Fronteer Development Group Inc. ("Fronteer" or the "Company") (TSX:
FRG)(NYSE Amex: FRG) reports its financial and operating results
for the three months ended March 31, 2009. Details of the Company's
financial results are described in the unaudited consolidated
financial statements and Management's Discussion and Analysis for
the three months ended March 31, 2009 available on SEDAR at
http://www.sedar.com. Further details on each of Fronteer's
projects and activities can also be found on the Company's website:
http://www.fronteergroup.com. All amounts are presented in Canadian
dollars unless otherwise stated.
Overview
Fronteer is a gold-focused exploration and development company
with a pipeline of robust development projects and a healthy
treasury to fund their advancement toward potential production. To
realize its vision of becoming a mid-tier producer in the gold
sector, Fronteer is committed to advancing the Company's projects
toward production, and acquiring a producing or near-term producing
gold asset to round out its pipeline.
There are three key gold projects in Nevada, USA, that form the
foundation for Fronteer's future production platform. They are Long
Canyon, a discovery potentially defining a new gold trend in the
Eastern Great Basin; Northumberland, a large Carlin-type gold
deposit with a significant resource base already defined; and,
Sandman, a property in which Newmont USA Limited ("Newmont"), a
subsidiary of Newmont Mining Corporation, has the option of
advancing to a production decision within the next few years. In
addition, Fronteer has built and retained a 40% interest in an
emerging mineral district in northwestern Turkey that includes two
gold deposits and a third copper-gold porphyry deposit. Fronteer
also owns 100% of Aurora Energy Resources Inc. ("Aurora"), a
company focused on advancing a large, high quality uranium project
in Labrador, Canada. Aurora was listed on the Toronto Stock
Exchange ("TSX") under the symbol AXU and its acquisition by
Fronteer was completed on April 21, 2009.
Highlights for the three months ended March 31, 2009 and through
the date of this release are:
- On March 2, 2009, the Company completed the acquisition of an
additional 49.9% of Aurora, giving the Company control of Aurora.
On April 21, 2009, Fronteer completed a second step transaction
which allowed it to acquire the remaining outstanding shares of
Aurora, giving it 100% ownership. Aurora was then officially
delisted from the TSX. The Company currently operates Aurora as a
wholly owned subsidiary.
- Mr. Troy Fierro joined Fronteer as Chief Operating Officer, a
newly created executive position strengthening the Company's
operational and mine-development expertise and focus. Mr. Fierro
has more than 25 years of experience in mine development, including
engineering and design, mine construction, project start-up and
operations management. Mr. Fierro is a proven operator and his
appointment will help accelerate Fronteer's transitions towards
gold production.
- A first National Instrument 43-101 ("NI 43-101") compliant
resource calculation was completed on the Long Canyon property. At
a 0.3 g/t cut-off, the resource comprises 363,000 ounces at an
average grade of 2.35 g/t gold (4,808,000 tonnes) (indicated),
along with 459,000 ounces at an average grade of 1.63 g/t gold
(8,780,000 tonnes) (inferred). A 2009 US$14,100,000 exploration
program has commenced and will be shared 51% / 49% between the
Company and its minority joint venture partner AuEx Ventures Inc.
("AuEx"), respectively.
- On May 4, 2009, Fronteer announced the completion of a
comprehensive metallurgical review of the Northumberland gold
deposit and the commencement of Phase 1 metallurgical testing. The
review, commissioned as part of Fronteer's overall development
strategy for the project, has identified proven processing methods
for the various mineralization types, which will be systematically
evaluated as part of Northumberland's multi-phase metallurgical
program.
- Newmont recently provided the results of the first 12 holes
from an ongoing 2009 US$5M work-program at Sandman. The drill
results confirm the high-grade nature of the gold mineralization,
and the potential for a large tonnage of lower-grade material.
- The Company and Teck Cominco Ltd.'s Turkish subsidiary
initiated a sale process for the Agi Dagi and Kirazli properties in
northwestern Turkey.
Acquisition of Aurora
On March 2, 2009, Fronteer acquired control of 92.1% of the
issued and outstanding shares of Aurora by issuing 30,134,229
common shares at a price of $2.90. As a result of its significant
shareholding in Aurora, Fronteer began to consolidate 100% of the
financial results of Aurora. Fronteer also announced its intention
to complete a second step transaction that would result in the
Company acquiring the remaining issued and outstanding shares of
Aurora. This second step was completed on April 21, 2009 when
Fronteer issued a further 4,806,661 shares for the remaining 7.9%
of Aurora. The transaction has been accounted for as an asset
purchase and the cost of each item of property, plant and equipment
acquired as part of the group of assets acquired was determined by
allocating the price paid for the group of assets to each item
based on its fair value at the time of the acquisition.
Based upon the March 2, 2009, balance sheet of Aurora, the
preliminary allocation of the purchase price, summarized in the
table below, is subject to change.
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Purchase price:
30,134,229 common shares of Fronteer $ 87,389,259
Additional 4,806,661 shares to be issued 13,939,317
Options exercisable into shares of Fronteer 3,022,615
Acquisition costs 2,138,598
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$ 106,489,789
Existing book value of equity investment in Aurora 74,041,932
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$ 180,531,721
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The purchase price and existing book value of equity investment
in Aurora were allocated as follows:
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Net assets acquired:
Current assets $ 98,503,441
Other assets 1,800,273
Exploration properties and deferred exploration
expenditures 92,510,513
Other liabilities (3,378,318)
Future income tax liability (8,904,188)
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$ 180,531,721
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Exploration Projects
Deferred exploration and acquisition expenditures, net of
recoveries for the three months ended March 31, 2009 and 2008
totalled $1,307,175 and $2,830,107 in the USA, $17,414 and $122,720
in Turkey, and nil and $75,085 in the Yukon, Canada, respectively.
Deferred exploration and acquisition expenditures related to the
Company's projects in Labrador, Canada from March 3, 2009 to March
31, 2009 totaled $735,080.
For 2009, the Company has a global budget of approximately
$26,500,000 including an exploration and development budget for all
projects (net of joint venture contributions) of approximately
$17,754,000 and including general and administrative expenses.
These amounts include Aurora's forecasted expenditures from May
through December 2009. Added to these amounts will be the Company's
51% share of the US$4,262,000 purchase of water rights and
associated surface rights for the Long Canyon Project.
Plans for 2009 at Northumberland are focused primarily on a
comprehensive metallurgical program, carried out in conjunction
with a broader advancement program, which includes identifying
preferred mine development options. In addition, the program will
include regional target generation, and minor reclamation of past
mining activity including pond relining and heap pad re-contouring.
The budget for the 2009 program is approximately US$3,360,000.
At Long Canyon, the US$14,100,000 2009 exploration and
development program which commenced in April expects to include
17,858 metres of core drilling, 28,962 metres of RC drilling,
ongoing geological mapping, and further rock/soil/road cut
sampling. The program also includes significant engineering,
metallurgical, land, and legal programs.
Newmont, as operator at Sandman, is funding a US$5,000,000 work
program in 2009. Drilling commenced in mid-January 2009 and Newmont
has completed 57 holes for approximately 5,733 metres to the end of
March 2009. Recent drill results from the 2009 work-program
provided by Newmont have been encouraging, establishing good grades
and continuity.
An airborne survey is currently being tendered to cover all the
outside licenses of the Central Mineral Belt ("CMB") Uranium
Property. Upon completion of the survey, the Company plans to
re-configure its current license boundaries and file for a return
of the posted performance bonds. For the remainder of 2009, the
Company will also focus on ongoing community relations work, a
continuation of environmental baseline studies, and ongoing
tailings design. In addition, the Company has commissioned the
completion of a scoping study which is expected to be completed by
the third quarter of 2009. The budget for the CMB for the remainder
of 2009 is approximately $4,500,000 net of projected bond recovery
and including general and administrative expenses.
Selected Financial Data
This summary of selected financial data should be read in
conjunction with the Management Discussion and Analysis
("MD&A") and the unaudited consolidated financial statements
and related notes thereto for the periods indicated.
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Three months ended March 31,
2009 2008
---------------------------------
Net loss (5,451,597) (6,223,412)
Basic and diluted earnings per share (0.06) (0.07)
Cash used in operations (5,763,818) (2,481,500)
Cash invested in mineral properties
and deferred exploration (2,303,855) (1,510,913)
Cash (used in) generated by financing
activities (145,846) 97,800
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As at
March 31, 2009 December 31, 2008
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Cash, cash equivalents and
short-term deposits 167,526,844 81,035,276
Working capital 167,911,517 78,420,274
Investment in Aurora (1) - 74,945,577
Investment in Turkish
Properties (2) 13,343,008 13,255,365
Exploration properties & deferred
exploration expenditures 322,235,055 227,664,887
Total assets 512,796,058 403,519,304
Asset retirement obligations 1,433,514 1,425,527
Shareholders' equity 440,330,931 338,534,602
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(1) The Company accounted for its investment in Aurora using the equity
method of accounting until March 2, 2009. From March 3, 2009, upon the
acquisition of control of Aurora, the Company has consolidated the
results of operations of Aurora. Total market capitalization of Aurora
at March 31, 2008, was approximately $179.5 million (December 31, 2008
- $131.9 million).
(2) The Company owns 40% of three Teck Cominco Ltd. subsidiaries. All
exploration properties and deferred exploration expenditures relating
to these properties have been re-classed to Investment in Turkish
Properties.
The Company's net loss for the three months ended March 31, 2009
was $5,451,597 or $0.06 per share, compared to a net loss of
$6,223,412 or $0.07 for three months ended March 31, 2008.
Contributing to the year-over-year differences was the recognition
of increased operating expenses such as wages and benefits
professional fees, office and general, investor relations and
promotion and amortization and a decrease in interest income.
Offsetting the above was a decrease in stock-based compensation,
write-downs of exploration properties and deferred exploration
expenditures and foreign exchange loss. The Company recorded an
increase in the equity in loss of Aurora period over period and
began to consolidate 100% of Aurora's results from March 3, 2009,
resulting in an additional $268,900 loss being recognized in the
quarter over and above what the Company would have realized on its
original 42.2% interest. The Company recognized a gain on the sale
of a long term investment in three months ended March 31, 2008. No
similar gain was recorded for the three months ended March 31,
2009.
Liquidity
At March 31, 2009, the Company had cash, cash equivalents and
short-term deposits on its balance sheet of $167,526,844 and
working capital of $167,911,517 as compared to cash of $81,035,276
and working capital of $78,420,274 at December 31, 2008. The change
in cash, cash equivalents and short-term deposits and working
capital of $86,491,568 and $89,491,243, respectively, is primarily
due to the Company's acquisition of and consolidation of Aurora and
its financial results for the quarter ended March 31, 2009, offset
by cash exploration expenditures of $2,303,855 and cash used in
operations of $5,763,818.
About Fronteer
Fronteer is an exploration and development company with a track
record of making big discoveries. Fronteer has an extensive gold
project pipeline in Nevada, a 40% interest in three gold and
copper-gold projects in western Turkey, and 100% ownership of
Aurora Energy Resources, a private subsidiary advancing a
world-class uranium district in Labrador, Canada. For further
information on Fronteer visit www.fronteergroup.com.
Except for the statements of historical fact contained herein,
certain information presented constitutes "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements, including but not limited to, those with respect to
size of exploration budgets and timing of exploration programs,
potential sale of Turkish assets, timing of bond recovery potential
size of mineralized zone, and size of exploration program involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievement of Fronteer to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, among others, risks related to
international operations and joint ventures, the actual results of
current exploration activities, conclusions of economic
evaluations, uncertainty in the estimation of ore reserves and
mineral resources, changes in project parameters as plans continue
to be refined, future prices of gold and silver, environmental
risks and hazards, increased infrastructure and/or operating costs,
labor and employment matters, and government regulation and
permitting requirements as well as those factors discussed in the
section entitled "Risk Factors" in Fronteer's Annual Information
form and Fronteer's latest Form 40-F on file with the United States
Securities and Exchange Commission in Washington, D.C. Although
Fronteer has attempted to identify important factors that could
cause actual results to differ materially, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove
to be accurate as actual results and future events could differ
materially from those anticipated in such statements. Fronteer
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Accordingly, readers should not place
undue reliance on forward-looking statements.
Contacts: Fronteer Development Group Inc. Mark O'Dea, Ph.D,
P.Geo President and CEO 604-632-4677 or Toll Free 1-877-632-4677
Fronteer Development Group Inc. Richard Moritz Director, Investor
Relations 604-632-4677 or Toll Free 1-877-632-4677 Fronteer
Development Group Inc. Glen Edwards Director, Communications
604-632-4677 or Toll Free 1-877-632-4677 info@fronteergroup.com
www.fronteergroup.com
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