and also because of certain expenditures related to the Company’s corporate development activities.

 

Concentrate deliveries and sales during the three months ended September 30, 2008 consisted of 2.3 million pounds of payable copper and 252,587 ounces of payable silver compared to 1.6 million pounds of copper and 183,427 ounces of silver during the three months ended September 30, 2007.

 

During the third quarter of 2008, cost of sales was $8.9 million compared to $7.0 million in the third quarter of 2007. The increase in cost of sales was largely a function of increased input costs and a significant increase in mill throughput. Operating costs per ton milled actually declined on a quarter over quarter basis from $32.89 per ton during the third quarter of 2007 to $26.65 per ton during the third quarter of 2008. However, at the end of September the Company reduced its carrying value of its inventory by $0.1 million because the cost of such inventory exceeded its net realizable value. Depreciation and amortization increased by $0.2 million (64%) for the third quarter of 2008 compared to the third quarter of 2007 because of the increase in mill throughput and a small increase in the depreciable basis of plant and equipment. The majority of the equipment is depreciated using the units of production method so changes in production rates have a corresponding effect on depreciation and amortization. The reclamation and remediation liability accretion expense was $0.1 million in the third quarter of 2008 and $0.2 million in the third quarter of 2007.

 

Exploration and development costs totaled $0.5 million in the third quarter of 2008, compared to $0.7 million in the third quarter of 2007. The small decrease increase in exploration and development was largely a function of a decrease in the exploration spending at Troy. Spending at Rock Creek was relatively static on a quarter over quarter comparison. General and administration costs were $2.2 million in the third quarter of 2008 compared to $1.1 million during the third quarter of 2007. The significant increase in general and administrative costs are largely due to one-off expenses as were described above. Other income during the third quarter was a net expense of $0.1 million compared to income of $0.4 million in the third quarter of 2007. This change is almost entirely due to the effect of foreign exchange movements during the periods being discussed.

 

As a result of the foregoing factors, the company reported a net loss before non controlling interest and taxes of $4.9 million for the third quarter of 2008 compared to net income before non-controlling interest and taxes of $0.4 million for the third quarter of 2007. For the three months ended September 30, 2008, the Company reported a net loss, after taxes and non controlling interests, of $3.0 million or $0.04 per share compared to a small net loss of $0.1 million or $0.00 per share for the three month period ended September 30, 2007.

 

At September 30, 2008, the Company’s cash and cash equivalents totaled $11.5 million compared to $13.1 million as at June 30, 2008. At September 30, 2008 working capital had fallen to $6.5 million from $12.5 million at June 30, 2008. With the continuing collapse of the prices for copper and silver, the Company’s working capital and cash resources continue to be depleted rapidly because of the obligation to refund certain monies to its customer as the value of concentrate shipments made in prior periods decline with the decline in commodity prices. The Company has negligible forward sales contracts to offset the falling commodity prices.

 

The viability of our operations are significantly influenced by the price of copper and silver. The sale of copper concentrate involves invoicing at past metal prices and then in months following, the final payment received is adjusted for final weights and assays and for metal prices that exist during the month of final settlement. The Company has a substantial amount of copper and silver in concentrate which is subject to this future pricing mechanism. The magnitude of the metal subject to change could be between 20% and 40% of annual sales. Therefore a dramatic decline in the metal prices could have a material effect of the Company’s earnings and cash balances. If the prices fall quickly and far enough the Company may not have sufficient current period sales to generate sufficient cash to maintain operations and refund the  money owed to its customers arising from this final pricing mechanism.

The table below illustrates certain key operating statistics for Troy (100% basis) for the three and nine months ended September 30, 2008, with a comparison to the three and nine months ended September 30, 2007.

 

Production levels during the third quarter of 2008, as measured by mill throughput, improved by 54.5% over the third quarter of 2007 because in 2007 mining operations were restricted by a rock fall which occurred in late July and resulted in the suspension of operations in numerous areas underground. Additionally, ore grades milled during the third quarter of 2008 were below that experienced during the third quarter of 2007 because the mine was forced to operate in lower grade areas because of a shortage of development headings. However, mill recoveries improved significantly in-spite of milling lower grade ore. During the third quarter, the mine successfully developed additional headings in the East Ore Body which should provide for increase operating flexibility in the future should the Company have sufficient resources to continue normal operations and should the commodity prices recovery from the low level experience during October and early November.

 

There has been no progress at Rock Creek since the end of June.

 

Revett, through its subsidiaries, owns both the Rock Creek Project and the Troy Mine both of which are located in northwest Montana. Based on the drilling to date, Rock Creek contains an estimated inferred resource of 137 million tons grading 1.67 ounces silver per ton and 0.72% copper, containing approximately 229 million ounces of silver and over 2 billion pounds of copper using a cut off grade of US $10.00 per ton. Further information on both the Troy Mine and the Rock Creek Project may be found in the National Instrument 43-101 reports at www.sedar.com. These reports were prepared on behalf of the Company by Mr. Jean-Francois Couture, P.Geo.  and   Mr. Ken Reipas, P.Eng. of SRK Consulting (Canada). Both Mr. Couture and Mr. Reipas are Qualified Persons in accordance with National Instrument 43-101. All of these issues are discussed in greater detail in the Company’s official filings at www.sedar.com and with the SEC on EDGAR. 

 

John Shanahan

President  & CEO

 

For more information, please contact:

Scott Brunsdon, CFO or Doug Ward, VP Corporate Development at (509) 921-2294 or visit our website at www.revettminerals.com.

 

 

Assets		September 30, 2008 (unaudited)		December 31, 2007
Current Assets
Cash and cash equivalents	$	11,479	$	14,055
Short term investments		-		3,955
Accounts receivable		2,695		970
Income taxes receivable		99		1,250
Inventories		4,899		4,519
Prepaid expenses and deposits		334		498
Total current assets		19,506		25,247
Mineral property, plant, equipment  and mine development (net)		61,953		60,714
Restricted cash		7,567		7,386
Other long term assets		1,161		1,264
Total assets	$	90,187	$	94,611
Liabilities and shareholders’ equity
Current liabilities
Trade accounts payable	$	2,162	$	1,985
Payroll liabilities		2,146		806
Income, property and mining taxes		1,434		1,161
Concentrate settlement payable		3,725		526
Other accrued liabilities		1,369		852
Current portion of long term debt		2,178		9,719
Total current liabilities		13,014		15,049
Long-term portion of debt		676		1,784
Reclamation and remediation liability		7,379		7,141
Future income taxes		7,874		8,391
Total liabilities		28,943		32,365
Non controlling interest		7,938		8,175
Shareholders' equity
Preferred stock, no par value, unlimited authorized,  nil issued and outstanding
Common stock, no par value unlimited authorized,  75,002,702  (2007- 74,295,702) shares issued and outstanding		56,871		56,315
Contributed surplus		1,732		1,556
Deficit		(5,297)		(3,800)
		53,306		54,071
Total liabilities and shareholders’ equity	$	90,187	$	94,611

	Three month period ended September 30, 2008		Three month period ended September 30, 2007		Nine month period ended September 30, 2008		Nine month period ended September 30, 2007
Revenues	$	7,430	$	9,136	$	32,841	$	35,754
Expenses:
Cost of sales		8,881		7,049		26,674		23,356
Depreciation and amortization		459		280		1,305		1,115
Exploration and development		546		656		1,856		1,756
General and administrative		2,183		1,074		4,558		3,113
Accretion of reclamation and remediation liability		147		162		442		485
		12,216		9,221		34,835		29,825
Income (loss) from operations		(4,786)		(85)		(1,994)		5,929
Other income (expenses):
Interest expense		(90)		(336)		(458)		(1,079)
Interest and other income		104		326		543		1,017
Foreign exchange gain (loss)		(135)		449		(316)		1,415
Total other income (expenses)		(121)		439		(231)		1,353
Net income (loss) before non controlling interest and taxes		(4,907)		354		(2,225)		7,282
Income tax recovery (expense)		793		385		723		(944)
Net income (loss) before non controlling interest		(4,114)		739		(1,502)		6,338
Non controlling interest		1,134		(859)		5		(2,430)
Net income (loss) and comprehensive income (loss) for the period	$	(2,980)	$	(120)	$	(1,497)	$	3,908
Basic earnings (loss) per share	$	(0.04)	$	0.00	$	(0.02)	$	0.05
Diluted earnings (loss) per share	$	(0.04)	$	0.00	$	(0.02)	$	0.05
Weighed average number of shares outstanding		75,002,702		73,197,703		74,922,713		72,976,235
Weighted average number of diluted shares outstanding		75,002,702		73,197,703		74,922,713		73,542,289

	Three month period ended September 30, 2008		Three month period ended September 30, 2007		Nine month period ended September 30, 2008		Nine month period ended September 30, 2007
Cash flows from operating activities:
Net income (loss) for the period	$	(2,980)	$	(120)	$	(1,497)	$	3,908
Adjustments to reconcile net  income to net cash provided by operating activities   Activities
Depreciation and amortization		459		280		1,305		1,115
Accretion of reclamation and remediation liability		147		162		442		485
Foreign exchange loss (gain)		133		(449)		316		(1,415)
Stock based compensation		57		152		176		648
Loss (gain) on disposal of fixed assets		(2)		7		65		7
Future income tax expense (recovery)		(576)		(385)		(723)		944
Non controlling interest		(1,134)		859		(5)		2,430
Accrued interest from reclamation trust fund		(24)		(87)		(177)		(254)
Amortization of prepaid insurance premium		31		14		99		107
Change in fair value of derivative contracts		2,821		(594)		2,930		1,051
Changes in:
Accounts receivable		1,628		2,509		(1,452)		(963)
Income taxes receivable		(99)		-		1,151		-
Inventory		(133)		(333)		(380)		(584)
Prepaid expenses and deposits		317		(1,030)		164		(1,206)
Accounts payable and accrued liabilities		677		(931)		2,307		(1,517)
Net cash provided by operating activities		1,322		54		4,721		4,756
Cash flows from investing activities:
Proceeds (purchase) of short term investments		-		968		3,955		(976)
Other long term assets		-		25		-		502
Purchase of plant and equipment		(1,792)		(429)		(1,947)		(1,296)
Purchase of minority interest		-		(1,003)		-		(1,003)
Net cash provided (used) by investing activities		(1,792)		(439)		2,008		(2,773)
Cash flows from financing activities:
Proceeds form the issuance of common stock, net		-		-		-		1,327
Repayment of debt		(814)		(402)		(8,203)		(2,746)
Repayment of capital leases		(210)		(321)		(786)		(745)
Net cash from (used by) financing activities		(1,024)		(723)		(8,989)		(2,164)
Effects of foreign exchange on cash held
In foreign currencies		(133)		449		(316)		1,415
Net increase (decrease) in cash and cash equivalents		(1,627)		(659)		(2,576)		1,234
Cash and cash equivalents, beginning of period		13,106		21,755		14,055		19,862
Cash and cash equivalents, end of period	$	11,479	$	21,096	$	11,479	$	21,096
Supplementary cash flow information:
Cash paid for interest expense		151		519		702		787
Cash paid for income taxes		-		1,200		75		1,200
Common stock issued to acquire non-controlling interest		-		-		556		-
Acquisition of plant and equipment under capital lease business acquisition		255		-		338		-
property, plant and eqiNon cash transactions: