HispanicBusiness

Third Quarter Fiscal 2013 Results

Operating expenses of $0.7 million for the third quarter were consistent with the prior-year period and the trailing second quarter. A decrease in employee related costs for the quarter were offset by increased asset retirement obligations due to the expansion of the heap leach pad and higher legal and audit fees. The Company realized a loss from operations of $1.3 million and $0.7 million for the third quarter of fiscal 2013 and 2012, respectively.

Interest expense, net of capitalized interest, was $0.5 million for the quarter, up from $0.4 million in the prior-year period for interest payments made on promissory and convertible notes issued to reduce potential future royalty obligations and debt incurred since April 2011.

For the third quarter of fiscal 2013, the Company had a net loss of $1.8 million, or $0.01 per diluted share, compared with a net loss of $1.2 million, or $0.01 per diluted share, for the same period of the prior year.

Liquidity Position

At December 31, 2012, the Company had cash on hand of $0.6 million, relatively consistent with the cash balance at March 31, 2012, but down significantly from the $4.5 million cash balance at September 30, 2012. The change in cash from the second quarter reflects ongoing operational investments to expand production capacity at the Borealis Property.

At December 31, 2012, the Company had $6.1 million of inventory. Additional current assets at the end of the third quarter included $0.1 million in accounts receivable, $0.7 million in prepaid expenses and $0.5 million in deferred debt costs.

Nine-Month Summary

Revenue for the nine-month period ending December 31, 2012 was $12.6 million on sales of 7,989 gold equivalent ounces compared with revenue of $0.9 million for the first nine months of fiscal 2012. The Company produced 7,709 gold equivalent ounces at a recovery rate of approximately 40%.

Operating expenses for the first nine months of fiscal year 2013 were $2.1 million, an increase of $0.2 million over the first nine months of fiscal year 2012, which reflects higher legal and audit fees associated with royalty negotiations, the senior credit facility and increased reporting associated with production.

Interest expense increased $1.3 million to $1.8 million from $0.5 million in the first nine months of fiscal 2012, due to the interest incurred on promissory and convertible notes issued to reduce the potential future obligations under the royalty liability and the credit facility. The Company also recognized a gain of $0.8 million in the nine-month period ending December 31, 2012 for the change in liability warrants issued in Canadian dollars.

Year-to-date fiscal 2013 net loss was $3.2 million compared with a net loss of $2.5 million in the prior-year period.

Focused on Expanding Production Capacity

The Company's strategy is to facilitate an increase in production volume and sales at Borealis to create operational leverage which will reduce cash costs per ounce and improve the recovery rate, as well as generate sufficient cash to invest in further exploration and development.

"While we experienced a setback with the failure of the ADR facility's boiler, we were able to quickly find a replacement and Borealis has begun pouring gold again," stated Donald B. Tschabrun, Chief Operating Officer of Borealis Mining Company LLC. "With production resuming and having Waterton onboard, we have shifted our focus back to investments aimed at expanding Borealis' production capacity including additional crushing capabilities and hauling equipment."