Pacific Rim Mining Corp. ("Pacific Rim" or "the Company") (TSX:PMU)(OTCQX:PFRMF)
reports its financial and operating results for the three months ended October
31, 2012. Details of the Company's financial results are provided in its interim
consolidated financial statements and Management's Discussion and Analysis
("MD&A") that will be publicly filed and made available to shareholders shortly.
Shareholders are strongly encouraged to review these documents. All monetary
amounts are expressed in United States ("US") dollars unless otherwise stated.
Nature of Operations
Pacific Rim is mineral exploration company focused on high grade,
environmentally clean gold deposits in the Americas and committed to excellence
in environmental stewardship and social responsibility. Pacific Rim's primary
asset is the advanced-stage, vein-hosted El Dorado gold deposit in El Salvador,
where the Company also owns several grassroots gold projects. The Company
additionally holds a joint venture option on the Hog Ranch epithermal gold
project in Nevada and is actively pursuing additional exploration opportunities
elsewhere in the Americas.
All references to "Pacific Rim" or "the Company" encompass the Canadian
corporation, Pacific Rim Mining Corp, its U.S. subsidiaries (Pac Rim Cayman LLC
("PacRim"), Pacific Rim Exploration Inc., and Dayton Mining (U.S.) Inc.), and
Salvadoran subsidiaries (Pacific Rim El Salvador, S.A. de C.V. ("PRES") and
Dorado Exploraciones, S.A. de C.V. ("DOREX"), inclusive.
The Company's business activity is focused on three main priorities: resolution
of the El Dorado project permitting impasse including legal recourse,
exploration of the Hog Ranch gold project and generation of new project
opportunities. The El Dorado project is the subject of an arbitration claim (the
"Arbitration") (more thoroughly described in the Company's Q2 2013 MD&A and
Fiscal 2012 MD&A) being heard at the International Center for the Settlement of
Investment Disputes ("ICSID") at the World Bank. During Q1 2013 the Arbitration
was given permission by ICSID to proceed, under the Investment Law of El
Salvador, to its final phase wherein the merits of the claim will finally be
addressed at ICSID headquarters in Washington, DC. Notwithstanding the ongoing
legal action, the Company continues to seek a negotiated resolution to the El
Dorado permitting impasse and to resuming its advancement of the El Dorado
project. The Company holds an option to earn a 65% interest in the Hog Ranch
gold property in Nevada. The Company selected targets for, and recently received
a permit to conduct, a Phase 1 drill program on the Hog Ranch property.
Pacific Rim's shares trade under the symbol PMU on the Toronto Stock Exchange
("TSX") and on the OTCQX market in the US under the symbol PFRMF.
Results of Operations
For the three month period ended October 31, 2012, Pacific Rim recorded a net
loss of $(1.4) million ($(0.01) per share), compared to net loss of $(0.8)
million ($0.00 per share) for the same period a year earlier. The loss recorded
for Q2 2013 is primarily a result of operating losses of $(1.3) million
(compared to $(1.1) million during Q2 2012). While Q2 2012 operating losses were
offset by a $0.4 million gain on derivative liability (unrealized income related
to changes in the fair value of common stock warrants issued by the Company
during private placement financings), operating losses were increased during Q2
2013 by a $(0.1) million loss on derivative liability.
For the six months ended October 31, 2012, Pacific Rim recorded a loss of $(1.9)
million or $(0.01) per share, compared to a loss of $(0.6) million or $(0.00)
per share, for the six months ended October 31, 2011. This $1.3 million increase
in net loss period over period is primarily attributable to a $1.3 million
difference in unrealized gain on derivative liability ($1.4 million for the
first six months of fiscal 2012 compared to $0.1 million for the same period of
the current fiscal year).
Expenses
Exploration expenses were $0.4 million during Q2 2013 compared to $0.6 million
during Q2 2012 reflecting a slowdown in activity at the Hog Ranch property
during the current quarter. Expenses related to the ICSID Arbitration were $0.4
million during Q2 2013 compared to $0.1 million during the same period a year
earlier reflecting renewed Arbitration activity in preparation for the final
phase of the case which commenced during Q2 2013. Other expenses were largely
unchanged quarter over quarter. As a result, operating loss for Q2 2013 was
$(1.3) million compared to $(1.1) million for Q2 2012.
As described above, during Q2 2013 the Company recorded an unrealized loss on
derivative liability of $(0.1) million compared to a gain of $0.4 million during
Q2 2012).
Unusual Items
There were no unusual items in Q2 2013.
Summary
Slightly lower exploration costs during Q2 2013 compared to Q2 2012 were offset
by slightly higher Arbitration costs, which led to a marginally increased
operating loss of $(1.3) million for the second quarter of fiscal 2013 compared
to $(1.1) million for the same period a year earlier. This loss was negligibly
increased by an unrealized loss on derivative liability of $(0.1) million during
Q2 2013, compared to an unrealized gain on derivative liability of $0.4 million
during Q2 2012, which led to a $0.6 million increase in net loss and
comprehensive loss period over period ($(0.8) million for Q2 2012 compared to
$(1.4) million during Q2 2013).
Liquidity and Capital Resources
Cash
During Q2 2013 the Company's cash and cash equivalents increased by $1.4 million
from $0.8 million at April 30, 2012 to $2.2 million at October 31, 2012.
Short-term investments also increased, from $0.5 million at April 30, 2012 to
$1.9 million at October 31, 2012. As a result of these increases in cash and
cash equivalents and short-term investments, current assets increased by $2.8
million during the first six months of fiscal 2013, from $1.4 million at April
30, 2012 to $4.2 million at October 31, 2012. This increase reflects increases
in cash and cash equivalents from the proceeds of a private placement financing
undertaken during Q2 2013 and redemptions from short term investments, offset by
expenditures of cash on the purchase of new short term investments and on
exploration and project generation expenses, general and administrative costs
associated with maintaining a public company, and expenditures related to the
Arbitration action.
The Company's financial statements have been prepared on the basis that the
Company will continue as a going concern, which assumes that the Company will be
able to meet its commitments, continue operations, realize its assets and
discharge its liabilities in the normal course of business for the foreseeable
future. There are events and conditions that cast substantial doubt on the
validity of that assumption. The Company will require additional financing in
the future in order to conduct substantial exploration programs and meet
property commitments, for administrative purposes and potentially for legal
expenses related to the Arbitration. The costs for the Arbitration are
substantial and are anticipated to increase as the case proceeds to through the
final, merits-based phase. While the Company has entered into a service and fee
agreement with its Arbitration legal counsel that provides legal fee cost
certainty, and, as a result of its recent private placement financing, has the
funds in place to pay the legal costs related to the final phase of the
Arbitration, additional unforeseen Arbitration-related costs may arise and
ongoing general and administrative and regulatory expenses will necessitate
additional financing in the future. Factors that could affect the availability
of financing include fluctuations in the Company's share price, the state of
international debt and equity markets, investor perceptions and expectations,
global financial and metals markets, progress on any of the Company's
exploration properties, and developments, if any, on the El Dorado project
permitting application. The Company believes it will be able to obtain the
necessary financing to meet its requirements on an ongoing basis; however, there
can be no assurance that the necessary financing will be obtained, and such
financing, if available, may be dilutive to the Company's shares and
shareholders. As it has in the past, the Company plans to obtain additional
financing through, but not limited to, the issuance of additional equity.
(The foregoing two paragraphs contain forward-looking statements regarding the
requirement for financing and the use of funds that may be raised. See
Forward-Looking Information.)
Working Capital
At October 31, 2012, the value of the Company's current assets was $4.2 million,
compared to $1.4 million at April 30, 2012, an increase of $2.8 million. This
increase in current assets is primarily the result of an increase in cash
related to the Company's October 2012 private placement financing, offset by
expenditures of cash on exploration, general and administrative responsibilities
and the Arbitration action. Resource property balances at October 31, 2012 were
negligibly higher than the April 30, 2012 balance ($5.51 million and $5.49
million respectively).
At October 31, 2012 the Company had current liabilities of $1.9 million,
compared to the April 30, 2012 balance of $1.6 million, which is due to a slight
increase in accounts payable and accrued liabilities. Of the accounts payable
and accrued liability balances, $1.5 million at October 31, 2012 (compared to
$1.4 million at April 30, 2012) is due to one vendor associated with the
Arbitration action.
The $2.8 million increase in current assets combined with the marginal increase
in current liabilities, resulted in a $2.5 million increase in working capital
from $(0.2) million at the end of fiscal 2012 to $2.3 million at the end of Q2
2013.
Financial Condition
The Company does not intend to resume significant exploration programs in El
Salvador until such time as the El Dorado environmental permit and exploitation
concession are received. The Company cannot judge if or when the required
permits will be received and is not currently planning any exploration programs
for its El Dorado, Santa Rita and Zamora-Cerro Colorado properties for the
immediate future beyond what is necessary to keep all of its exploration
licences in good standing. Should the required permits be granted, the Company
will evaluate its options for resuming full scale exploration work designed to
advance its El Salvador projects.
During Q1 2013, following completion of a surface work program during fiscal
2012, the Company applied for and was granted a drill permit to conduct a
10-15-hole (approximately 12,000 meter) drill program at the Hog Ranch property,
which permit allows for expanding the drill program to 31 holes. The Hog Ranch
drill program is subject to future financing (favourable conditions for which
are unlikely to occur until such time as the El Dorado permit has been received)
and sourcing of drill contractors, and consequently may not commence during
fiscal 2013 as previously anticipated. Acquisition of the Remance project is in
doubt and therefore, no exploration plans for Remance are being contemplated at
this time. However, if a final acquisition agreement on Remance is signed, as
per the terms of the Remance LOI the Company will be responsible for undertaking
a $1 million exploration program in the first year of the option period. The
Company intends to continue its project generation initiatives with the aim of
evaluating and possibly acquiring new exploration properties of merit that fit
its exploration focus.
The Company anticipates that the Hog Ranch drill program and associated
exploration will cost approximately $1.5 million, with a further $1 million
required in the event the Remance property is acquired. Minimal expenditures are
anticipated for generative exploration work. The Company will require additional
financing in order to carry out the planned Hog Ranch drill program, as well as
any other future exploration work of a substantive nature.
(The foregoing two paragraphs contain forward-looking statements regarding the
scope and anticipated costs of exploration and generative work programs
management intends to undertake during fiscal 2013. See Forward-Looking
Information.)
The Company's general and administrative costs are expected to remain stable
during the remainder of fiscal 2013. Expenditures related to the Arbitration
claim are expected to increase substantially as the case proceeds through the
final phase. At October 31, 2012, the Company had accumulated a liability of
approximately $1.5 million related to the Arbitration. Additional working
capital (likely through equity financing) will be required to fund ongoing
general and administrative costs. Though the Company has signed a service and
fee agreement with its Arbitration legal counsel that will preclude legal fee
cost overruns, ancillary Arbitration-related expenses such as expert witnesses,
court costs, etc. are less certain and may be substantial.
(The foregoing paragraph contains forward-looking statements regarding
anticipated general and administrative expenses for fiscal 2013, and the
requirement for additional financing to fund legal costs and future general
working capital expenses. See Forward-Looking Information.)
The business of mining and exploration involves a high degree of risk and there
can be no assurance that any of the Company's current exploration projects will
result in profitable mining operations. The Company has no source of revenue,
and will require additional cash in the future to fund exploration and
administrative expenses. As at October 31, 2012, the Company has working capital
of $2.3 million, has incurred losses since inception and has an accumulated
deficit of $91.7 million. The Company's ability to continue operations and
exploration activities as a going concern is dependent upon its ability to
obtain future financing. The Company will need to raise additional funds to
support exploration and administration expenses and may require additional funds
to support unanticipated expenses related to the Arbitration action. While the
Company has been successful in obtaining financing in the past, there is no
assurance that sufficient funds will be available to the Company, or be
available on favourable terms in the future. Factors that could affect the
availability of financing include fluctuations in the Company's share price, the
state of international debt and equity markets, investor perceptions and
expectations, global financial and metals markets, progress on any of the
Company's exploration properties, and developments, if any, on the El Dorado
project permitting application. Additional financing will require, but may not
be limited to, the issuance of additional equity. Readers are encouraged to
thoroughly review the Risks and Uncertainties detailed in the Company's MD&A for
fiscal 2012.
Outlook
Exploration
During the first half of fiscal 2013, the Company applied for and was granted a
drill permit to conduct a 10-15 hole (approximately 12,000 meter) Phase 1 drill
program at Hog Ranch, which permit allows for expansion of the drill program to
31 holes. The Company has selected and prioritized drill targets for Hog Ranch
but has elected to forestall commencement of this Phase 1 drill program until
such time as it can minimize the dilution on the cost of capital necessary to
undertake the program (conditions for which are not likely to occur until such
time as the El Dorado permit is granted). In addition to being subject to
financing, commencement of this drill program is dependent on sourcing of drill
contractors at a competitive rate. As such, the Hog Ranch drill program may not
occur during fiscal 2013 as previously anticipated.
The Company's acquisition of the Remance property is on hold and highly
uncertain at this time, pending the vendor's legal appeal of the Government of
Panama's recent decision to deny extension of the Remance concession term. While
the Company is keeping the Remance LOI in effect during Minera Clifton's appeal,
it does not intend to sign a final agreement to acquire the Remance project
unless the term of the concession is extended.
The Company will continue to curtail its exploration programs and expenditures
in El Salvador until such time as PRES receives the El Dorado environmental
permit and exploitation concession. The Company remains hopeful that it will
either receive the El Dorado permit and mining concession or that it will be
appropriately compensated. The Company will continue to seek opportunities for
dialogue with the GOES aimed at resolving its permitting issues in El Salvador
including receipt of the environmental and mining permits for the El Dorado
project as well as re-establishing the exploration licence for Santa Rita.
The Company continues to seek new project opportunities in North and Central
America.
The planned Phase 1 Hog Ranch drill program is expected to cost approximately
$1.5 million. However, commencement of this drill program is dependent on
securing adequate future financing, and procurement of drill contractors and as
such, its timing is currently uncertain. If the Remance project is acquired, the
Company will require financing to undertake an exploration program, as per the
terms of its Remance letter of intent that is anticipated to cost approximately
$1.0 million. Additional exploration work required to keep all of its El
Salvador projects in good standing, and exploration expenses related to the
Company's generative programs, will continue through fiscal 2013 and for the
foreseeable future.
(The foregoing paragraph contains forward-looking statements regarding the
Company's exploration plans and anticipated costs during fiscal 2013 and beyond,
its efforts to settle the El Dorado permit impasse, and its requirements for
additional funding. See Forward-Looking Information.)
General and Administrative and Legal
The Company's general and administrative costs are expected to remain stable
during the remainder of fiscal 2013. Additional working capital (likely through
equity financing) will be required in the future to fund ongoing general and
administrative costs. Expenditures related to the Arbitration claim are expected
to increase substantially as the case proceeds through the final phase. Though
the Company has signed a service and fee agreement with its Arbitration legal
counsel that will preclude legal fee cost overruns, ancillary
Arbitration-related expenses such as expert witnesses, court costs, etc. are
less certain and may be substantial.
The Company will continue to seek opportunities for dialogue with the GOES aimed
at resolving the El Dorado permitting situation. The Company and its
subsidiaries have a well-documented history of supporting local inhabitants and
building relationships with all stakeholders. This is a key component of the
Company's approach to exploration and development, and will continue in all
jurisdictions in which it and its subsidiaries operate.
Unless these diplomatic efforts are successful, the Arbitration action is
expected to proceed during the remainder of fiscal 2013 and beyond. The Company
and its legal counsel are currently preparing for the final phase of the ICSID
Arbitration case. PacRim's Memorial (initial written testimony in which the
details of its case our presented) is now in preparation and will be submitted
to the Tribunal in March 2013. This submission will be followed by a written
response from the GOES and oral testimony by both parties before the Tribunal.
Based on these submissions and testimonies, the Tribunal will determine whether
El Salvador has breached Salvadoran and international law by refusing to issue
the necessary mining licenses for the El Dorado Mine. They will also determine
El Salvador's monetary liability for breaching the investment protections owed
to a foreign investor as per in its own laws. The final phase of the Arbitration
case is expected to continue through calendar 2013 and potentially beyond.
(The foregoing paragraph contains forward-looking statements regarding
anticipated general and administrative and legal expenses during fiscal 2013;
anticipated schedule of events through the final phase of the Arbitration; and
management's expectations regarding expected Arbitration costs and its ability
to manage these expenses. See Forward-Looking Information.)
Key Issues
Important corporate and technical issues facing the Company in the coming fiscal
months (and beyond) include: developments related to the Arbitration action;
ongoing efforts to reach a resolution to the El Dorado permitting impasse with
the GOES; the Company's ability to secure adequate future financing for
exploration expenses including the planned Hog Ranch drill program, maintenance
of the El Salvador and Nevada properties and general working capital purposes;
the execution and outcome of the Company's Phase 1 drill program at the Hog
Ranch property; developments related to the potential signing of a formal option
agreement to acquire the Remance project and the subsequent undertaking of an
exploration and drilling program at Remance if, as, and when it is formally
acquired; and, the continued search for additional exploration project
opportunities. Readers are strongly encouraged to review the information
provided in Section 13 - Risks and Uncertainties of the Q2 2013 MD&A and more
thoroughly detailed in Section 14 of the Company's fiscal 2012 MD&A.
(The foregoing paragraph contains forward-looking statements regarding
management's assessment of the key issues facing the Company during fiscal 2013
and the requirement for additional financing. See Forward-Looking Information.)
On behalf of the board of directors,
Thomas C. Shrake, President and CEO
Forward-Looking Information
The information contained herein contains "forward-looking statements" within
the meaning of Section 21E of the United States Securities Exchange Act of 1934
(as amended) and applicable Canadian securities legislation. Forward-looking
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
management. Any statements that express predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or performance are
not statements of historical fact and may be "forward-looking statements."
Statements concerning reserves and mineral resource estimates may also be deemed
to constitute forward-looking statements to the extent that they involve
estimates of the mineralization that will be encountered if the property is
developed, and in the case of mineral reserves, such statements reflect the
conclusion based on certain assumptions that the mineral deposit can be
economically exploited.
This report contains forward-looking statements regarding:
-- the Company's future financing requirements and the use of funds that
may be raised. These assumptions are based on management's estimate of
working capital requirements and past expenditures. There are no
guarantees that future financing will be available to the Company under
acceptable terms and conditions. Readers are cautioned that without
additional financing the Company's ongoing exploration plans may not be
carried out as anticipated and its ability to continue its business may
be at risk.
-- the Company's assessment of expected legal costs associated with the
Arbitration and its ability to meet these costs based on current cash
and cash equivalent balances, as well as management's assessment that
unanticipated Arbitration costs may arise for which additional financing
may be required. The Company's expectation that it can meet the expected
legal expenses during the final phase of the Arbitration is based on its
understanding of costs laid out in the service and fee agreement with
its legal counsel as well as its understanding of potential additional
costs. Unanticipated costs related to the Arbitration may cause these
assumptions to change and there can be no guarantee that the Company
will not require additional financing related to the Arbitration or that
additional financing will be available to the Company under acceptable
terms and conditions.
-- the scope of exploration and generative work programs management plans
to undertake during fiscal 2013 and in the foreseeable future. These
expectations are based on various assumptions including but not limited
to: the Company's ability to secure financing, procure contractors and
obtain permits necessary to commence the proposed Hog Ranch drill
program; the Company and/or its subsidiary's signing of a Formal
Agreement to acquire the Remance project; the Company and/or its
subsidiaries' continued title and access to the El Dorado, Santa Rita
and Zamora-Cerro Colorado properties; the availability and accessibility
of projects the Company may be interested in acquiring; the availability
of sufficient working capital and access to financing; the ability to
procure adequate experienced staff; the availability of contractors; and
other risks and uncertainties. Should any of these assumptions prove
incorrect or requirements not be met, the Company's project generation
and exploration for fiscal 2013 and beyond may not occur as planned.
-- the Company's intent to forego significant exploration work at the El
Salvador projects until certain permits are granted, the implication
being that if and when these permits are granted increased investments
in exploration will be made in El Salvador. Readers are cautioned that
this statement conveys management's intent but that resumption of a
large-scale exploration program at the El Salvador projects is dependent
on not only the PRES's receipt of the El Dorado permit but also the
availability of adequate financing, the ability to procure adequate
experienced staff, the availability of contractors, and other risks and
uncertainties. Should any of these assumptions prove incorrect or
requirements not be met, the Company's project generation and
exploration plans for the remainder of fiscal 2012 may not occur as
planned.
-- the Company's exploration plans and anticipated costs for fiscal 2013
and beyond. The anticipated exploration expenditures reflect estimations
made by management based on current levels of expenditure and
anticipated work programs as described previously. Should unexpected
costs arise, exploration expenditures may differ from those currently
anticipated.
-- anticipated general and administrative, and legal expenses and the
possible requirement for additional financing to fund general working
capital expenses and potential, unanticipated legal costs. These
statements are based on management's assumption the Arbitration action
will continue through fiscal 2013 and the expected costs of pursuing
this action, plus the Company's anticipated burn rate for general and
administrative costs. Should PRES receive the El Dorado permits at any
time, the necessity to continue the CAFTA action may be averted and the
anticipated impact on general and administrative costs may not
materialize.
Forward-looking statements are subject to a variety of risks and uncertainties,
which could cause actual events or results to differ from those reflected in the
forward-looking statements, including the risks and uncertainties outlined above
and other risks and uncertainties related to the Company's prospects, properties
and business detailed in its fiscal 2012 MD&A, in the Company's Annual
Information Form for the year ended April 30, 2012 and in the Company's most
recent Annual Report on Form 20F filed with the US Securities and Exchange
Commission. Should one or more of these risks and uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements. Investors are
cautioned against attributing undue certainty to forward-looking statements. The
Company does not undertake to update any forward-looking statements that are
incorporated by reference herein, except in accordance with applicable
securities laws.
National Instrument 43-101 Disclosure
Mr. William Gehlen, Vice President Exploration, supervises Pacific Rim's
exploration work on the El Dorado project. Mr. Gehlen is a Certified
Professional Geologist with the AIPG (No. 10626), an employee of the Company and
a Qualified Person as defined in NI 43-101.
Mr. David Ernst, Chief Geologist, supervises the Company's project generation
initiatives and conducted due diligence geological investigations and
confirmatory sampling at the Remance Project. Mr. Ernst is geologist licensed by
the State of Washington, an employee of Pacific Rim and a Qualified Person as
defined in NI 43-101.
Pacific Rim's sampling procedures follow the Exploration Best Practices
Guidelines outlined by the Mining Standards Task Force and adopted by The
Toronto Stock Exchange. Samples are assayed using fire assay with a gravimetric
finish on a 30-gram split. Quality control measures, including check- and sample
standard-assaying, are being implemented. Samples are assayed by Inspectorate
America Corporation in Reno, Nevada USA, an ISO 9002 certified laboratory,
independent of Pacific Rim Mining Corp.
FOR FURTHER INFORMATION PLEASE CONTACT:
Pacific Rim Mining Corp.
604-689-1976 or 1-888-775-7097
604-689-1978 (FAX)
general@pacrim-mining.com
www.pacrim-mining.com
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