Pacific Rim Mining Corp. ("Pacific Rim" or "the Company")
(TSX:PMU)(OTCQX:PFRMF) reports its financial and operating results
for the three months ended October 31, 2012. Details of the
Company's financial results are provided in its interim
consolidated financial statements and Management's Discussion and
Analysis ("MD&A") that will be publicly filed and made
available to shareholders shortly. Shareholders are strongly
encouraged to review these documents. All monetary amounts are
expressed in United States ("US") dollars unless otherwise
stated.
Nature of Operations
Pacific Rim is mineral exploration company focused on high
grade, environmentally clean gold deposits in the Americas and
committed to excellence in environmental stewardship and social
responsibility. Pacific Rim's primary asset is the advanced-stage,
vein-hosted El Dorado gold deposit in El Salvador, where the
Company also owns several grassroots gold projects. The Company
additionally holds a joint venture option on the Hog Ranch
epithermal gold project in Nevada and is actively pursuing
additional exploration opportunities elsewhere in the Americas.
All references to "Pacific Rim" or "the Company" encompass the
Canadian corporation, Pacific Rim Mining Corp, its U.S.
subsidiaries (Pac Rim Cayman LLC ("PacRim"), Pacific Rim
Exploration Inc., and Dayton Mining (U.S.) Inc.), and Salvadoran
subsidiaries (Pacific Rim El Salvador, S.A. de C.V. ("PRES") and
Dorado Exploraciones, S.A. de C.V. ("DOREX"), inclusive.
The Company's business activity is focused on three main
priorities: resolution of the El Dorado project permitting impasse
including legal recourse, exploration of the Hog Ranch gold project
and generation of new project opportunities. The El Dorado project
is the subject of an arbitration claim (the "Arbitration") (more
thoroughly described in the Company's Q2 2013 MD&A and Fiscal
2012 MD&A) being heard at the International Center for the
Settlement of Investment Disputes ("ICSID") at the World Bank.
During Q1 2013 the Arbitration was given permission by ICSID to
proceed, under the Investment Law of El Salvador, to its final
phase wherein the merits of the claim will finally be addressed at
ICSID headquarters in Washington, DC. Notwithstanding the ongoing
legal action, the Company continues to seek a negotiated resolution
to the El Dorado permitting impasse and to resuming its advancement
of the El Dorado project. The Company holds an option to earn a 65%
interest in the Hog Ranch gold property in Nevada. The Company
selected targets for, and recently received a permit to conduct, a
Phase 1 drill program on the Hog Ranch property.
Pacific Rim's shares trade under the symbol PMU on the Toronto
Stock Exchange ("TSX") and on the OTCQX market in the US under the
symbol PFRMF.
Results of Operations
For the three month period ended October 31, 2012, Pacific Rim
recorded a net loss of $(1.4) million ($(0.01) per share), compared
to net loss of $(0.8) million ($0.00 per share) for the same period
a year earlier. The loss recorded for Q2 2013 is primarily a result
of operating losses of $(1.3) million (compared to $(1.1) million
during Q2 2012). While Q2 2012 operating losses were offset by a
$0.4 million gain on derivative liability (unrealized income
related to changes in the fair value of common stock warrants
issued by the Company during private placement financings),
operating losses were increased during Q2 2013 by a $(0.1) million
loss on derivative liability.
For the six months ended October 31, 2012, Pacific Rim recorded
a loss of $(1.9) million or $(0.01) per share, compared to a loss
of $(0.6) million or $(0.00) per share, for the six months ended
October 31, 2011. This $1.3 million increase in net loss period
over period is primarily attributable to a $1.3 million difference
in unrealized gain on derivative liability ($1.4 million for the
first six months of fiscal 2012 compared to $0.1 million for the
same period of the current fiscal year).
Expenses
Exploration expenses were $0.4 million during Q2 2013 compared
to $0.6 million during Q2 2012 reflecting a slowdown in activity at
the Hog Ranch property during the current quarter. Expenses related
to the ICSID Arbitration were $0.4 million during Q2 2013 compared
to $0.1 million during the same period a year earlier reflecting
renewed Arbitration activity in preparation for the final phase of
the case which commenced during Q2 2013. Other expenses were
largely unchanged quarter over quarter. As a result, operating loss
for Q2 2013 was $(1.3) million compared to $(1.1) million for Q2
2012.
As described above, during Q2 2013 the Company recorded an
unrealized loss on derivative liability of $(0.1) million compared
to a gain of $0.4 million during Q2 2012).
Unusual Items
There were no unusual items in Q2 2013.
Summary
Slightly lower exploration costs during Q2 2013 compared to Q2
2012 were offset by slightly higher Arbitration costs, which led to
a marginally increased operating loss of $(1.3) million for the
second quarter of fiscal 2013 compared to $(1.1) million for the
same period a year earlier. This loss was negligibly increased by
an unrealized loss on derivative liability of $(0.1) million during
Q2 2013, compared to an unrealized gain on derivative liability of
$0.4 million during Q2 2012, which led to a $0.6 million increase
in net loss and comprehensive loss period over period ($(0.8)
million for Q2 2012 compared to $(1.4) million during Q2 2013).
Liquidity and Capital Resources
Cash
During Q2 2013 the Company's cash and cash equivalents increased
by $1.4 million from $0.8 million at April 30, 2012 to $2.2 million
at October 31, 2012. Short-term investments also increased, from
$0.5 million at April 30, 2012 to $1.9 million at October 31, 2012.
As a result of these increases in cash and cash equivalents and
short-term investments, current assets increased by $2.8 million
during the first six months of fiscal 2013, from $1.4 million at
April 30, 2012 to $4.2 million at October 31, 2012. This increase
reflects increases in cash and cash equivalents from the proceeds
of a private placement financing undertaken during Q2 2013 and
redemptions from short term investments, offset by expenditures of
cash on the purchase of new short term investments and on
exploration and project generation expenses, general and
administrative costs associated with maintaining a public company,
and expenditures related to the Arbitration action.
The Company's financial statements have been prepared on the
basis that the Company will continue as a going concern, which
assumes that the Company will be able to meet its commitments,
continue operations, realize its assets and discharge its
liabilities in the normal course of business for the foreseeable
future. There are events and conditions that cast substantial doubt
on the validity of that assumption. The Company will require
additional financing in the future in order to conduct substantial
exploration programs and meet property commitments, for
administrative purposes and potentially for legal expenses related
to the Arbitration. The costs for the Arbitration are substantial
and are anticipated to increase as the case proceeds to through the
final, merits-based phase. While the Company has entered into a
service and fee agreement with its Arbitration legal counsel that
provides legal fee cost certainty, and, as a result of its recent
private placement financing, has the funds in place to pay the
legal costs related to the final phase of the Arbitration,
additional unforeseen Arbitration-related costs may arise and
ongoing general and administrative and regulatory expenses will
necessitate additional financing in the future. Factors that could
affect the availability of financing include fluctuations in the
Company's share price, the state of international debt and equity
markets, investor perceptions and expectations, global financial
and metals markets, progress on any of the Company's exploration
properties, and developments, if any, on the El Dorado project
permitting application. The Company believes it will be able to
obtain the necessary financing to meet its requirements on an
ongoing basis; however, there can be no assurance that the
necessary financing will be obtained, and such financing, if
available, may be dilutive to the Company's shares and
shareholders. As it has in the past, the Company plans to obtain
additional financing through, but not limited to, the issuance of
additional equity.
(The foregoing two paragraphs contain forward-looking statements
regarding the requirement for financing and the use of funds that
may be raised. See Forward-Looking Information.)
Working Capital
At October 31, 2012, the value of the Company's current assets
was $4.2 million, compared to $1.4 million at April 30, 2012, an
increase of $2.8 million. This increase in current assets is
primarily the result of an increase in cash related to the
Company's October 2012 private placement financing, offset by
expenditures of cash on exploration, general and administrative
responsibilities and the Arbitration action. Resource property
balances at October 31, 2012 were negligibly higher than the April
30, 2012 balance ($5.51 million and $5.49 million
respectively).
At October 31, 2012 the Company had current liabilities of $1.9
million, compared to the April 30, 2012 balance of $1.6 million,
which is due to a slight increase in accounts payable and accrued
liabilities. Of the accounts payable and accrued liability
balances, $1.5 million at October 31, 2012 (compared to $1.4
million at April 30, 2012) is due to one vendor associated with the
Arbitration action.
The $2.8 million increase in current assets combined with the
marginal increase in current liabilities, resulted in a $2.5
million increase in working capital from $(0.2) million at the end
of fiscal 2012 to $2.3 million at the end of Q2 2013.
Financial Condition
The Company does not intend to resume significant exploration
programs in El Salvador until such time as the El Dorado
environmental permit and exploitation concession are received. The
Company cannot judge if or when the required permits will be
received and is not currently planning any exploration programs for
its El Dorado, Santa Rita and Zamora-Cerro Colorado properties for
the immediate future beyond what is necessary to keep all of its
exploration licences in good standing. Should the required permits
be granted, the Company will evaluate its options for resuming full
scale exploration work designed to advance its El Salvador
projects.
During Q1 2013, following completion of a surface work program
during fiscal 2012, the Company applied for and was granted a drill
permit to conduct a 10-15-hole (approximately 12,000 meter) drill
program at the Hog Ranch property, which permit allows for
expanding the drill program to 31 holes. The Hog Ranch drill
program is subject to future financing (favourable conditions for
which are unlikely to occur until such time as the El Dorado permit
has been received) and sourcing of drill contractors, and
consequently may not commence during fiscal 2013 as previously
anticipated. Acquisition of the Remance project is in doubt and
therefore, no exploration plans for Remance are being contemplated
at this time. However, if a final acquisition agreement on Remance
is signed, as per the terms of the Remance LOI the Company will be
responsible for undertaking a $1 million exploration program in the
first year of the option period. The Company intends to continue
its project generation initiatives with the aim of evaluating and
possibly acquiring new exploration properties of merit that fit its
exploration focus.
The Company anticipates that the Hog Ranch drill program and
associated exploration will cost approximately $1.5 million, with a
further $1 million required in the event the Remance property is
acquired. Minimal expenditures are anticipated for generative
exploration work. The Company will require additional financing in
order to carry out the planned Hog Ranch drill program, as well as
any other future exploration work of a substantive nature.
(The foregoing two paragraphs contain forward-looking statements
regarding the scope and anticipated costs of exploration and
generative work programs management intends to undertake during
fiscal 2013. See Forward-Looking Information.)
The Company's general and administrative costs are expected to
remain stable during the remainder of fiscal 2013. Expenditures
related to the Arbitration claim are expected to increase
substantially as the case proceeds through the final phase. At
October 31, 2012, the Company had accumulated a liability of
approximately $1.5 million related to the Arbitration. Additional
working capital (likely through equity financing) will be required
to fund ongoing general and administrative costs. Though the
Company has signed a service and fee agreement with its Arbitration
legal counsel that will preclude legal fee cost overruns, ancillary
Arbitration-related expenses such as expert witnesses, court costs,
etc. are less certain and may be substantial.
(The foregoing paragraph contains forward-looking statements
regarding anticipated general and administrative expenses for
fiscal 2013, and the requirement for additional financing to fund
legal costs and future general working capital expenses. See
Forward-Looking Information.)
The business of mining and exploration involves a high degree of
risk and there can be no assurance that any of the Company's
current exploration projects will result in profitable mining
operations. The Company has no source of revenue, and will require
additional cash in the future to fund exploration and
administrative expenses. As at October 31, 2012, the Company has
working capital of $2.3 million, has incurred losses since
inception and has an accumulated deficit of $91.7 million. The
Company's ability to continue operations and exploration activities
as a going concern is dependent upon its ability to obtain future
financing. The Company will need to raise additional funds to
support exploration and administration expenses and may require
additional funds to support unanticipated expenses related to the
Arbitration action. While the Company has been successful in
obtaining financing in the past, there is no assurance that
sufficient funds will be available to the Company, or be available
on favourable terms in the future. Factors that could affect the
availability of financing include fluctuations in the Company's
share price, the state of international debt and equity markets,
investor perceptions and expectations, global financial and metals
markets, progress on any of the Company's exploration properties,
and developments, if any, on the El Dorado project permitting
application. Additional financing will require, but may not be
limited to, the issuance of additional equity. Readers are
encouraged to thoroughly review the Risks and Uncertainties
detailed in the Company's MD&A for fiscal 2012.
Outlook
Exploration
During the first half of fiscal 2013, the Company applied for
and was granted a drill permit to conduct a 10-15 hole
(approximately 12,000 meter) Phase 1 drill program at Hog Ranch,
which permit allows for expansion of the drill program to 31 holes.
The Company has selected and prioritized drill targets for Hog
Ranch but has elected to forestall commencement of this Phase 1
drill program until such time as it can minimize the dilution on
the cost of capital necessary to undertake the program (conditions
for which are not likely to occur until such time as the El Dorado
permit is granted). In addition to being subject to financing,
commencement of this drill program is dependent on sourcing of
drill contractors at a competitive rate. As such, the Hog Ranch
drill program may not occur during fiscal 2013 as previously
anticipated.
The Company's acquisition of the Remance property is on hold and
highly uncertain at this time, pending the vendor's legal appeal of
the Government of Panama's recent decision to deny extension of the
Remance concession term. While the Company is keeping the Remance
LOI in effect during Minera Clifton's appeal, it does not intend to
sign a final agreement to acquire the Remance project unless the
term of the concession is extended.
The Company will continue to curtail its exploration programs
and expenditures in El Salvador until such time as PRES receives
the El Dorado environmental permit and exploitation concession. The
Company remains hopeful that it will either receive the El Dorado
permit and mining concession or that it will be appropriately
compensated. The Company will continue to seek opportunities for
dialogue with the GOES aimed at resolving its permitting issues in
El Salvador including receipt of the environmental and mining
permits for the El Dorado project as well as re-establishing the
exploration licence for Santa Rita.
The Company continues to seek new project opportunities in North
and Central America.
The planned Phase 1 Hog Ranch drill program is expected to cost
approximately $1.5 million. However, commencement of this drill
program is dependent on securing adequate future financing, and
procurement of drill contractors and as such, its timing is
currently uncertain. If the Remance project is acquired, the
Company will require financing to undertake an exploration program,
as per the terms of its Remance letter of intent that is
anticipated to cost approximately $1.0 million. Additional
exploration work required to keep all of its El Salvador projects
in good standing, and exploration expenses related to the Company's
generative programs, will continue through fiscal 2013 and for the
foreseeable future.
(The foregoing paragraph contains forward-looking statements
regarding the Company's exploration plans and anticipated costs
during fiscal 2013 and beyond, its efforts to settle the El Dorado
permit impasse, and its requirements for additional funding. See
Forward-Looking Information.)
General and Administrative and Legal
The Company's general and administrative costs are expected to
remain stable during the remainder of fiscal 2013. Additional
working capital (likely through equity financing) will be required
in the future to fund ongoing general and administrative costs.
Expenditures related to the Arbitration claim are expected to
increase substantially as the case proceeds through the final
phase. Though the Company has signed a service and fee agreement
with its Arbitration legal counsel that will preclude legal fee
cost overruns, ancillary Arbitration-related expenses such as
expert witnesses, court costs, etc. are less certain and may be
substantial.
The Company will continue to seek opportunities for dialogue
with the GOES aimed at resolving the El Dorado permitting
situation. The Company and its subsidiaries have a well-documented
history of supporting local inhabitants and building relationships
with all stakeholders. This is a key component of the Company's
approach to exploration and development, and will continue in all
jurisdictions in which it and its subsidiaries operate.
Unless these diplomatic efforts are successful, the Arbitration
action is expected to proceed during the remainder of fiscal 2013
and beyond. The Company and its legal counsel are currently
preparing for the final phase of the ICSID Arbitration case.
PacRim's Memorial (initial written testimony in which the details
of its case our presented) is now in preparation and will be
submitted to the Tribunal in March 2013. This submission will be
followed by a written response from the GOES and oral testimony by
both parties before the Tribunal. Based on these submissions and
testimonies, the Tribunal will determine whether El Salvador has
breached Salvadoran and international law by refusing to issue the
necessary mining licenses for the El Dorado Mine. They will also
determine El Salvador's monetary liability for breaching the
investment protections owed to a foreign investor as per in its own
laws. The final phase of the Arbitration case is expected to
continue through calendar 2013 and potentially beyond.
(The foregoing paragraph contains forward-looking statements
regarding anticipated general and administrative and legal expenses
during fiscal 2013; anticipated schedule of events through the
final phase of the Arbitration; and management's expectations
regarding expected Arbitration costs and its ability to manage
these expenses. See Forward-Looking Information.)
Key Issues
Important corporate and technical issues facing the Company in
the coming fiscal months (and beyond) include: developments related
to the Arbitration action; ongoing efforts to reach a resolution to
the El Dorado permitting impasse with the GOES; the Company's
ability to secure adequate future financing for exploration
expenses including the planned Hog Ranch drill program, maintenance
of the El Salvador and Nevada properties and general working
capital purposes; the execution and outcome of the Company's Phase
1 drill program at the Hog Ranch property; developments related to
the potential signing of a formal option agreement to acquire the
Remance project and the subsequent undertaking of an exploration
and drilling program at Remance if, as, and when it is formally
acquired; and, the continued search for additional exploration
project opportunities. Readers are strongly encouraged to review
the information provided in Section 13 - Risks and Uncertainties of
the Q2 2013 MD&A and more thoroughly detailed in Section 14 of
the Company's fiscal 2012 MD&A.
(The foregoing paragraph contains forward-looking statements
regarding management's assessment of the key issues facing the
Company during fiscal 2013 and the requirement for additional
financing. See Forward-Looking Information.)
On behalf of the board of directors,
Thomas C. Shrake, President and CEO
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 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.
This report contains forward-looking statements regarding:
-- the Company's future financing requirements and the use of funds that
may be raised. These assumptions are based on management's estimate of
working capital requirements and past expenditures. There are no
guarantees that future financing will be available to the Company under
acceptable terms and conditions. Readers are cautioned that without
additional financing the Company's ongoing exploration plans may not be
carried out as anticipated and its ability to continue its business may
be at risk.
-- the Company's assessment of expected legal costs associated with the
Arbitration and its ability to meet these costs based on current cash
and cash equivalent balances, as well as management's assessment that
unanticipated Arbitration costs may arise for which additional financing
may be required. The Company's expectation that it can meet the expected
legal expenses during the final phase of the Arbitration is based on its
understanding of costs laid out in the service and fee agreement with
its legal counsel as well as its understanding of potential additional
costs. Unanticipated costs related to the Arbitration may cause these
assumptions to change and there can be no guarantee that the Company
will not require additional financing related to the Arbitration or that
additional financing will be available to the Company under acceptable
terms and conditions.
-- the scope of exploration and generative work programs management plans
to undertake during fiscal 2013 and in the foreseeable future. These
expectations are based on various assumptions including but not limited
to: the Company's ability to secure financing, procure contractors and
obtain permits necessary to commence the proposed Hog Ranch drill
program; the Company and/or its subsidiary's signing of a Formal
Agreement to acquire the Remance project; the Company and/or its
subsidiaries' continued title and access to the El Dorado, Santa Rita
and Zamora-Cerro Colorado properties; the availability and accessibility
of projects the Company may be interested in acquiring; the availability
of sufficient working capital and access to financing; the ability to
procure adequate experienced staff; the availability of contractors; and
other risks and uncertainties. Should any of these assumptions prove
incorrect or requirements not be met, the Company's project generation
and exploration for fiscal 2013 and beyond may not occur as planned.
-- the Company's intent to forego significant exploration work at the El
Salvador projects until certain permits are granted, the implication
being that if and when these permits are granted increased investments
in exploration will be made in El Salvador. Readers are cautioned that
this statement conveys management's intent but that resumption of a
large-scale exploration program at the El Salvador projects is dependent
on not only the PRES's receipt of the El Dorado permit but also the
availability of adequate financing, the ability to procure adequate
experienced staff, the availability of contractors, and other risks and
uncertainties. Should any of these assumptions prove incorrect or
requirements not be met, the Company's project generation and
exploration plans for the remainder of fiscal 2012 may not occur as
planned.
-- the Company's exploration plans and anticipated costs for fiscal 2013
and beyond. The anticipated exploration expenditures reflect estimations
made by management based on current levels of expenditure and
anticipated work programs as described previously. Should unexpected
costs arise, exploration expenditures may differ from those currently
anticipated.
-- anticipated general and administrative, and legal expenses and the
possible requirement for additional financing to fund general working
capital expenses and potential, unanticipated legal costs. These
statements are based on management's assumption the Arbitration action
will continue through fiscal 2013 and the expected costs of pursuing
this action, plus the Company's anticipated burn rate for general and
administrative costs. Should PRES receive the El Dorado permits at any
time, the necessity to continue the CAFTA action may be averted and the
anticipated impact on general and administrative costs may not
materialize.
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
the risks and uncertainties outlined above and other risks and
uncertainties related to the Company's prospects, properties and
business detailed in its fiscal 2012 MD&A, in the Company's
Annual Information Form for the year ended April 30, 2012 and in
the Company's most recent Annual Report on Form 20F filed 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.
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 the Company and a Qualified Person as defined in NI
43-101.
Mr. David Ernst, Chief Geologist, supervises the Company's
project generation initiatives and conducted due diligence
geological investigations and confirmatory sampling at the Remance
Project. Mr. Ernst is geologist licensed by the State of
Washington, 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.
The TSX has neither reviewed nor accept responsibility for the
adequacy or accuracy of this release.
Contacts: Pacific Rim Mining Corp. 604-689-1976 or
1-888-775-7097 604-689-1978 (FAX)general@pacrim-mining.com
www.pacrim-mining.com