Pacific Rim Mining Corp. ("Pacific Rim" or "the Company") (TSX:
PMU)(AMEX: PMU) reports its financial and operating results for the
three months ended July 31, 2008. Details of the Company's
financial results are provided in its Q1 2009 consolidated
financial statements and Management's Discussion and Analysis
("MD&A") that will be mailed to shareholders shortly. All
monetary amounts are expressed in United States ("US") dollars
unless otherwise stated.
Overview
Pacific Rim is a growth-oriented, revenue-generating,
environmentally and socially responsible gold exploration company
with operations in North America and with development and
exploration assets in Central America. Pacific Rim's primary asset
and focus of its growth strategy is the El Dorado gold project in
El Salvador. The Company is also generating and exploring a
pipeline of grassroots gold projects. Pacific Rim's goal is to
become a low cost, intermediate level gold producer. The Company's
shares trade under the symbol PMU on both the Toronto Stock
Exchange ("TSX") and the American Stock Exchange ("AMEX").
Financial Highlights
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Three Months Three Months
Ended Ended
July 31, 2008 July 31, 2007
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Summarized Statement of Loss(i)
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Revenue $ 1,808 $ 1,339
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Operating costs $ 1,204 $ 139
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Exploration expenditures $ 2,451 $ 2,346
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Loss for the period $(3,269) $(1,459)
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Loss per share (basic and diluted) $ (0.03) $ (0.01)
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Weighted average shares outstanding
(basic and diluted) 116,915,460 109,781,960
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Summarized Statement of Cash Flows(i)
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Cash Flow used for operating activities $(3,329) $(3,003)
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Cash Flow provided by investing activities $ 2,084 $ 1,379
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Net decrease in cash and cash equivalents $(1,245) $(1,624)
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at at
July 31, 2008 April 30, 2008
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Summarized Balance Sheet(i)
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Cash and cash equivalents $ 677 $ 1,922
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Cash and cash equivalents, short term
investments and inventories $ 3,900 $ 7,444
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Total assets $14,704 $18,270
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Total liabilities $ 5,646 $ 6,109
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Working Capital $ 1,580 $ 4,723
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(i) all amounts in thousands of US dollars, except share and per share
amounts
Fiscal 2008 Technical and Corporate Developments
The Company's technical and corporate activities for the three
months ended July 31, 2008 include:
- In May 2008 the Company restarted work on the El Dorado gold
project feasibility study, which had been put on hold in March 2007
in order to drill define the Balsamo gold deposit, quantify its
gold resources and include them in the feasibility study.
Completion of the feasibility study will provide the Company and
its shareholders with a mine plan for El Dorado based on the
updated resource estimate and current input and commodity prices.
The El Dorado feasibility study is being led by SRK Consulting and
will include an underground mine plan for the Minita, South Minita
and Balsamo deposits, processing facility and tailings impoundment
designs, and an economic analysis of the proposed combined
operation. It is expected to be completed by December 2008.
- In July 2008 the Company suspended drilling activity at its El
Dorado project and commenced the lay off of El Salvador-based
staff, having made the decision to reduce its El Salvador
exploration and investment activity until such time as the
Government of El Salvador grants a mining permit for the El Dorado
project.
- During Q1 2009 the Company incurred a loss of $3.3 million and
as at July 31, 2008 has an accumulated deficit of $78.0 million.
The Company will require additional funding to maintain its ongoing
exploration programs and property commitments as well as for
administrative purposes. These conditions and risks cast
substantial uncertainty on the validity of the going concern
assumption as presented in the notes to the financial
statements.
Results of Operations
For the three month period ended July 31, 2008, Pacific Rim
recorded a loss of $(3.3) million or $(0.03) per share, compared to
a loss of $(1.5) million or $(0.01) per share for the three month
period ended July 31, 2007. The $1.8 million increase in net loss
for Q1 2009 compared to Q1 2008, despite a moderate increase in
revenues, is primarily related to increased mine operating costs
and increased general and administrative costs.
Mine Operating Income
Revenue, consisting entirely of the sale of gold and silver
bullion from the Denton-Rawhide mine, was $1.8 million in Q1 2009,
compared to $1.3 million in Q1 2008. The increase in revenue
quarter over quarter is attributable to significant improvements in
the average realized gold price ($904 per ounce for Q1 2009
compared to $679 per ounce for Q1 2008) that offset the decrease in
gold production from the Denton-Rawhide mine (2,227 ounces of gold
for Q1 2009 compared to 3,042 ounces for Q1 2008).
Cost of sales was $1.3 million in Q1 2009 compared to $0.2
million in Q1 2008. This $1.1 million increase quarter over quarter
is due to rising operating costs at the Denton-Rawhide mine ($1.2
million during Q1 2009 compared to $0.1 million during Q1
2008).
As a result of the decrease in revenues between Q1 2008 and Q1
2009, and increase in mine operating costs, mine operating income
decreased by $0.6 million quarter over quarter, from $1.1 million
in Q1 2008 to $0.5 million in Q1 2009.
Expenses
Net non-operating expenses increased during Q1 2009 to $3.7
million from $2.6 million during Q1 2008.
Despite the slow down in activity, exploration expenditures
increased marginally quarter over quarter, from $2.3 million during
Q1 2008 to $2.5 million during Q1 2009 primarily due to the
resumption of expenditures related to the El Dorado feasibility
study.
General and administrative expenses increased between Q1 2008
($0.7 million) and Q1 2009 ($1.3 million) primarily as a result of
increased legal fees as well as increased expenditures related to
the Company's year end regulatory filings.
The Company realized interest income of $0.1 million in each of
Q1 2008 and Q1 2009, earned on cash and short term investments held
during each of the above 3 month periods.
The Company booked an unrealized foreign exchange loss of $0.1
million during Q1 2009 compared to an unrealized foreign exchange
gain of $0.3 million during Q1 2008. The decrease in foreign
exchange gain quarter over quarter primarily reflects the decrease
in the US-Canadian dollar exchange rate on the Company's Canadian
dollar-denominated investments on hand.
Unusual Items
There were no unusual items booked in either Q1 2009 or Q1
2008.
Summary
As a result of the decrease in mine operating income and
increase in expenses, the Company realized an after-tax loss for Q1
2009 of $(3.3) million or $(0.3) per share, compared to a loss of
$(1.5) million ($(0.01) per share) for Q1 2008.
Liquidity and Capital Resources
Cash
During Q1 2009 Pacific Rim's cash and cash equivalents decreased
by $1.2 million from $1.9 million at the end of fiscal 2008 to $0.7
million at the end of the Company's first quarter of fiscal 2009.
At July 31, 2008 short term investments (consisting of short term,
redeemable guaranteed investment certificates and bankers
acceptances) were $2.0 million compared to $4.2 million at April
30, 2008. Inventory, consisting of production inventory in process
at the Denton-Rawhide mine and bullion inventory not yet sold, was
$1.2 million at July 31, 2008 compared to $1.3 million at April 30,
2008. The total of cash and cash equivalents, short term
investments and bullion inventory (which in the Company's opinion
are collectively equivalent to cash, being available to cover
short-term cash requirements) was $3.7 million at July 31, 2008
compared to $7.2 million at April 30, 2008, a decrease of $3.5
million.
During Q1 2009 the Company received cash flow from the following
sources: $0.1 million from Denton-Rawhide operations, $2.2 million
in net redemptions of short term investments. Outlays of cash
during the year included: $2.3 million in direct exploration
expenditures, $1.1 million in direct general and administrative
expenses and $0.2 million in the purchase of property, plant and
equipment. The net of these cash inflows and outlays was a decrease
in cash and cash equivalents of $1.2 million during the Company's
first quarter of fiscal 2009.
Working Capital
At July 31, 2008, the book value of Pacific Rim's current assets
stood at $4.1 million, compared to $7.7 million at April 30, 2008,
a reduction of $3.6 million. The decrease in current assets is
primarily a result of redemptions of short term investments (into
cash) and subsequent cash expenditures as outlined in Sections 6
and 7 above. Property, plant and equipment and closure fund
balances did not change significantly during the Company's first
quarter of fiscal 2009 and were valued at $6.8 million and $3.8
million respectively at July 31, 2008 and April 30, 2008. The
Company's total assets at the end of its first quarter of fiscal
2009 were $14.7 million compared to $18.3 million at the end of
fiscal 2008.
At July 31, 2008, Pacific Rim had current liabilities of $2.5
million compared to $2.9 million at April 30, 2008. The $0.4
million decrease in current liabilities is due to a decrease in
accounts payable, reflecting invoices received but not paid at July
31, 2008. Future income tax liability, asset retirement
obligations, pension and post-retirement benefit liability and
severance liability did not change between the fiscal 2008 year end
and the end of the Company's first quarter of fiscal 2009 and were
valued at $1.0 million, $1.6 million, $0.1 million and $0.4 million
respectively. Currently, Pacific Rim has no short- or long-term
debt.
The $3.6 million decrease in current assets offset in part by
the $0.4 million decrease in current liabilities, resulted in a
$3.1 million reduction in working capital from $4.7 million at
April 30, 2008 to $1.6 million at July 31, 2008.
The Company has substantially reduced its El Salvador
exploration programs and anticipates continuing to operate at these
reduced levels during fiscal 2009, until such time as the El Dorado
exploitation concession permit is received. The Company's
exploration plans for the remainder of fiscal 2009 are:
- to complete work on the El Dorado project feasibility study,
expected to be completed by December 2008.
- to conduct a mapping and surface sampling program on the
Company's two Costa Rican properties and to launch a grassroots
reconnaissance program in Guatemala.
- to continue to advance the El Dorado, Santa Rita and
Zamora-Cerro Colorado projects by mapping, surface sampling and
trenching, maintaining the licences in good standing.
The Company anticipates that its fiscal 2009 exploration plans
as outlined above will cost approximately $1.0 million and that
general and administrative costs will decrease compared to fiscal
2008 expenditures due to anticipated staffing reductions. If
regulatory and political conditions warrant, and adequate financing
is available, the Company will resume aggressive exploration of its
El Dorado, Santa Rita and Zamora-Cerro Colorado projects in El
Salvador, which will result in increased exploration and general
and administrative expenditures over those currently anticipated
for fiscal 2009. In order to undertake an expanded exploration
program the Company may require additional financing during fiscal
2009. Pacific Rim forecasts production levels, revenue and cash
flow from the Denton-Rawhide gold mine roughly 6 months in advance
due to the variability in recoveries that are inherent in a
residual heap leach operation, and the volatility in gold price.
Though the Denton-Rawhide operation is expected to contribute funds
over the coming fiscal year that will be used for exploration or
general and administrative expenses, the operation's contributions
to the Company's cash available for exploration is decreasing
annually and in fiscal 2009 it is not expected to contribute
significant amounts to the Company's available working capital. The
Company anticipates receiving cash flow from tipping fees related
to the sale of the Denton-Rawhide open pits (see Section 4.3), as
defined under the terms of the Denton-Rawhide Property Purchase and
Sale Agreement expected to close in October 2008 once the landfill
becomes operational. Substantial additional financing will be
required if the Company is able to commence development activities
(construction of an access / haulage ramp) at El Dorado during the
coming fiscal year.
Production
Pacific Rim is 49% joint venture owner of the Denton-Rawhide
gold mine, located near Fallon, Nevada. Kennecott Rawhide Mining
Company ("Kennecott"), a subsidiary of Rio Tinto Plc, is 51% joint
venture owner and operator of the mine. Denton-Rawhide is a
residual heap leach operation that ceased active mining in October
2002. Crushing and stacking of a low-grade ore stockpile continued
until May 2003 at which time the operation commenced the residual
leach and reclamation phase.
Pacific Rim's share of production from the Denton-Rawhide
operation during Q1 2009 was 2,227 ounces of gold and 19,331 ounces
of silver at a total cash production cost of $521 per ounce of gold
produced (calculated as per industry standards and net of silver
credits). During Q1 2008, Pacific Rim's share of production was
3,042 ounces of gold and 26,634 ounces of silver at total cash
production costs of $246 per ounce. Cash production costs per ounce
of gold increased quarter over quarter primarily due to the ongoing
decreases in production since the cessation of active mining at the
operation, which provides fewer ounces over which to spread the
operating costs. Furthermore, Q1 2008 production costs include a
credit for silver sales for which there is no corresponding credit
in Q1 2009.
Q1 2009 gold production from Denton-Rawhide was approximately
27% lower than in the same period a year earlier. This decline in
production represents the natural slowdown in recovery that occurs
in the residual leach phase of a heap leach operation that was
further impacted during Q1 2009 by the removal of the Merrill-Crowe
circuit, which is being substituted by an expansion of the carbon
circuit. This substitution commenced during fiscal 2008 and was
completed subsequent to the end of Q1 2009. Replacing the
Merrill-Crowe with an expanded carbon circuit is expected to cut
processing costs by reducing the cost of consumables. Silver
production will decline under this processing plan, however, the
cost savings are expected to exceed the value of the portion of
silver no longer recovered.
A variety of techniques are being employed at the Denton-Rawhide
mine to maximize gold production as the operation continues through
the residual leach phase. These efforts may result in short term
increases in gold production at Denton-Rawhide but are not expected
to materially offset the long term slowdown in production which is
typical of residual leach operations. Gold production from
Denton-Rawhide is anticipated to continue at declining rates
through the remainder of fiscal 2009. For the purposes of internal
budgeting, the Company's projections for Denton-Rawhide production
look forward no more than 6 months at a time.
Outlook
Going forward, Pacific Rim will continue to operate a reduced
exploration program within El Salvador until such time as the
Company receives the permit for the El Dorado exploitation
concession. Without receipt of this permit, or final approval of
its El Dorado EIS, which would strongly indicate the Government of
El Salvador's intention to grant the El Dorado exploitation
concession, the Company does not intend to invest the millions of
dollars in exploration in El Salvador, either on the El Dorado
project or its grassroots Santa Rita or Zamora-Cerro Colorado
projects, it has in previous years. The Company anticipates
expending approximately $1.0 million on exploration during fiscal
2009, which will be spent on low cost mapping, sampling and
trenching programs at El Dorado, Santa Rita and Zamora-Cerro
Colorado, as well as initial exploration and prospecting on its new
Costa Rican gold projects, and on limited community relations
programs in the El Dorado and surrounding area. This work will be
revised should circumstances change and depending on the Company's
working capital balances and/or financing opportunities.
The Company will continue its extensive outreach efforts to
federal and municipal government officials, church leaders,
business leaders, and citizens while it seeks a resolution to the
permitting issue. Pacific Rim's history of supporting local
inhabitants and building bridges with all stakeholders is well
documented, is a key component of the Company's approach to
exploration and development, and will continue in all jurisdictions
in which it operates.
Should a negotiated resolution to the ongoing delays in
obtaining the El Dorado exploitation concession, or other
indications that a resolution may be forthcoming as described above
not materialize in the near term, the Company intends to initiate
legal proceedings under both CAFTA and El Salvadoran law to protect
its rights regarding the future of the El Dorado project.
The Denton-Rawhide land sale agreement is expected to close
during the Company's second quarter of fiscal 2009, after which the
Company intends to investigate methods by which it can monetize its
long term royalty payment on the landfill operation proposed by the
purchasers. Gold production at Denton-Rawhide is expected to
continue at declining rates throughout the remainder of fiscal 2009
as is typical of residual leach operations.
On behalf of the board of directors,
Thomas C. Shrake, President and CEO
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 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.
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 (often, but not always, using words
or phrases such as "expects" or "does not expect", "is expected",
"anticipates" or "does not anticipate", "plans", "estimates" or
"intends", or stating that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved) 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.
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,
without limitation: risks related to gold price and other commodity
price fluctuations; risks and uncertainties relating to the
interpretation of drill results, the geology, grade and continuity
of mineral deposits; risks related to the inherent uncertainty of
production and cost estimates and the potential for unexpected
costs and expenses; results of prefeasibility and feasibility
studies, and the possibility that future exploration, development
or mining results will not be consistent with the Company's
expectations; mining and development risks, including risks related
to accidents, equipment breakdowns, labour disputes or other
unanticipated difficulties with or interruptions in production; the
potential for delays in exploration or development activities or
the completion of feasibility studies; the uncertainty of
profitability based upon the Company's history of losses; risks
related to failure to obtain adequate financing on a timely basis
and on acceptable terms; risks related to environmental regulation
and liability; risks related to hedging activities; political and
regulatory risks associated with mining and exploration; and other
risks and uncertainties related to the Company's prospects,
properties and business strategy detailed elsewhere in this
MD&A and in the Company's Annual Information Form for the year
ended April 30, 2008 (incorporated by reference into the Company's
Form 40F on file 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.
Contacts: Pacific Rim Mining Corp. Barbara Henderson (604)
689-1976 or Toll Free: 1-888-775-7097. (604) 689-1978 (FAX) Email:
info@pacrim-mining.com Website: www.pacrim-mining.com
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