Ivernia Reports Third Quarter 2014 Financial Results

TORONTO, Oct. 28, 2014 (GLOBE NEWSWIRE) -- Ivernia Inc. ("Ivernia" or, collectively with its subsidiaries, the "Company") (TSX:IVW) today reported results for the three and nine months ended September 30, 2014. Principal activities during the third quarter of 2014 focused on maximizing production and sales levels. Our work was centered on improving recovery, maximizing head grades of ore delivered to the mill, and completing the majority of the drilling activity required to support an ongoing project to understand and determine the optimal use and development of the Paroo Station mine (the "Mine") and its deposits.

Concentrate revenue for the third quarter of 2014 was $37.1 million from the sale of 27,000 tonnes of lead concentrate containing 18,300 tonnes of lead metal compared to revenue of $37.2 million for the third quarter of 2013 from 27,000 tonnes of concentrate containing 18,000 tonnes of lead metal. Concentrate revenue for the first nine months of 2014 was $111.2 million from the sale of 83,900 tonnes of concentrate containing 56,100 tonnes of lead metal compared to revenue of $59.2 million for the first nine months of 2013 from the sale of 44,000 tonnes of concentrate containing 28,000 tonnes of lead metal.

Net loss for the third quarter of 2014 was $3.9 million or $nil per share, compared to net income of $0.5 million or $nil per share for the third quarter of 2013. The net loss for the first nine months of 2014 was $4.5 million or $0.01 per share compared to a net loss of $34.5 million or $0.05 per share for the first nine months of 2013. The net loss for the third quarter of 2014 was primarily due to our sales being constrained by the suspension of shipments of lead concentrate and a decline in the LME lead price during the later part of the quarter.

THIRD QUARTER 2014 HIGHLIGHTS

Financial

• Revenue of $37.1 million on the sale of 27,000 tonnes of concentrate containing 18,300 tonnes of lead.
• Gross profit of $2.3 million.
• Net loss after tax of $3.9 million.
• Principal repayments of C$0.8 million per month under the Sprott Facility (defined below) commenced on June 30, 2014.
• Increased trade and other receivables balance of $13.5 million, due to late shipments towards the end of September, resulting from a rail bridge closure.

Operational

• We produced 29,900 tonnes of lead concentrate containing 20,400 tonnes of lead metal.
• We continue to focus on maximizing production and sales levels.
• Our transportation route suffered a disruption due to a rail bridge closure which resulted in the suspension of shipments from the Port of Fremantle for a period of three weeks. We maintained mining and milling operations while stockpiling lead concentrate at the Mine and recommenced shipping shortly after the re-opening of the bridge on September 5, 2014. This led to an accumulation of deliveries to customers near quarter end resulting in a reduction of cash receipts for the quarter and a higher than normal trade receivables balance of $13.5 million at the quarter end. Cash flows from the collection of trade receivables and sale of the stockpiled inventory are expected to be received during the fourth quarter of 2014 and first quarter of 2015.
• We expect to remain on target to meet the production and sales levels released in our 2014 Guidance by producing and selling between 80,000 and 85,000 tonnes of lead.
• We commenced drilling activity supporting a project to determine the optimal use and future development of the Mine.

FINANCIAL AND OPERATING HIGHLIGHTS

1. The Mine was placed on care and maintenance in April 2011. In April 2013, we recommenced mining, processing and transportation operations.
2. Average lead price - London Metal Exchange ("LME") cash settlement is calculated from April 4, 2013 onwards, being the date of restart of milling and processing operations.
3. The figures for lead metal in concentrate sold for the third quarter of 2014 is subject to adjustment for the final settlement of weights and assays for concentrate shipped during this period.

OPERATIONS REVIEW

During the third quarter we sold approximately 27,000 tonnes of lead concentrate (2013: 27,000 tonnes) containing 18,300 tonnes of lead (2013: 18,000 tonnes of lead). During the quarter our rail transportation route suffered a disruption when a cargo vessel in the Port of Fremantle broke loose from its moorings, damaging the rail bridge into the port (the "Bridge Closure"). We were unable to ship lead concentrate from the Port of Fremantle for a period of three weeks. During the Bridge Closure we maintained mining and milling operations while stockpiling lead concentrate at the Mine. The rail bridge was re-opened on September 5, 2014 and we recommenced shipments shortly thereafter, keeping us on target to meet the projected sales levels reported in our 2014 Guidance as defined in the Production Outlook section below.

During the third quarter of 2014, the mill processed over 350,000 tonnes of ore which was an increase of 6% compared to the corresponding quarter in 2013 when the mill processed 331,000 tonnes of ore. The average head grade of ore for the third quarter of 2014 was 7.2% lead compared to an average head grade of 6.9% for the third quarter of 2013.

During the third quarter of 2014, we processed 19% more when compared with the second quarter of 2014. The average head grade for the third quarter of 2014 was 14% lower when compared to average head grade of the second quarter of 8.4%. At higher grades of lead our processing capacity is limited by the filter press which in turn limits the amount of ore we are able to mill. At lower grades of lead our milling capacity is not constrained by the filter press which allows us to mill a larger volume of ore.

The 19% increase in milling was offset by the 14% reduction in head grade enabling us to produce similar quantities of lead when compared to the second quarter of 2014. As at the end of the third quarter, lead production is in line with the 2014 Guidance as defined the Production Outlook section below.

The plant recovered an average of 81% of the lead in ore delivered to the mill, producing 29,900 tonnes of lead concentrate with an average grade of 68% containing 20,400 tonnes of lead metal. This compares favorably to the corresponding quarter in 2013 when the average plant recovery was 74% resulting in the production of 26,000 tonnes of lead concentrate with an average grade of 65% containing 17,000 tonnes of lead metal. The performance in the third quarter of 2014 represents increases of 15% and 20% in the production of lead concentrate and lead metal, respectively, when compared to the third quarter of 2013. The higher recoveries in the third quarter of 2014 are principally attributed to the efficiencies achieved from being in continuous operation since the second quarter of 2013.

In the first quarter of 2014, the Mine faced a variety of challenges from an extreme weather event to unusual ore characteristics. The challenges of the first quarter resulted in the Mine being behind its 2014 Guidance production level at the end of the quarter. The improved production output in the second and third quarters of 2014 has kept the Mine on target to meet production and sales levels as disclosed in the 2014 Guidance. The improved performance in the second and third quarters resulted from the activation of a number of operational plans. These plans centered on improving recovery, increasing head grades of ore delivered to the mill and the reclamation of low grade concentrate sent to the process dam.

For the third quarter of 2014, the LME cash settlement lead price averaged $0.99 per pound, which was higher than the average of $0.95 per pound for the second quarter of 2014 and also higher than the third quarter of 2013 when the average was $0.95 per pound.

During the third quarter of 2014, we continued to negotiate with native title holders in relation to a new expanded land use agreement covering the Mine and related exploration and operation activity.

During the third quarter of 2014, we completed the majority of the drilling activity required to support an ongoing project to understand and determine the optimal use and development of the Mine and its deposits with due consideration of the Company's current financial condition. We expect the remaining drilling activity to be completed during the fourth quarter. Among other things, the project will study ore throughput rates for the mill and processing scenarios, capital requirements and operating costs, expanded regulatory and stakeholder approvals and land access requirements. Our ability to achieve higher production capacity is subject to a number of pre-conditions, including the development of the Pinzon deposit, the receipt of regulatory approval to increase the annual ore throughput rate of the Mine above 1.7 Mtpa and a capital investment to complete the mill expansion. We expect that the outcomes from the project will form part of a new technical report prepared under NI 43-101 which we expect to be filed prior to the end of the first quarter of 2015.

Summary quarterly Mine production, process production, shipments and inventories:

⁽¹⁾ Ore mined does not include low grade ore.

The Mine was not operational during the first quarter of 2013. In April, 2013, we recommenced mining, processing and transportation operations.

Production Outlook

Despite transportation disruptions during the quarter, our production and sales rates remain in line with the 2014 Guidance. The full year guidance of expected production and sales of between 80,000 to 85,000 tonnes of lead contained in concentrate ("2014 Guidance") remains unchanged. The 2014 Guidance is a forward-looking statement based on certain material factors and assumptions. See "Forward-Looking Statements".

Investing activities

For the third quarter and first nine months of 2014, net cash used in investing activities included expenditure of $0.7 million (2013 - $1.5 million) and $1.6 million (2013 - $11.0 million), respectively, on capital projects including the switch from using diesel to natural gas at the power station and improvements made to the Tailings Storage Facility.

Capital Resources, Liquidity and Working Capital Requirements

The Company had a working capital deficiency as at December 31, 2013 of approximately $6.8 million due, in part, to the current portion of its long term debt. As a result, the Finance Committee of the Board of Directors worked with management starting at the end of 2013 to help ensure that the Company remains cash flow positive in 2014 and to improve the Company's working capital position. The Finance Committee and management determined that given the budgeted expenditures for 2014, the state of lead prices in recent months, interest payments, the commencement of principal repayments to Sprott Resource Lending Partnership ("Sprott") on March 31, 2014 and the potentially significant consequences that even a minor transportation disruption (such as the one that occurred in late January 2014) could have on the Company's cash flows, that it was necessary for the Company to take proactive steps to improve its working capital position and to reduce the risk of the Company becoming cash flow negative in 2014. Accordingly, the Finance Committee engaged in discussions with Sprott which resulted in amending the January 29, 2013 credit facility with Sprott on March 31, 2014 to postpone the commencement of repayment of principal instalments from March 31, 2014 to June 30, 2014 and to allow the C$20 million principal to be repaid in equal monthly instalments over a 24 month period ending May 31, 2016 (as amended, the "Sprott Facility"), and closing a related private placement of common shares for proceeds of C$5 million on April 11, 2014. The Sprott Facility, as amended, and related private placement proceeds have improved the Company's working capital position since year end. In particular, the Sprott Facility, as amended, postponed the commencement of principal repayments by three months until June 30, 2014 and allows Ivernia to repay the C$20 million principal in equal monthly instalments of C$833,333 over 24 months compared to monthly instalments of C$1,666,667 over 12 months.

During the quarter, shipments of lead concentrate were suspended for a period of three weeks due to the Bridge Closure. During the closure, mining and milling operations continued and during this period the Company stockpiled lead concentrate inventory. Shipments of lead concentrate to customers recommenced shortly after the re-opening of the rail bridge on September 5, 2014 resulting in a higher than usual trade receivables balance at quarter end due to an accumulation of sales near quarter end. Accordingly as of September 30, 2014 the Company had $2.9 million in cash and cash equivalents and had a working capital surplus of $2.6 million. The Company continues to transport inventory stockpiled during the Bridge Closure resulting in a higher than usual inventories balances as at September 30, 2014. Cash flows from the sale of the stockpiled inventory and collection of trade receivables are expected to be received during the fourth quarter of 2014 and first quarter of 2015.

We expect that the Company will return to being cash flow positive for the fourth quarter of 2014 following the sale of the remaining stockpiled inventory and collection of trade receivables from sales near the end of third quarter of 2014, assuming current lead prices and foreign exchange rates do not materially deteriorate from the averages experienced over the third quarter. However, ongoing cash flow from operating activities continues to be exposed to fluctuations in metal prices, production and shipping rates, the A$/US$ exchange rate and demand for lead concentrate. See "Risk Factors – Funding Requirements" in the 2013 Annual Information Form dated March 24, 2014 (the "2013 AIF") and "Forward-Looking Statements" above. If management considers cash flow from operating activities to be insufficient to fund non-operating activities going forward or that working capital will not be sufficient to meet the covenants under the Sprott Facility, the Company may need to consider additional financing in the future.

Management's Discussion and Analysis and Consolidated Financial Statements

Ivernia's unaudited financial statements and management's discussion and analysis for the three and nine months ended September 30, 2014 will be filed today and will be available on the Ivernia website at www.ivernia.com or SEDAR at www.sedar.com.

About Ivernia

Ivernia is an international base metal mining company and the owner of the Paroo Station Mine, located in Western Australia. Ivernia trades under the symbol "IVW" on the Toronto Stock Exchange. Ivernia and the Mining Operations operate under a management services arrangement with Enirgi Group Corporation, Ivernia's majority shareholder.

Additional information on Ivernia is available on the Company's website at www.ivernia.com and at SEDAR at www.sedar.com.

Forward-Looking Statements

Certain statements contained herein are forward-looking information within the meaning of securities laws. All statements included herein (other than statements of historical facts) which address activities, events or developments that management anticipates will or may occur in the future are forward-looking statements, including without limitation statements as to the following: the 2014 Guidance (defined below) or other future targets and estimates for production and sales, the Company's ability to meet its working capital needs and debt repayments in the near term, projections with respect to cash flows and working capital, any additional financing requirements to operate the Mine (as defined below), the cost and timing for completion of capital projects necessary for ongoing operations, the Company's ability to comply with the transportation and operating conditions for the Mine (the "Operating Conditions"), capital expenditures, operating costs, cash costs, mineral resources, mineral reserves, life of mine, recovery rates, grades and prices, business strategies and measures to implement such strategies, competitive strengths, estimated goals and plans for Ivernia's future business operations, lead market outlook and other such matters. Forward-looking statements are often, but not always, identified by the use of words such as ''seek'', ''anticipate'', ''contemplate'', ''target'', ''believe'', ''plan'', ''estimate'', ''expect'', and ''intend'' and statements that an event or result ''may'', ''will'', ''can'', ''should'', ''could'' or ''might'' occur or be achieved and other similar expressions. These statements are based upon certain reasonable factors, assumptions and analyses made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. However, whether actual results and developments will conform with management's expectations is subject to a number of risks and uncertainties, including factors underlying management's assumptions, such as, expected concentrate sales, the costs and other capital expenditures required to maintain operations and transportation, the timing, need and ability to raise any additional financing and the risks relating to ramping up mining and milling throughput and operations, funding requirements, operations being placed on care and maintenance, matters relating to regulatory compliance and approvals, shareholder dilution, matters relating to public opinion, presence of a majority shareholder and management services agreements, matters related to the Esperance settlement and shipments through the Port of Fremantle, regulatory proceedings and litigation and general operating risks such as metal price volatility, lead carbonate concentrate treatment charges, exchange rates, the fact that the Company has a single mineral property, health and safety, environmental factors, mining risks, metallurgy, labour and employment regulations, government regulations, insurance, dependence on key personnel, constraints on cash distribution from the Mine, the nature of mineral exploration and development and common share price volatility. Additional factors and considerations are discussed in the 2013 AIF and elsewhere in other documents filed from time to time by Ivernia with Canadian securities regulatory authorities. While Ivernia considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. These factors may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and there can be no assurance that the actual results or developments anticipated by management will be realized or, even if substantially realized, that they will have the expected results on the Company. Undue importance should not be placed on forward-looking information nor should reliance be placed upon this information as of any other date. Except as required by law, while it may elect to, Ivernia is under no obligation and does not undertake to update this information at any particular time.

For further information please contact:

Ivernia Inc.
Jessica Helm
VP, Corporate Communications
Suite 3001, 1 Adelaide Street East
Toronto, Ontario M5C 2V9
(416) 867 9298
Email: investor@ivernia.ca