VANCOUVER, Canada -- Callinan Royalties reports strong financial performance in the three months ended September 30, 2012.
Callinan holds a 62⁄3% Net Profits Interest ("NPI") royalty and another $0.25 per ton royalty on its royalty lands that include the 777 Mine owned by HudBay Minerals Inc. located at Flin Flon, Manitoba, Canada as well as the adjacent 777 North Mine scheduled for production in late 2012.
The Company's net earnings attributable to shareholders for the period ended September 30, 2012 is $2,456,123 compared to $9,634,348 for the same period last year, or $0.05 per share compared to $0.19 per share last year. The current period earnings include accrued interest of $90,000 resulting from the reported financing agreement with Gold Royalties Corporation. Prior year results included a one-time recovery of $5,032,168 in deferred taxes realized from the spin-out of the exploration properties in 2011.
A summary of the financial information is included in the following table:
| || Three Months |
| Three Months |
| Operating summary |
| Revenue || $ 4,586,398 || $ 6,476,937 |
| Net earnings (After taxes) || $ 2,456,123 || $ 9,634,348 |
| Diluted Earnings Per Share || $ 0.05 || $ 0.19 |
| Net Cash Flow from Operating Activities || $ 7,108,527 || $ 8,961,979 |
The following are highlights from the first fiscal quarter:
- Callinan Royalties Corporation has received interim quarterly royalty payments totaling $3,359,471.50 from HudBay Minerals Inc.
- The board of directors of the Company declared a regular quarterly cash dividend for the first fiscal quarter on its common shares of two cents per common share. The dividend was paid on October 15, 2012.
- As previously announced on July 31, Callinan entered into an agreement with Gold Royalties Corporation whereby Callinan provided C$5.4 million to Gold Royalties Corporation ("GRC") via a convertible debenture. The financing was provided to facilitate in part the purchase by GRC of royalty interests on the Eagle gold project located in the Yukon Territory, Canada. At Callinan's option and at any time before or on the maturity date, Callinan has the right to convert the principal and accrued interest to 60% of the royalty interests or into share units of GRC comprised of 1 common share of GRC at $0.80 and 1 warrant priced at $1.20. The accrued interest will be converted into shares issued at market price.
Update on Independent Audit
The independent audit by Grant Thornton of the NPI calculations continues towards completion. Audit work has been protracted as much of the source material evidencing entries from the originally selected early years is not available from HudBay. In addition, a partial audit of 2011 for comparison purposes has been initiated. Once this phase of work has been completed Grant Thornton will report to the Board of Directors of Callinan.
On September 09, 2011, Callinan reported that it had executed a standstill agreement with Hudson Bay Mining & Smelting Co., Limited ("HudBay"), a wholly-owned subsidiary of HudBay Minerals Inc., which placed in abeyance Callinan's law suit in respect of its Net Profits Interest and Royalty agreement with HudBay dated January 1, 1988 while Callinan conducted an independent audit.
In the law suit, which was commenced in 2007 in the Manitoba Court of Queen's Bench, Callinan alleged that HudBay had not properly accounted to Callinan for the net profits interest ("NPI"). The law suit was prolonged while Callinan pursued an application against Deloitte & Touche, LLP ("Deloitte"), HudBay's auditor for production of Deloitte's working papers prepared in connection with Deloitte's annual audit of the NPI and opinion to the effect that the NPI had been properly calculated. Although the application did not initially succeed, Callinan prevailed on appeal and production of the working papers was ordered by the Manitoba court.
Under the standstill agreement, Callinan initially planned to audit the NPI calculations for four selected years, namely 1993, 2003, 2004 and 2007. Callinan retained Grant Thornton LLP to conduct the independent audit. HudBay agreed to cooperate with the auditors and to supply all available documents reasonably requested for the audit. In return, Callinan had agreed to hold the law suit in abeyance during the conduct of the audit while retaining the right at its sole discretion to terminate the audit and proceed with the law suit on reasonable notice in writing to HudBay of not less than 30 days.
The board of directors of Callinan Royalties Corporation has declared a quarterly cash dividend for the quarter ending December 31, 2012 on its common shares of two cents per common share to all shareholders of record at the close of business on December 31, 2012. The ex-dividend date will be December 27, 2012 and it is expected that the dividend will be paid on or about January 15, 2013.
It is anticipated that future quarterly dividends will be payable approximately 15 days following each fiscal quarter. The declaration, timing, and payment of future dividends will largely depend on the Company's financial results as well as other factors. Dividends paid by Callinan Royalties Corporation are eligible dividends for Canadian income tax purposes unless otherwise stated.
On Behalf of the Board of Directors,
Roland Butler, CEO