News
Feb 15, 2010Magma Energy Corp. Announces Second Quarter Results
CanGEA member Magma Energy Corp. has announced its second quarter financial and operating results.
VANCOUVER, BRITISH COLUMBIA—(Marketwire - Feb. 15, 2010)-
(All amounts in US dollars unless otherwise stated and all production figures are approximate)
Magma Energy Corp. (TSX:MXY) today reported its financial and operating results for the second quarter ended December 31, 2009. The Company also provided an update on its operations. This earnings release should be read in conjunction with the Company’s MD&A, unaudited Financial Statements and Notes to Financial Statements for the corresponding period along with the audited consolidated Financial Statements, the related MD&A, and the Annual Information Form for the year ended June 30, 2009. This information is available on the Company’s website at http://www.magmaenergycorp.com and has been posted on SEDAR at http://www.sedar.com.
Commenting on today’s announcement, Ross Beaty, Chairman and CEO, said, “Magma Energy continued to grow rapidly in the second quarter of fiscal 2010. We completed a private placement in October which raised $20 million net of costs and closed our previously announced acquisition of a 40.94% interest in HS Orka. A further 2.16% interest is expected to close in March, 2010. These transactions add 75 MW to our producing reserves and add 276 MW to our resource base. Magma was also awarded $10 million in US Department of Energy grants for our Soda Lake and McCoy properties. We ended the quarter with a successful flow test at Soda Lake which enabled us to confirm half of our 8 MW net expansion program, and we expect to confirm the balance in early 2010.”
Financial Results
For the second quarter ended December 31, 2009, Magma reported a net loss of $5.25 million or (0.02) per share. The Soda Lake operation earned revenues of $1.41 million, gross profit of $589,000, and net income of $203,000 after deducting non-cash and other related expenses.
Magma’s share of the operating results in Iceland power company HS Orka are for the period December 14 to 31, 2009. The Company’s share of HS Orka’s net loss was $1.93 million, due to a loss in the value of embedded derivatives in certain of its sales contracts. These contracts are indexed to the market price of aluminum, which declined during the month of December after increasing during most of 2009. HS Orka’s financial condition improved significantly during 2009 due to higher aluminum prices and more stable currency conditions.
On a cash basis for the quarter ended December 31, 2009, the Company spent $3.59 million on operating activities and $53.60 million on investing activities, including investments of $48.71 million of payments for the acquisition of HS Orka, $2.46 million to acquire and explore the Company’s portfolio of exploration projects and $2.57 million on the Soda Lake expansion. In October 2009, the Company raised net proceeds of $19.77 million by way of private placement. At December 31, 2009, Magma had cash and cash equivalents of $53.68 million, working capital of $52.34 million, and long-term debt of $48.32 million.
Soda Lake Operation
The Soda Lake operation produced as expected during the quarter with occasional interruptions due to the Phase 1 expansion program, which is designed to boost production from 11 MW gross to 23 MW gross. As part of the field optimization program, well 45A-33 was successfully flow tested in December and demonstrated the well to be capable of 3 MW of net power. The flow test, along with an additional 1 MW net resulting from plant refurbishments, confirmed half of the Phase 1 expansion program. Magma expects to confirm the remaining capacity increase by the end of March, 2010.
Iceland
During the second quarter Magma completed the acquisition of a 40.94% interest in HS Orka. The purchase was financed by the proceeds of a $20 million private placement that closed in October 2009, from cash on hand and by long-term debt of $48 million secured by a 32% interest in HS Orka. A further 2.16% interest is expected to close in March 2010.
HS Orka is the largest privately owned energy company in Iceland with installed net capacity of 175 MW from its two power plants. Expansion plans for an additional 230 MW are in place and construction has already begun at the aluminum smelter where the power will be sold. Power contracts are currently being negotiated and the transmission line has been approved. HS Orka has 175 MW of Reserves and 640 MW of Resources as defined by the Geothermal Reporting Code.
Magma’s investment in HS Orka and, consequently, in Iceland’s energy industry, is a significant part of the Company’s strategic plans for growth. To support these plans and other global projects, Magma recently opened a new Iceland office staffed with an exceptionally experienced team of geothermal experts.
Exploration Activities
Subsequent to the quarter end, Magma was awarded the 100,000 hectare Pellado property, which adjoins the Maule property. The drilling and magnetotelluric geophysical program carried out by Magma in 2009 at Maule resulted in the discovery of a large heat anomaly, the Mariposa Geothermal Resource (“Mariposa”). This resource straddles the Pellado and Maule properties and is estimated to contain an Inferred Resource of 320 MW of electrical generation capacity, as defined by the Geothermal Reporting Code.
Road construction was completed in late January, 2010 and a planned $15 million exploration program is now underway. The program currently anticipates two wells being drilled on each of the Pellado and, when granted, the Maule properties.
Exploration work on Magma’s US properties during the quarter consisted primarily of environmental assessments, reflection seismology and other geophysical work. A slim hole drilling program is scheduled to commence at Desert Queen in the fourth quarter. In late October, 2009 the US Department of Energy awarded $10 million to the Company for innovative exploration activities at Soda Lake and McCoy. Early stage exploration work occurred at its other Latin American properties and, in October 2009, Magma won two geothermal concessions in Nicaragua.
Mr. Beaty concluded, “Since our IPO in early July 2009, Magma Energy has increased its geothermal power production more than ten fold to 86 MW, and its in-ground geothermal resources by nearly four times to 784 MW. I look forward to this rapid growth continuing in 2010.”
About Magma Energy Corp.
Magma Energy Corp. is a geothermal power company which operates, develops, explores and acquires geothermal energy projects. We have an extensive portfolio of properties throughout the western United States, Iceland and Latin America, including one operating power plant in Nevada and an interest in two other operating power plants in Iceland.
Magma Energy will host a conference call to discuss financial and operating results on Tuesday, February 16, 2010 at 11:30 am ET (8:30 am PT). North American participants dial 1-877-240-9772, International participants dial 1-416-340-8527, and Switzerland and United Kingdom participants dial 00-800-2787-2090. For participants from the UAE, please contact .(JavaScript must be enabled to view this email address) for instructions. The call will also be broadcast live on the Internet at http://www.investorcalendar.com/IC/CEPage.asp?ID=154644. Listeners may also gain access by logging on at http://www.magmaenergycorp.com. The call will be available for replay for one week after the call by dialing 1-416-695-5800/1-800-408-3053 (for International and North American callers) and entering replay pin number 5174721.
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