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Revett Minerals Inc (NYSEMKT:RVM)

Q1 2013 Earnings Call

May 13, 2013 11:30 am ET

Executives

Kenneth S. Eickerman - Chief Financial Officer, Principal Accounting Officer and Controller

John G. Shanahan - Chief Executive Officer, President, Non Independent Director, Member of Environmental Committee and Member of Safety Committee

Analysts

Spencer Lehman

Walt Sosnowski

Tony Kamin

Jessica Pendal - VSA Capital Limited, Research Division

Operator

Good morning, my name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Revett Minerals Inc.'s Q1 2013 Conference Call. [Operator Instructions] Thank you. Ken Eickerman, CFO, you may begin your conference.

Kenneth S. Eickerman

Okay, thank you, Sarah. And good day, everyone, and thanks for joining our 2013 First Quarter Financial and Operations Conference Call. I am Ken Eickerman, the CFO. And joining me today is our President and CEO, John Shanahan; along with Doug Miller, our Vice President of Operations.

Before we begin, I would like to note that this call contains forward-looking statements that are made pursuant to Safe Harbor provisions of the Federal Security Laws. These statements involve risks, uncertainties and assumptions that may cause actual results to differ materially from those anticipated. Listeners to the call are advised to review the risk factors contained in our most recent annual report on Form 10-K for descriptions of risks, uncertainties and assumptions related to the forward-looking statements.

Please note that this call is intended for investors and may not be reproduced by the media, in whole or in part, without prior consent.

At this time, I'll turn the call over to our President and CEO, John Shanahan, who will recap the results of the first quarter. When he's done, I will walk through the -- our financials, and then John will wrap it up, and we'll finish with your questions. John?

John G. Shanahan

Well, thanks, Ken. Appreciate it. I think, for all our shareholders and interested parties, we're all well aware that it was a difficult quarter as we continue our redevelopment efforts here at the Troy Mine. To date, of course, we're following the plan that we have in accordance with MSHA. We're still in an evaluation phase as we're developing into that Lower Quartzite.

I think our performance and our financials for the quarter really speak for themselves where our focus is cash conservation while we do the necessary work to complete this evaluation phase of underground operations. We do anticipate over the next couple of weeks getting a very good picture, and we will be looking to put a update out at the end of this month.

With that, Ken, I'll pass this call back to you, and perhaps you can walk through our financials. And we'll come back and take some questions. Thank you.

Kenneth S. Eickerman

Sure, John, thank you. Yes, guys, I'm just going to give a real high-level overview of our first quarter.

As John mentioned, it was not a pretty quarter. We lost $4.1 million or about $0.12 a share compared to a profit of $3.7 million or $0.11 a share in the first quarter of 2012. For 2013, we were not able to invoice any concentrate sales, therefore we had no revenue to offset our costs.

Our cost of sales of $4.4 million reflect the efforts to design a plan to resume the mining operations and to maintain our staffing levels, as we did not lay off any employees during the first quarter of 2012. The exploration and development spending of $350,000 was primarily for the Rock Creek. And at SEIS, we spent about $300,000 with the outside consultants to continue the efforts to get that SEIS approved.

One other unusual item we had during the quarter is, included in our interest expense was a noncash write-off of the unamortized balance of the loan fees of approximately $600,000. We extended the loan in late February and the accounting rules require that we write down these deferred loan fees because there is no assurance that the credit facility will be renewed.

On our balance sheet, our cash and short-term investments, we still had $21 million at the end of the quarter, along with working capital of $22.5 million.

With that, I'll turn it back to John for some final comments and we'll take your questions.

John G. Shanahan

Well, thanks again, Ken.

Often, as we review our quarters, we're always looking for things we can improve on. And of course, we're always looking for the silver lining. I think, for this call, we're not going to sugarcoat matters. As we go through these redevelopment efforts, as we go through our evaluation phase, our cash burn is at the rate of just over about $2 million per month.

There is a silver lining, it's our financial health. We have no debt in place, nor do we have any hedges. The last of our $4 copper was final priced in February of this year, so we don't have any of those contingencies or commitments that we've got to work our way around. I suppose, given what we have seen of falling metal prices, we don't have the QP adjustments that, often during falling -- periods of falling metal prices, are worrisome for producers. Our final pricings, as I said, from December production, were finalized in February.

So there's a clean balance sheet for us, which is good because it just keeps our focus on what we need to do to complete this underground evaluation phase. As I said earlier, I think our plans are -- we're looking for a full updates at the end of May for exactly where we are.

Now with that, we'll take some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Spencer Lehman with Financial West.

Spencer Lehman

Just a quick one on the accounting. I'm looking at Yahoo! Finance, and then I know they're not always accurate, but they show the $21 million cash, but then they also show a $2 million in debt. So what do you think they're referring to there?

John G. Shanahan

Oh, thanks, but yes, Spencer, that is our debt. It's our short-term debt, which is for lease of equipment. When I referred to no debt, I suppose I'm really referring to corporate debt. But we do lease -- there are leases of equipment that we have on our books. Probably, what we used pay when we're using some of that equipment. But that's what's referred to there. My apologize -- apologies if...

Spencer Lehman

No, no, no, not your -- no, they are usually -- that column usual does refer to long-term debt, at least I'm used to seeing. So it's not your fault. It's just that they're including the short-term and it's -- yes, okay, so that's understandable.

John G. Shanahan

And then perhaps I should have been clearer when I talk about no structured corporate debt. But we do have those equipment leases to the tune of around $2 million.

Spencer Lehman

Yes, yes. They're -- okay, good. And then just a general question as far as this setback here you've had. How do you see that impacting on Rock Creek going forward? I mean, I could see where there could even be a silver lining to it from the standpoint that you've been cooperating so well working with the various agencies, and that probably has got you some brownie points. And do you see that helping long term? Or it's just a -- really a setback, time wise and money wise?

John G. Shanahan

It's certainly not a setback. I suppose, if you have to ask the question, "Is Revett committed to being a good operator, and are they committed long term to being the best operator they can be in Northwest Montana?" I think the answer is yes. We've certainly -- between the agencies and everyone else, they realize the difficulties we have at the moment, and they have told us they -- how much they appreciate the communication and what we're doing. So in terms of structurally, Rock Creek is going to be a similar operation to Troy, obviously just a larger operation, a higher grade. But in terms of just their mining efficiencies and mining methodologies, there will always -- there will be some slight differences. But to answer your question, Spencer, it has not been a detriment. As I said, I think, if you want to take a -- to read the pulse on commitment, you're getting a pretty strong heartbeat at the moment.

Operator

[Operator Instructions] You next question comes from the line of Walt Sosnowski with SRC Capital.

Walt Sosnowski

John, the -- looking at the next few weeks here, and I know you've mentioned in your prepared remarks that you are planning on maybe giving us a more thorough update here at the end of the month, but if -- for that you know at this point, can you walk us through what are the steps necessary to get back to commercial operations again at the -- given what you know at this point?

John G. Shanahan

Walt, I'm going to start off with an apology to you because I think I had dropped you an e-mail last week. You had asked me at the time of the call when I incorrectly had it down in my diary as 9:00 -- or 11:00 a.m., rather, [indiscernible]. So I suppose I've given you half an hour to think of a question, Walt. That was probably my bad. But no, you're right, I think the next couple of weeks are crucial for us because as we start getting into that sections of the Lower Quartzite, which are really going to tell us what our next steps are. And that's where we are today. We -- I'm up at the Troy Mine this week, most of this week. But as we start to move through some of those areas, I think we're going to get, really, a clear picture of what it's going to take. Now we're hoping for the best, Walt, but we've been at this long enough now to realize that we've just got to put our head down and get through. And I think that's why we're just looking forward to geting to the end of the month where we have a clearer picture. So at this stage, the steps would be, if the path -- if our way forward is clear, it's obviously commencing the dewatering, rerouting those utilities and getting things going back again. But once again, until we really complete this evaluation phase, I suppose we're just remaining with a number of options of what it could possibly look like.

Walt Sosnowski

And once you complete the evaluation phase, then what does MSHA want to -- what other things are -- is MSHA looking for at this point? What are the next steps with MSHA?

John G. Shanahan

Next steps, whenever that is, once we've been able to get our way forward very clear, we would present them with the plan of operation, and they would come back and approve that.

Operator

Your next question comes from the line of Tony Kamin with Eastwood Partners.

Tony Kamin

Can you comment, John, on the section that's impacted at Troy? I know that you've been increasing your exploration around Troy before this happened. Do you have a sense of what percentage of your resource at Troy would potentially be impacted by the applicable area that's been impacted here?

John G. Shanahan

Well, the main groundfall was along our main haulage group. And it really didn't cut off access to reserves. It certainly didn't cut off access to our resources and potential development of the I Beds, the JF Property, but it sure made logistics more difficult. And so the development work that we're doing in the drifting that we're doing to the Lower Quartzite is really a way to bypass that area on the upper level. So at this stage, we have not written off our reserves because we believe, for successful wins in the evaluation phase, that we'll able to access them. And it certainly hasn't -- it will change how we access the I Beds and the JF Property, but long term, those goals of achieving that still remain. It's just -- it really is a logistics problem at this point.

Operator

[Operator Instructions] Your next question comes from the line of Jessica Pendal with VSA Capital.

Jessica Pendal - VSA Capital Limited, Research Division

I just had a quick question in regards to the announcement that you're expecting to put out at the end of the month, with the update on what's going on at Troy. I just wanted to know if, as a part of that announcement, you will be including some guidance for the year on exactly how this incident has affected the production numbers and what you expect to see for the remainder of the year.

John G. Shanahan

Jessica, I think we've come to the conclusion that we're not going to put out guidance numbers until we're really at that point of by putting production through. So it's -- certainly, at the end of the month, we're not going to be in position to put out the guidance numbers for 2013.

Jessica Pendal - VSA Capital Limited, Research Division

Okay, not a problem. And just following up from that, I'm sure that the last thing that I read, even in this announcement from last week, was that the timing for start-up was still looking at Q2. But having heard what's going on and what's still needs to happen, I'm just questioning whether that's still actually viable.

John G. Shanahan

Well, it's something we're grappling with at the moment. Clearly, in the next couple of weeks, it's the big question that we have to answer. And that's part of what we're working on at the moment, Jessica, and it's part and parcel of what we hope to be able to announce at the end of the month.

Operator

And there are no further questions over the phone at this time. I turn the call back over to the presenters.

John G. Shanahan

Well, thank you. I appreciate everybody's time and support. And as with quarter 1, quarter 2 is a difficult quarter for us, but we are working away. Our long-term objective, our long-term goals, have not changed, and that's to operate Troy and to develop Rock Creek. That's not changing. How we get there, may, certainly, but we're not changing our long-term objectives.

So I thank everybody for their interest and support. And thank you, Sarah, for the call.

Operator

This concludes today's conference call. You may now disconnect.

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