VANCOUVER, May 29 - First Dynasty Mines Ltd. announced first-quarter results today that include the initial due diligence costs for the proposed acquisition of the Gunung Pongkor gold mine in West Java. ``We believe these costs represent a sound investment for a project of great value,'' said Marcus Randolph, the recently named president of First Dynasty.
Gunung Pongkor has published gold reserves of 3.1 million ounces and produced 66,000 ounces in 1995. First Dynasty's production goal for the mine is 200,000 ounces annually.
Consulting fees related to the acquisition of Gunung Pongkor and the expense associated with the exercise of stock options together accounted for most of the increase in losses from $502,000 one year earlier to $830,000 ($0.02 per share) for the first quarter of 1996. Partly offsetting these higher costs was operating profit of $135,000 realized from the company's Indonesian oil operations acquired at the end of the 1995 first quarter.
``The first-step,'' Randolph continued, ``will be the transfer to First Dynasty of 100 percent of the Gunung Pongkor mine and related exploration concessions at a preliminary value range of US $120 million to $145 million, for common shares in First Dynasty. The agreed share price has been set within a range of US $6.00-$7.00, the average closing price of First Dynasty shares for the ten-day trading period ended May 15. Of course, the agreement is subject to the approval of both companies' boards of directors, First Dynasty shareholders, The Toronto Stock Exchange and other regulatory bodies. We hope to move quickly on this transaction, completing it by August 30.''
General and administrative expenses charged to First Dynasty's Denver office amounted to $910,000 for the quarter, which included approximately $415,000 in deferred compensation related to the exercise of stock appreciation rights on stock options exercised on the death of a director, and approximately $106,000 for consulting, principally related to work contracted for the acquisition of Gunung Pongkor. Apart from these two items, general and administrative expenses for the corporate office and exploration offices were essentially unchanged from the previous year.
Interest income in 1996 of $61,000 was $31,000 higher than the prior year because of higher average cash balances. In 1995, the company incurred interest expense of $94,000 on debts, which were repaid in the third quarter from proceeds of equity raised in the second quarter of 1995.
Management changes announced by Randolph include the resignation of Timothy Haddon as co-chairman, president and chief executive officer. Mr. Haddon, who remains a director of the company, will be succeeded by Johannes Kotjo, current co-chairman, as sole chairman. Randolph's appointment as president was announced earlier this month.
Current management of First Dynasty will resign their positions to assume identical roles within the company's wholly owned subsidiary, Ivanhoe Goldfields Ltd. Ivanhoe Goldfields will manage the company's North American assets from the Denver offices.
To facilitate the restructured management, Randolph and Myron Goldstein will be appointed to the First Dynasty board, replacing Fred Park and Elwin Smith, who will join the board of Ivanhoe Goldfields. Management has also recommended that Ramon A. Recto be elected as a director at the company's annual general meeting scheduled to be held on June 21.
First Dynasty Mines Ltd. is listed on The Toronto Stock Exchange under the trading symbol FDM and quoted on NASDAQ under FDYMF.
CONSOLIDATED BALANCE SHEETS
(Stated in United States Dollars)
March 31, March 31,
1996 1995
(unaudited) (unaudited)
----------- -----------
ASSETS
------
Current Assets
Cash and cash equivalents $ 2,031,000 $ 4,758,000
Accounts receivable 6,371,000 5,816,000
Supplies inventory 1,363,000 29,000
Prepaid expenses 2,034,000 56,000
----------- -----------
Total Current Assets 11,799,000 10,659,000
Investment in oil and gas properties,
at cost (full cost method) 50,794,000 41,786
Less accumulated depletion,
depreciation and amortization (2,778,000) -
----------- -----------
Net investment in oil and gas
properties 48,016,000 41,786,000
Deferred mineral acquisition and
exploration expenditures 7,260,000 5,529,000
Furniture, fixtures and
equipment, net 374,000 788,000
Other assets 1,483,000 -
--------- -----------
TOTAL ASSETS $ 68,932,000 $ 58,762,000
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 2,299,000 $ 136,000
Accrued liabilities 2,710,000 3,192,000
Current portion of long-term debt - 1,200,000
----------- ------------
Total Current Liabilities 5,009,000 4,528,000
Long-term debt 1,650,000 6,886,000
Notes payable - 5,567,000
---------- ------------
Total Liabilities 6,659,000 16,981,000
---------- ------------
SHAREHOLDERS' EQUITY
Share capital
Issued and outstanding, no par, common stock:
47,073,456 and 40,758,373 at March 31, 1996
and 1995, respectively. 71,577,000 44,276,000
Foreign currency translation
adjustment 4,000 (24,000)
Deficit (9,308,000) (2,471,000)
---------- ----------
Total Shareholders' Equity 62,273,000 41,781,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 68,932,000 $ 58,762,000
----------- ------------
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(Stated in United States Dollars)
For Three Months Ending March 31,
1996 1995
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $ (830,000) $ (502,000)
Items not involving use of cash and cash equivalents:
Depletion, depreciation and
amortization 1,401,000 5,000
Accrued interest on notes payable - 94,000
Change in non-cash operating working
capital items (3,920,000) 321,000
Change in other assets (544,000) -
----------- ---------
Net cash used in operating
activities (3,893,000) (82,000)
----------- ---------
INVESTING ACTIVITIES
Purchase of oil and gas operations - (38,735,000)
Additions to furniture, fixtures
and equipment (31,000) (5,000)
Additions to oil & gas investment (2,257,000) -
Additions to deferred mineral acquisition
and exploration expenditures (674,000) (171,000)
Net cash used in investing
activities (2,962,000) (38,911,000)
----------- ------------
FINANCING ACTIVITIES
Proceeds from long-term debt and
notes payable - 1,477,000
Share capital issued 2,079,000 41,508,000
Issuance costs - (487,000)
Repayment of long-term debt - (250,000)
---------- -----------
Net cash provided by financing
activities 2,079,000 42,248,000
---------- ----------
Foreign currency translation
adjustment (5,000) (14,000)
---------- -----------
INCREASE IN CASH AND CASH
EQUIVALENTS (4,781,000) 3,241,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,812,000 1,517,000
---------- ----------
CASH AND CASH EQUIVALENTS, END $ 2,031,000 $ 4,758,000
---------- ----------
CONSOLIDATED STATEMENT OF LOSS
(Stated in United States Dollars)
For Three Months Ending March 31,
1996 1995
(Unaudited) (Unaudited)
REVENUE
Oil and gas revenues $ 3,080,000 $ -
Interest 61,000 30,000
---------- ------------
Total revenues 3,141,000 30,000
OPERATING COSTS AND EXPENSES
Oil and gas production 966,000 -
Depletion, depreciation and
amortization 1,401,000 5,000
General and administrative 1,600,000 433,000
Interest - 94,000
Foreign exchange 4,000 -
---------- ----------
Total operating costs and
expenses 3,971,000 532,000
--------- ----------
NET LOSS 830,000 502,000
DEFICIT, BEGINNING OF PERIOD 8,478,000 1,969,000
DEFICIT, END OF PERIOD $ 9,308,000 $ 2,471,000
---------- ----------
NET LOSS PER SHARE $0.02 $0.02
On March 29, 1995, First Dynasty completed the acquisition of Energy Process Services Ltd. (``EPS'') whose principal asset is its 80 percent ownership of Genindo EPS Petroleum Ltd. (``GEPS''). GEPS operates the Sembakung oilfield in northeast Kalimantan under a Technical Assistance Contract with the Indonesian state owned oil and gas company, Pertamina.
During 1995, the Company was awarded three concessions in Myanmar, and negotiated Memorandums of Understanding for the acquisitions of 80 percent of the Minika project in Irian Jaya, Indonesia and of 100 percent of the Gunung Pongkor mine in West Java, Indonesia.
On May 6, 1996, First Dynasty announced a reorganization of the management and election of new directors of the Company designed to enhance the ability of the Company to manage and finance its current Southeast Asian assets and acquire important precious and base metal projects throughout the region and to manage the development of the Dublin Gulch project. First Dynasty's head office will move from Denver to Singapore and a new management team, led by Marcus P. Randolph as First Dynasty's president, will be established there. Mr. Timothy Haddon will resign as Co-chairman, President, and Chief Executive Officer, but will remain a Director of the Company. He will be succeeded by Mr. Johannes Kotjo, currently Co-Chairman, as sole Chairman, and Mr. Randolph as President. The current management will resign and be elected to identical positions with IGL, continuing to reside in Denver. To facilitate the election of Messrs. Randolph and Goldstein, Messrs. Fred Park and Elwin Smith will resign from the Board and be appointed to IGL's Board of Directors. Management also has recommended that Mr. Ramon A. Recto be elected a director of the Company at its Annual General Meeting on June 21.
On May 16, the Company announced further agreement with PT Aneka Tambang, the wholly owned Indonesian state mining company and the 100 percent owner of Gunung Pongkor. Under the agreement, First Dynasty will acquire 100 percent of the Gunung Pongkor mine and its related exploration concessions at a preliminary value range of US $120 to $145 million for common shares in First Dynasty. The agreed share price has been set within a range of US $6.00 and $7.00, the average closing price of First Dynasty's shares for the ten day trading period ending May 15, 1996. The agreement is subject to the approval of both Boards of Directors, First Dynasty shareholders, the Toronto Stock Exchange and other regulatory bodies. The parties intend to complete the transaction by August 30, 1996.
Operating Results
For the first quarter of 1996, the Company recorded a net loss
of $830,000, versus a loss of $502,000 in the first quarter of 1995.
On a stand alone basis, the net operating profit (earnings before interest and taxes) of Energy Process Services Ltd. amounted to $135,000. As the acquisition of EPS was accounted for as occurring at the end of the first quarter of 1995, no financial results were recorded in the prior year.
During the 1996 first quarter, EPS's share of oil produced equaled 1686 barrels of oil per day as the Sembakung field produced in total approximately 4134 barrels of oil per day. Revenue from sales of crude oil amounted to $3,080,000 in the quarter. Production costs were $966,000 and general and administrative costs $593,000. Total cash operating costs of $1,559,000 thus averaged $10.03 per barrel. Depletion, depreciation, and amortization equaled $1,386,000, including the amortization of the initial acquisition.
General and administrative expenses charged to the Denver general office amounted to $910,000 for the quarter, which included approximately $415,000 in deferred compensation related to the exercise of stock appreciation rights on stock options exercised on the death of a director, and approximately $106,000 for consulting, principally related to work contracted for the acquisition of Gunung Pongkor. Apart from these two items, general and administrative expenses for the corporate office and exploration wereessentially unchanged from the year earlier period.
Liquidity and Capital Resources
As of the end of the first
quarter, the Company had cash and
cash equivalents of $2,031,000 and net working capital of $6,790,000
as compared with balances of $4,758,000 and $6,131,000 respectively
at the start of the year.
During the first quarter, operating activities consumed $3,893,000. While the Company incurred a net loss of $830,000 in the quarter, included in the loss were non-cash charges for depletion, depreciation, and amortization of $1,401,000. The increase in First Dynasty's non-cash working capital is principally due to a $2,095,000 increase in accounts receivable related to the higher level of sales and production, a $552,000 increase in supplies inventory as EPS prepared for its drilling program, and a $1,513,000 increase in prepaid expenses related to periodic construction payments on a slant hole drill rig being built for GEPS.
The Company spent $2,257,000 on development expenditures for the Sembakung field during the quarter. Of the $674,000 spent on mineral properties, $64,000 represented payment made in shares for options on leases on the Clear Creek property. Expenditures on Dublin Gulch amounted to $451,000, of which $14,000 was for a royalty payment and $437,000 for engineering studies related to the evaluation of the Dublin Gulch property. the balance of expenditures was spent on the Company's three licenses in Myanmar.
In the first quarter of 1995, First Dynasty acquired 100 percent of the shares of EPS in exchange for 14.7 million shares valued at $2.38 per share, $1 million in cash, and a promissory note of $1.5 million subject to final determination of EPS's year end 1994 net working capital.
During the 1996 period, the Company financed its needs by a $4,781,000 drawdown of cash balances and the issuance of $2,079,000 of shares, of which $1,601,000 arose from the exercise of warrants to purchase common shares at $6.50 per share. Other shares were issued for stock options and the Clear Creek option payment.
First Dynasty has outstanding warrants to purchase 1,753,750 shares at a price of $6.50 per share. These warrants expire on June 27, 1996 and management expects that they will all be exercised by that date, providing the Company with $11.4 million in capital. In addition, the exercise of certain options by management and directors in connection with the corporate reorganization is expected to provide a further $2.7 million of equity to the Company. The $14.1 million of new equity funds is forecast to provide ample liquidity for First Dynasty for the remainder of this year. In early 1997, Energy Process Services Ltd. is expected to become a net cash generator, following completion of the initial development wells.
If the anticipated Gunung Pongkor acquisition is completed, the Company expects that the consideration will be common shares. Further development requirements are expected to be funded from a project financing arranged by a major commercial bank, which is already working with PT Aneka Tambang. Management has begun discussion of a facility to finance general corporate requirements.
For further information please contact:
Media: Ray Torresan (604) 688-7166
Shareholder-Investor: Nina Tarmohamed (604) 688-7166