Surface drilling decreased by 24% during the nine month period ending March 31, 2013 to $23.73 million, due to projects completing earlier than anticipated or being delayed in the Canadian operations. Underground drilling decreased by 25% during the nine month period ending March 31, 2013 to $6.00 million, as compared to $8.03 million during the comparable period in fiscal 2012. The decrease is due to an underground contract not being renewed in the Atlantic division.
Direct costs for the nine months ended March 31, 2013 were $26.83 million compared to $36.36 million in the comparable period in fiscal 2012. Gross margins for the nine months ended March 31, 2013 were 20.2% compared to 19.8% during the nine months ended March 31, 2012, when direct costs include depreciation expenses (or 25.8% compared to 24.1% for the respective periods, when direct costs are adjusted to exclude depreciation expense). Although margins in Canada were lower, the Company was able to maintain higher margins in the international operations.
General and administrative expenses decreased by approximately 8% or $453,586 from $5.64 million in the first nine months of fiscal 2012 to $5.19 million in the first six months of fiscal 2013. The decrease is primarily a result of decreased salary costs from restructuring the Canadian operations, lower travel expenditures and lower bad debt allowance.
Net income after tax for the first nine months of fiscal 2013 was $144,791 compared to net income after tax of $2.39 million earned in the comparable period of fiscal 2012. The main differences are the $710,889 extraordinary gain recorded in the first quarter of fiscal 2012 and higher taxes as a result of higher revenues reported in the first nine months of fiscal 2012, as compared to the first nine months of fiscal 2013.
Cash flow from operations (before changes in non-cash operating working capital items) was $2.14 million during the first nine months of fiscal 2013, compared to $3.97 during the first nine months of fiscal 2012.
Virtually all metal prices are adjusting downward to levels last seen throughout 2009 and into early 2010. In addition, the materials sector has become the least favoured sector in the global financial sector. All areas of the mineral exploration and mining sectors are undergoing a significant revaluation and reduction of capital expenditures, as well as increases in cost control programs. The dearth of financings in the junior exploration sector over the last two years is also causing multi-billion dollar cutbacks of global exploration expenditures. Does this mean that the entire mining industry is faced with a long-term major adjustment, or are we looking at an overdue correction? We believe it is the latter, and have adjusted our budgets and plans on this basis. We do not anticipate a material turn in the markets until sometime in 2014, but we see a number of positive consequences of this type of environment.
The better managed juniors with good mining projects will survive and will, over time, encourage the private and public sectors to provide financing for their projects. The mid-tier and major mining companies will become stronger and will, in many cases, acquire good projects previously developed by undercapitalized juniors. Concurrently, the USA economy, emerging market economies and European economies are anticipated to become stronger and increase their demand for metals, from a decreasing supply.
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