Loss for the Period
In Q2 2013, the Company recorded a loss of $1.5 million compared to a loss of $1.6 million in the previous year. For the six months ended, the Company recorded a loss of $3.4 million compared to a loss of $2.8 million in 2012.
In addition to the operational factors described in the previous sections, a number of other factors contributed to the increased six month 2013 loss including increased depreciation, amortization and depletion arising from a larger asset base, increased financing charges related to additional equipment financing and debenture issuances in 2012, increased debenture issue amortization and accretion expenses and an unrealized foreign exchange loss on the Company's US$ denominated debenture.
Other Key Financial Metrics
Q2 2013 net capital expenditures on equipment, capital repairs and mineral property development totalled $2.4 million, compared to $3.9 million in Q2 2012 and $2.5 million in the previous quarter. During Q2, the Company invested $0.5 million in new mine development (including engineering, permitting, pond building, road construction and general site preparation) primarily at Posey Mill 2 and additional incremental infrastructure at Old Union 2. The Company capitalized major repairs to existing equipment in the amount of $1.3 million. The Company also financed a $1.2 million purchase of two tractors whose rental agreements had expired. Offsetting these expenditures were asset sales of $0.7 million. The Company does not anticipate any significant new equipment purchases for the remainder of the year.
Through June 2013, capital expenditures were $4.9 million or almost half of the $9.3 million expenditures incurred in the prior year. In 2012, the Company was investing significantly in order to position itself for growth in 2013. Also, additional expenditures were incurred in 2012 at the Powhatan mine as a result of a repositioning of the mine and the introduction of a new management team.
As at June 30, 2013, the Company had a working capital deficit of $19.4 million. The substantial majority of this deficit relates to debt repayments due in 2014 including unsecured debentures due in May 2014.
With production at steady state levels at all of our mines since late June, monthly sales in excess of 60,000 tons and significantly reduced capital expenditures, the Company expects to generate free cash flow in order to manage its working capital obligations and to start accumulating cash. In addition, at June 30, 2013, the Company had undrawn credit facilities of $1.4 million. Also, liquidity indicators started to improve in Q2 as evidenced by an improvement in operating cash flow by 67% as compared to Q1 and positive free cash flow as compared to a deficit in Q1.
Respecting the Company's $1.1 million debenture due August 31, 2013, the Company expects to repay a portion of the principal and refinance the remainder until May 2014, at an interest rate of 10%.
Outlook for the remainder of 2013
The Company has now opened all of its new mines each of which is close to operating at or near planned efficiency. In July 2013, the Company booked sales of 67,500 tons, far and away the best month in the Company's history. The Company believes that it can sustain production and contracted sales above 60,000 tons a month for the foreseeable future.
In addition to the improved sales profile, the Company believes its existing equipment fleet is sufficient for the foreseeable future with its existing mine plan. On this basis, no significant new equipment purchases are planned for the rest of 2013 and well into 2014. As well, expenditures on new mine development will be significantly lower.
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