Filo Reports Q3 2024 Results
VANCOUVER, BC, Nov. 8, 2024 /CNW/ - Filo Corp. (TSX:FIL) (Nasdaq First North Growth Market: FIL) (OTCQX:FLMMF) ("Filo", or the "Company") announces its results for the three and nine months ended September 30, 2024. PDF Version
Jamie Beck, President & CEO, commented, "We are very happy to have announced the Company's transaction with BHP and Lundin Mining, which delivers compelling value to Filo's shareholders. Our exploration success has been unmatched since the Company was originally spun-out in 2016, and now is the right moment to hand the project off to its next stewards to maximize the potential of this remarkable discovery. We are pleased to have recommenced our drilling program in September through the commendable efforts of our operating team. We now have all nine drilling rigs operating at site."
Q3 2024 Highlights
During and subsequent to the third quarter of 2024, the Company's highlights included:
On July 29, 2024, the Company announced that it has entered into a binding arrangement agreement, as may be amended, supplemented or otherwise modified from time to time (the "Arrangement Agreement") with BHP Investments Canada Inc. ("BHP"), a wholly-owned subsidiary of BHP Group Limited, and Lundin Mining Corporation ("Lundin Mining", and together with BHP, the "Purchaser Parties") whereby the Purchaser Parties will acquire all of the outstanding common shares of Filo that the Purchaser Parties and their respective affiliates do not already own through a plan of arrangement (the "Transaction") for total consideration of approximately Canadian dollars ("$CAD") 4.1 billion ($CAD 33.00/share) through a combination of cash and Lundin Mining shares. The Transaction is expected to be completed in the first quarter of 2025, subject to the satisfaction or waiver of closing conditions. Concurrent with entering into the Arrangement Agreement, Filo and each of the Purchaser Parties (or their affiliates) entered into a subscription agreement pursuant to which the Purchaser Parties subscribed for an aggregate of 3,484,848 Filo Shares at an issue price of $CAD 33.00 per Filo Share, or approximately $CAD 115.0 million in the aggregate (the "Concurrent Private Placement"). The Concurrent Private Placement was not conditional on completion of the Transaction and was completed on August 7, 2024. Please refer to the Company press releases dated July 29, 2024 and August 7, 2024 for more information;
On September 26, 2024, the Company announced that the shareholders of the Company (the "Shareholders"), at the special meeting of Shareholders held that day (the "Meeting"), approved the Transaction. Please refer to the press release dated September 26, 2024 for more information;
On October 8, 2024, the Company announced that it has obtained a final order from the Ontario Superior Court of Justice (Commercial List) approving the Transaction. Please refer to the press release dated October 8, 2024 for more information;
The Company resumed drilling operations during September 2024 (halted in mid-April 2024), with all employees and contractors remobilized to the Project Site. During the three and nine months ended September 30, 2024 the Company drilled 1,766m and 18,441m, respectively.
2024 Drilling and Assay Results
Drilling and assay results disclosed by the Company during and subsequent to the nine months ended September 30, 2024 are summarized in Appendix 1 to this news release.
Outlook
Drilling activities recommenced at the Filo del Sol Project during the September 2024, and the Company and its drilling-related contractors have fully remobilized to site.
As a result of the shutdown of the drilling program, the Company is now expecting to drill between 30,000 and 35,000 metres during 2024, down from the original target of 40,000m. The focus of the 2024 program will remain exploration and resource growth with multiple step-out targets in all directions from zones of known mineralization, including both the Bonita and Aurora Zones. The Company continues to maintain a strong focus on improving drill productivity through a variety of initiatives.
Data collected from the current campaign is being used to develop a comprehensive geological model which will guide further exploration. The Company is continuing preliminary metallurgical testwork on the sulphide mineralization, as well as environmental and social baseline programs in support of future project permitting.
The Company's plans and timelines are subject to equipment and staff availability, along with being able to operate safely and effectively and in accordance with the Company's health and safety protocols.
Selected Financial Information
Effective January 1, 2024, the Company changed the functional currencies of its parent and subsidiary companies (see table below) to United States dollars ("$USD"). The Company also changed its presentation currency from $CAD to $USD. The changes were enacted to reflect changes in the composition of the Company's contracts and monetary outlays being predominantly denominated in $USD. The change in functional currencies is being recognized prospectively. The change in presentation currency requires retrospective restatement of all prior periods presented in the financial statements. The amounts reported in the statement of financial position as at January 1, 2023 (derived from the consolidated statement of financial position as at December 31, 2022; not presented herein) and December 31, 2023 have been restated in $USD based on the closing exchange rates on December 31, 2022 and December 31, 2023, respectively. The statements of comprehensive loss (income), cash flows and changes in equity for the three and nine months ended September 30, 2023 have been restated in $USD based on the average exchange rate for the three and nine months ended September 30, 2023.
The $CAD/$USD exchange rates used to reflect the change in presentation currency were as follows:
Q4-22
Q1-23
Q2-23
Q3-23
Q4-23
Average rate
n/a
0.7398
0.7445
0.7456
0.7344
Closing rate
0.7383
n/a
n/a
n/a
0.7561
(in thousands of US dollars)
September 30,
December 31,
January 1,
2024
2023
(Restated)
2023
(Restated)
Cash and cash equivalents
100,144
81,748
55,313
Working capital
85,528
65,776
44,518
Mineral properties
8,568
7,618
7,189
Total assets
114,972
94,049
63,470
Financial Results
(in thousands of US dollars, except per share amounts)
Three months ended
Nine months ended
September 30,
September 30,
2024
2023
(Restated)
2024
2023
(Restated)
Exploration and project investigation
17,294
27,331
70,347
79,424
General and administration ("G&A"), excluding share-based compensation expense(1)
3,274
1,274
6,013
4,273
Share-based compensation expense(1)
1,200
1,254
6,401
5,289
Net loss
17,929
17,431
70,032
61,645
Basic and diluted loss per share
0.13
0.13
0.53
0.49
(1)
Share based compensation is a non-cash cost which reflects the amortization of the estimated fair value of share options over their vesting period. The fair value of share options is calculated using the Black-Scholes pricing model, which relies heavily on the Company's share price and historical share price volatility. A portion of this expense is included in Exploration and Project Investigation expense.
The financial information in this table was selected from the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2024, which are available on SEDAR+ at www.sedarplus.ca and the Company's website www.filocorp.com
During the three months ended September 30, 2024, exploration costs were lower as a result of the temporary halting of drilling operations at the Project site due to weather conditions. Costs in any particular period may also be impacted by other relevant factors, such as the financial position of the Company, other corporate initiatives, and the scope of planned exploration/project work.
Exploration and project investigation expenses for the three and nine months ended September 30, 2024 were $17.3 million and $70.3 million, respectively, compared to expenses of $27.3 million and $79.4 million incurred during the comparative periods in 2023. During the three and nine months ended September 30, 2024, the Company completed resource drilling of 1,766m and 18,441m, respectively, compared to 8,831m and 37,188m completed during the comparative periods in 2023. Drilling metres during the three and nine months ended September 30, 2024 were negatively impacted as a result of temporarily halting drilling operations at the Filo del Sol site (mid-April to mid-September 2024) due to poor weather conditions. During this time, the Company incurred standby costs with its contractors, who are specialized in high elevation operations, in order to be able to quickly to remobilize to the Project site when weather conditions permitted in September 2024.
For the three and nine months ended September 30, 2024, Filo incurred net losses of $17.9 million and $70.0 million, respectively (2023, $17.4 million and $61.6 million), resulting mainly from operating losses of $21.6 million and $81.6 million, respectively (2023, $29.6 million and $88.0 million). The operating losses were offset by net gains of $1.5 million and $7.6 million from the use of marketable securities (2023, $10.2 million and $23.1 million). Exploration and project investigation costs are the primary driver of the operating losses, and for the three and nine months ended September 30, 2024, they accounted for approximately 80% and 86% of the operating losses (2023, 92% and 90%). The Company expenses its exploration costs through the consolidated statement of comprehensive loss, except for mineral property option payments and mineral property acquisition costs, which are capitalized. The period-over-period decrease in net gains from the use of marketable securities is the result of a devaluation of the Argentinian peso that occurred in December 2023, following the results of the Argentinian federal election.
Liquidity and Capital Resources
As at September 30, 2024, the Company had cash and cash equivalents of $100.1 million and net working capital of $85.5 million, compared to cash and cash equivalents of $81.7 million and net working capital of $65.8 million as at December 31, 2023. The increase in the Company's cash and cash equivalents and net working capital is due to net proceeds of $83.2 million received as part of the Concurrent Private Placement, $1.9 million received on the partial disposition of certain Net Smelter Royalties held by the Company, and $2.7 ...
