NovaCopper Provides Project Update and Year End Financial Results
February 6, 2015
February 6, 2015 - Vancouver, British Columbia - NovaCopper Inc. (TSX, NYSE-MKT: NCQ) ("NovaCopper" or "the Company") provides an update on its projects and announces its financial results for the year and fourth quarter ended November 30, 2014. Details of the Company's financial results are contained in the audited consolidated financial statements and Management's Discussion and Analysis which will be available on the Company's website at www.novacopper.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. All amounts are in United States dollars unless otherwise stated.
In 2014, NovaCopper:
- Completed a 37-hole re-logging program on the Bornite property;
- Supported the Alaska Industrial Development Export Authority ("AIDEA") in advancing activities towards preparation of the environmental impact statement for the Ambler mining distrct access road;
- Carried out a broad range of local community-related programs; and
- Spent $2.5 million on the UKMP Projects for cumulative project expenditures of $53.8 million.
In 2014, the Company continued work on Bornite which is part of the Company's Upper Kobuk Mineral Projects ("UKMP Projects") located in the Ambler mining district in Northwest Alaska. The Company completed a re-logging program of approximately 13,000 meters (42,650 feet) in 37 historical drill holes from Bornite drilled by Kennecott Copper Company. Targeted historical holes were located within the near-surface Ruby Creek zone of the Bornite deposit. Of the 37 holes sampled, 5 holes had intervals of copper grading more than 0.5% copper, and 21 holes contained mineralization grading more the 0.2% copper demonstrating continued success from a similar effort in 2013. The 2013 program of re-sampling and re-assaying targeted 33 drill holes comprising 11,067 meters of core originally drilled and only selectively sampled by Kennecott between 1957 and 1975. The 2013 re-assay program resulted in a significant increase in the amount of copper-bearing mineralization at Bornite.
While we carried out limited but cost-effective work on the Bornite deposit in 2014, during the next two to three years, we plan to advance the Arctic deposit, an important high-grade polymetallic project to feasibility with a total investment of approximately $20 million. Subject to obtaining financing, we plan to invest approximately $8 to $10 million during the 2015 field season mainly for drilling the Arctic in-pit resource from inferred to measured and indicated confidence levels to support the classification of resources and collect Arctic in-pit geotechnical and metallurgical data. Funds will also be utilized for environmental and engineering studies to gather information in preparation for a feasibility study. We also intend to complete sufficient work to assess the viability of a mining operation at Bornite, specifically with evaluating potential synergies between the two sites and potentially lengthening the mine life of the UKMP Projects and the Ambler mining district.
In fiscal 2014, the Company expended $2.5 million on the UKMP Projects
consisting of $1.2 million in wages and benefits, $0.4 million in
project support expenses, $0.4 million in land maintenance and permit
expenses, and $0.2 million in geochemical analytical expenses.
Cumulative spending on the UKMP Projects since 2004 totals $53.8
The 2014 field season was conducted without any lost time incidents
marking the second consecutive year the project has gone injury free.
Environmental baseline data collection continued in 2014 and annual
maintenance of the stream gauges and the meteorological station on the
property were performed. Water quality sampling continued marking 7
years of continuous environmental baseline data collection. No spills
were reported during the 2014 field season while 7,500 gallons of fuel
were handled. No wildlife was encountered during the short field
presence and the camp was closed well before the seasonal caribou
The Company has always focused on local hiring and works closely with
NANA Regional Corporation, Inc. ("NANA") on workforce development. NANA
is one of 13 Regional Alaska Native Corporations created pursuant to
the Alaska Native Claims Settlement Act ("ANCSA") and is owned by more
than 13,600 Iñupiat shareholders. The NANA region is 38,000 square
miles, most of which is above the Arctic Circle, and encompasses 11
communities. NovaCopper hired 22 seasonal employees during 2014 of
which 12 (55%) were NANA shareholders. This proportion of NANA
shareholder employment in 2014 is consistent with previous years hiring
statistics of greater than 50% shareholder hire. All NANA shareholders
employed were Upper Kobuk residents from the villages of Ambler,
Shungnak and Kobuk. 93% of the total workforce was returning employees
from 2013 and 88% of NANA shareholders were returning from 2013.
Between 2011 and 2014 wages paid to 150 NANA shareholders totaled $1.4
million for employment in 225 positions.
The Company also continued community efforts in the Northwest Arctic
Borough. We held 37 meetings in the NANA region during 2014 bringing
the cumulative in-region meetings to approximately 140. The Company
held community open houses, provided mining education to schools and
participated in village council meetings. NovaCopper also initiated a
prom dress drive in 2014 collecting donations of over 100 dresses and 50
men's suits/ties from business associates in Vancouver, Canada and
Fairbanks and Barrow, Alaska. The Company organized transportation to
village schools via Alaska Airlines and Ravn Alaska and, both airlines
generously donated their resources for the benefit of the youth in
Workforce development efforts also continued with NovaCopper-NANA's
Kuuvangmiut Scholarship awards made to 17 NANA shareholders in 2014.
The Workforce Development Committee comprised of members from both
NovaCopper and NANA received and considered 82 applications for college
and vocational education.
On March 18, 2014, we announced the release of an updated NI 43-101
resource estimate for the Bornite deposit and on April 1, 2014, we filed
a NI 43-101 technical report titled "NI 43-101 Technical Report on the
Bornite Project, Northwest Alaska, USA" dated effective March 18, 2014.
This updated Bornite Project resource estimation included the results of
drilling completed and the re-logging and re-assaying program
undertaken during the 2013 field season. At a base case 0.50% copper
cutoff grade, the Bornite Project is estimated to contain in-pit
indicated resources of 14.1 million tonnes at an average grade of 1.08%
copper or 334 million lbs of contained copper and in-pit inferred
resources of 109.6 million tonnes at an average grade of 0.94% copper or
2.3 billion lbs of contained copper. Resources are stated as contained
within a pit shell developed using a metal price of $3.00/lb copper,
mining costs of $2.00/tonne, milling costs of $11/tonne, general and
administrative cost of $5.00/tonne, 87% metallurgical recoveries and an
average pit slope of 43 degrees. In addition to the in-pit resources, at
a base case 1.50% copper cutoff grade, the Bornite Project contains
below-pit inferred resources of 55.6 million tonnes at an average grade
of 2.81% copper or 3.4 billion lbs of contained copper that may be
amenable to underground extraction methods. Resources are stated as
potentially being economically viable in an underground mining scenario
based on a projected metal price of $3.00 per pound copper, underground
mining costs of $50.00 per tonne, milling costs of $11.00 per tonne,
general and administrative of $5.00 per tonne, and an average
metallurgical recovery of 87%. See "Cautionary Note to United States
During 2014, we focused efforts on supporting AIDEA with their
activities towards advancing the Ambler Mining District Industrial
Access Road ("AMDIAR") which is anticipated to provide access to UKMP
Projects. AIDEA continued to collect community input at meetings held
through the winter of 2013/2014 in various local villages. In late April
2014, AIDEA's board of directors approved a resolution authorizing
AIDEA to proceed with an application for the Ambler road to the federal
agencies that have jurisdiction over the AMDIAR project and to engage a
firm to prepare the environmental impact statement for the project under
the direction of the federal agencies. Environmental baseline studies
were conducted by Dowl during the summer field season in preparation for
the submission of the environmental impact statement. The United States
Army Corps of Engineers ("USACE") has selected HDR, Inc. as the third
party environmental engineer to manage the environmental impact
statement process on behalf of the USACE.
The permitting document is substantially complete. In light of the
recent drop in oil prices, the Government of Alaska is reviewing all
capital projects. We expect the permitting process will continue.
On July 7, 2014, we completed a non-brokered private placement with our
three largest shareholders for $7.5 million in Units. Each Unit was
priced at $1.15 per Unit and consisted of one common share and one
common share purchase warrant. Each common share purchase warrant
entitles the holder to purchase one common share at a price of $1.60 per
share for a period of five years from the closing date. Net proceeds
from the private placement were approximately $7.2 million. The gross
proceeds raised were allocated for the 12 months following closing to
fund $2.7 million on program expenditures, $4.0 million on general and
administrative expenses including costs associated with the offering,
and $0.8 million on one-time expenses incurred in reducing annual
general and administrative expenses. We are currently on track to meet
our budgeted expenditures.
Annual Financial Results
The following selected annual information is prepared in accordance with U.S. GAAP.
in thousands of dollars,
except for per share amounts
|Selected financial results||Year ended
November 30, 2014
November 30, 2013
November 30, 2012
|General and administrative||1,484||1,915||2,276|
|Mineral properties expense||2,512||8,894||15,327|
|Salaries -- stock-based compensation||887||8,225||9,411|
|Loss and comprehensive loss for the year||9,648||24,394||31,018|
|Basic and diluted loss per common share||$0.17||$0.47||$0.67|
For the year ended November 30, 2014, we reported a net loss of $9.6 million (or $0.17 basic and diluted loss per common share) compared to a net loss of $24.4 million for the corresponding period in 2013 (or $0.47 basic and diluted loss per common share) and a net loss of $31.0 million for the corresponding period in 2012 (or $0.67 basic and diluted loss per common share). This variance was primarily due to a decrease in mineral property expenses, stock-based compensation, and general and administration expenses for 2014 and 2013. This variance was primarily due to the type of exploration program undertaken during the 2014 field season. The significant reduction in mineral property expenses is related to the differing magnitude of the field programs at our UKMP Projects in 2014, 2013 and 2012. In 2014, we completed a re-sampling and re-assaying program of approximately 13,000 meters of historical drill core. In 2013, we completed an exploration drilling campaign at Bornite of 8,142 meters and a re-sampling and re-assaying program comprising 11,067 meters of historical drill core, and in 2012, we completed an exploration drilling program mainly at Bornite of 17,209 meters. Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs.
The other significant reduction in expenses is from a charge of $0.9 million in stock-based compensation in 2014 compared to $8.2 million in 2013, and $9.4 million in 2012. The expense recognized for current year included $0.5 million in expense relating to stock options and $0.4 million in expense relating to previously granted restricted share units ("RSUs") and deferred share units ("DSUs"). The expense recognized for 2013 of $8.2 million included $4.8 million in expense relating to previously granted stock options and $3.4 million in expense relating to the RSU and DSU grants in December 2012. On November 22, 2013, we cancelled 5,710,000 stock options at an exercise price of CAD$3.11 which were originally granted in 2012. Remaining expense relating to unvested options at the time of cancellation of $0.8 million was accelerated and recognized in the year. In 2012, we became a publicly listed entity, and as a result, recorded stock-based compensation expense for the first time. Total expense recognized for the year ended November 30, 2012 was $9.4 million.
General and administrative expenses for the year ended November 30, 2014 were $1.5 million, a reduction of $0.5 million from the $1.9 million incurred for the year ended November 30, 2013, and a further reduction of $0.4 million from the $2.3 million incurred for the year ended November 30, 2012. Expenses in 2012 were high due to the spin-out and costs incurred in connection with becoming a separate public company. Expenses in 2013 and 2014 represent a reduction in general and administrative expenses due to our efforts with cost reductions. The comparable basic and diluted loss per common share for 2014 is lower than 2013 and 2012 mainly as a result of the decreased loss and comprehensive loss for the year, as well as additional shares issued during 2014 as a result of the private placement completed in July 2014.
Other important variances for the twelve-month period ended November 30, 2014 compared to the same period in 2013 and 2012 are as follows: (a) $0.8 million in amortization compared to $1.0 million in 2013 and $0.8 million in 2012 due to timing of capital purchases in the prior fiscal year; (b) $0.9 million in professional fees in 2014 and 2013 compared to $0.7 million in 2012 primarily as additional expenses were incurred in financing and prospectus-related filings in Canada and the United States in 2014 and 2013 respectively; (c) $3.0 million on salaries in 2014, $3.2 million on salaries in 2013, and a similar amount of $2.4 million incurred in 2012, which reflects comparable staff costs overall on an annualized basis because we did not have full time staff until May 2012. In 2014, we incurred $1.5 million in severance expenses in August and September 2014 due to a one-time reduction in staff which was offset by a recovery of $0.3 million due to a reversal of accrued bonuses to employees no longer eligible to receive payment. In addition, as a result of the reductions, salaries of $0.4 million for the fourth quarter of 2014 were lower than the previous quarters of 2014.
Fourth Quarter Results
During the fourth quarter of 2014, we incurred a net loss of $2.0 million compared to $4.9 million for the comparable period in 2013. The decrease in net loss in 2014 compared to 2013 was a result of reduced activities in the fall of 2014 due to a re-logging and re-assaying program conducted in the 2014 field season compared with a drilling program in 2013 which ended in mid-August. We incurred $0.6 million of mineral property expenses in the fourth quarter of 2014 compared to $1.0 million in the fourth quarter of 2013. The decrease in net loss was also due to reduced salary and general and administrative expenses in the fourth quarter of 2014 as we reduced staffing in August 2014 by approximately half. We incurred salary expenses of $0.4 million in the fourth quarter of 2014 compared to $1.4 million in the fourth quarter of 2013. The fourth quarter of 2013 included a recording of $0.8 million in 2013 bonuses for which there is no comparable expense in 2014. General and administrative expenses were reduced from $0.5 million in the fourth quarter of 2013 to $0.3 million in the fourth quarter of 2014. The other item which reflects the decrease in net loss resulted from stock-based compensation of $1.4 million in the fourth quarter of 2013 compared to $0.6 million in 2014 resulting from the cancellation of options and acceleration of expense in late 2013 and the timing of expense due to vesting of stock options and units.
Liquidity and Capital Resources
We expended $8.6 million on operating activities compared with $15.2 million for operating activities for the same period in 2013, and expenditures of $19.9 million for operating activities for the same period in 2012. A majority of cash spent on operating activities during all periods was expended on mineral property expenses, salaries and general and administrative expenses, which also accounts for the corresponding decrease. This difference relates mainly to earlier settlement of payables for mineral property expenses in the year and reduced spending in 2013 and 2014 compared to 2012.
During the year ended November 30, 2014, we generated $7.2 million from financing activities compared to expenditures of $0.3 million on financing activities in the year ended November 30, 2013 and $43.8 million from financing activities generated in the same period in 2012. The generation of cash in 2014 was raised from the completion of a private placement of $7.2 million in July 2014.
At November 30, 2014, we had $5.1 million in cash and cash equivalents and working capital of $4.8 million. We will need to raise additional funds to continue operations and to support further exploration and development of our projects and administration expenses. Based on the plan described above but not committed, we are likely to require financing within the next twelve months. Future financings are anticipated through equity financing, debt financing, convertible debt, or other means. There is no assurance that we will be successful in obtaining additional financing, that sufficient funds will be available to us, or be available on favourable terms.
Erin Workman, P.Geo., Director of Technical Services for NovaCopper Inc., is a Qualified Person as defined by NI 43-101. Ms. Workman has reviewed the technical information in this news release and approves the disclosure contained herein.
NovaCopper Inc. is a base metals exploration company focused on
exploring and developing the Ambler mining district located in
northwestern Alaska. It is one of the richest and most-prospective
known copper-dominant districts located in one of the safest
geopolitical jurisdictions in the world. It hosts world-class
polymetallic VMS deposits that contain copper, zinc, lead, gold and
silver, and carbonate replacement deposits which have been found to host
high-grade copper mineralization. Exploration efforts have been focused
on two deposits in the Ambler district -- the Arctic VMS deposit and
the Bornite carbonate replacement deposit. Both deposits are located
within NovaCopper's land package that spans approximately 143,000
hectares. NovaCopper has an agreement with NANA Regional Corporation,
Inc., a Regional Alaska Native Corporation that provides a framework for
the exploration and potential development of the Ambler mining district
in cooperation with local communities. Our vision is to develop the
Ambler mining district into a premier North American copper producer.
More information on the Company, its properties and its management team is available on the Company's website at www.novacopper.com.
Rick Van Nieuwenhuyse
President & Chief Executive Officer
Chief Financial Officer
604-638-8088 or 1-855-638-8088
# # #
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain "forward-looking information"
and "forward-looking statements" (collectively "forward-looking
statements") within the meaning of applicable Canadian and United States
securities legislation including the United States Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical fact, included herein, without limitation, statements
relating to the future operating or financial performance of NovaCopper,
planned expenditures and the anticipated activity at the UKMP Projects,
are forward-looking statements. Forward-looking statements are
frequently, but not always, identified by words such as "expects",
"anticipates", "believes", "intends", "estimates", "potential",
"possible", and similar expressions, or statements that events,
conditions, or results "will", "may", "could", or "should" occur or be
achieved. These forward-looking statements may include statements
regarding perceived merit of properties; exploration plans and budgets;
mineral reserves and resource estimates; work programs; capital
expenditures; timelines; strategic plans; market prices for precious and
base metals; or other statements that are not statements of fact.
Forward-looking statements involve various risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate, and actual results and future events could differ materially
from those anticipated in such statements. Important factors that could
cause actual results to differ materially from NovaCopper's expectations
include the uncertainties involving the need for additional financing
to explore and develop properties and availability of financing in the
debt and capital markets; uncertainties involved in the interpretation
of drilling results and geological tests and the estimation of reserves
and resources; the need for cooperation of government agencies and
native groups in the development and operation of properties; the need
to obtain permits and governmental approvals; risks of construction and
mining projects such as accidents, equipment breakdowns, bad weather,
non-compliance with environmental and permit requirements, unanticipated
variation in geological structures, metal grades or recovery rates;
unexpected cost increases, which could include significant increases in
estimated capital and operating costs; fluctuations in metal prices and
currency exchange rates; and other risks and uncertainties disclosed in
NovaCopper's Annual Report on Form 10-K for the year ended November 30,
2014 filed with Canadian securities regulatory authorities and with the
United States Securities and Exchange Commission and in other NovaCopper
reports and documents filed with applicable securities regulatory
authorities from time to time. NovaCopper's forward-looking statements
reflect the beliefs, opinions and projections on the date the statements
are made. NovaCopper assumes no obligation to update the
forward-looking statements or beliefs, opinions, projections, or other
factors, should they change, except as required by law.
Cautionary Note to United States Investors
The Arctic Preliminary Economic Assessment and the Bornite
Technical Report have been prepared in accordance with the requirements
of the securities laws in effect in Canada, which differ from the
requirements of U.S. securities laws. Unless otherwise indicated, all
resource and reserve estimates included in this press release have been
prepared in accordance with National Instrument 43-101 Standards of
Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute
of Mining, Metallurgy, and Petroleum Definition Standards on Mineral
Resources and Mineral Reserves. NI 43-101 is a rule developed by the
Canadian Securities Administrators which establishes standards for all
public disclosure an issuer makes of scientific and technical
information concerning mineral projects. Canadian standards, including
NI 43-101, differ significantly from the requirements of the United
States Securities and Exchange Commission ("SEC"), and resource and
reserve information contained therein may not be comparable to similar
information disclosed by U.S. companies. In particular, and without
limiting the generality of the foregoing, the term "resource" does not
equate to the term "reserves". Under U.S. standards, mineralization may
not be classified as a "reserve" unless the determination has been made
that the mineralization could be economically and legally produced or
extracted at the time the reserve determination is made. The SEC's
disclosure standards normally do not permit the inclusion of information
concerning "measured mineral resources", "indicated mineral resources"
or "inferred mineral resources" or other descriptions of the amount of
mineralization in mineral deposits that do not constitute "reserves" by
U.S. standards in documents filed with the SEC. Investors are cautioned
not to assume that any part or all of mineral deposits in these
categories will ever be converted into reserves. U.S. investors should
also understand that "inferred mineral resources" have a great amount of
uncertainty as to their existence and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or any
part of an "inferred mineral resource" will ever be upgraded to a higher
category. Under Canadian rules, estimated "inferred mineral resources"
may not form the basis of feasibility or pre-feasibility studies except
in rare cases. Investors are cautioned not to assume that all or any
part of an "inferred mineral resource" exists or is economically or
legally mineable. Disclosure of "contained ounces" in a resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does not
constitute "reserves" by SEC standards as in-place tonnage and grade
without reference to unit measures. The requirements of NI 43-101 for
identification of "reserves" are also not the same as those of the SEC,
and reserves reported by the Company in compliance with NI 43-101 may
not qualify as "reserves" under SEC standards. Accordingly, information
concerning mineral deposits set forth in this press release or the
Bornite Technical Report may not be comparable with information made
public by companies that report in accordance with U.S. standards.