GlobeStar Reports Second Quarter 2009 Results

TORONTO, ONTARIO--(Marketwire - Aug. 12, 2009) - (All dollar amounts are expressed in United States currency unless otherwise stated.) GlobeStar Mining Corporation ("GlobeStar") GMI today announced key highlights of its financial and operational results for the three months (the "Second Quarter 2009") and six months ended June 30, 2009 (the "First Half 2009"). Copies of GlobeStar's Second Quarter 2009 financial statements and management's discussion and analysis are available on GlobeStar's website at www.globestarmining.com and at www.sedar.com. GlobeStar will hold a conference call at 9:00 a.m. (EDT) on Thursday August 13, 2009 to discuss these results; call-in details are included at the end of this release. A short presentation will be made during the conference call, for which presentation slides will be available on the investor relations tab of GlobeStar's website. Highlights - GlobeStar completed another successful quarter of operations and exploration. - Second Quarter 2009 gross revenues were approximately $17.1 million, operating earnings were $4.8 million and cash flows from operating activities were $4.6 million. - First Half 2009 gross revenues were approximately $31.3 million, operating earnings were $9.6 million and cash flows from operating activities were $9.4 million. - Cash, including restricted cash, and accounts receivable totalled approximately $13.4 million as at June 30, 2009 as compared to $10.3 million as at March 31, 2009. - GlobeStar made its first scheduled repayment of long-term debt on June 30, 2009 in the amount of approximately $2.9 million. At the end of the Second Quarter 2009, GlobeStar was in compliance with all covenants, including completion tests at the Cerro de Maimon Mine, under the senior debt facility. - Cash costs during the Second Quarter 2009 were approximately $1.09 per payable pound of copper sold after byproduct credits and approximately $0.92 per payable pound of copper sold after byproduct credits during the First Half 2009. - Second Quarter 2009 sales were approximately 6.2 million pounds of copper, 1,700 ounces of gold and 139,000 ounces of silver. First Half 2009 sales were approximately 12.6 million pounds of copper, 3,200 ounces of gold and 305,000 ounces of silver. - An initial phase of exploration drilling northwest of the Cerro de Maimon open pit has intersected sufficient sulphide and oxide mineralization to require a follow up drill program to define possible additions to the current ore reserve. - Ongoing drilling in the Bayaguana gold-copper district has intersected narrow (less than 2 metres wide) sulphide horizons that have assayed up to 4% copper and minor precious metals. Drilling will continue in this prospective area until at least the end of 2009. Second Quarter 2009 Financial Statements GlobeStar's Second Quarter 2009 results reflect the commencement of commercial production at the Cerro de Maimon copper-gold-silver mine and related facilities (the "Cerro de Maimon Mine") on January 1, 2009. Consequently, there are no comparable operating results for the second quarter of 2008. Results of Operations: During the Second Quarter 2009, GlobeStar sold approximately 10,300 tonnes of copper concentrate plus dore bars containing gold and silver. Gross revenues from the sale of concentrate during the Second Quarter 2009 totalled approximately $16.4 million while the sale of gold-silver dore produced gross revenues of approximately $0.7 million. Refining, treatment, freight and other marketing-related charges totalled approximately $2.7 million and operating expenses were approximately $7.0 million during the Second Quarter 2009. Cash costs per payable pound of copper sold were approximately $1.63 before byproduct credits and $1.09 after byproduct credits. These cash costs include mine site operating costs as well as smelting, refining, freight and royalty charges related to marketing the copper concentrate. Operating earnings were approximately $4.8 million after amortization and depletion of $2.5 million. A net loss of approximately $4.2 million resulted from the $7.1 million unrealized loss on the fair value of GlobeStar's copper, gold and silver hedges during the Second Quarter 2009. The value of the hedges declined primarily due to the increase in the price of copper during the quarter. The following condensed Statements of Loss outline the financial results of operations during the Second Quarter 2009 and the First Half 2009. /T/ ---------------------------------------------------------------------------- Statements of Loss (in U.S. $millions) Three Months Six Months Ended Ended June 30, 2009 June 30, 2009 ---------------------------------------------------------------------------- Gross revenues 17.1 31.3 ---------------------------------------------------------------------------- Refining, treatment and other charges (2.7) (5.0) ---------------------------------------------------------------------------- Net revenues 14.4 26.3 ---------------------------------------------------------------------------- Operating expenses (7.0) (12.3) ---------------------------------------------------------------------------- Amortization & depletion - mineral properties (2.6) (4.4) ---------------------------------------------------------------------------- Operating earnings 4.8 9.6 ---------------------------------------------------------------------------- General & administrative expenses (1.5) (2.7) ---------------------------------------------------------------------------- Amortization and exploration property write downs (0.1) (0.3) ---------------------------------------------------------------------------- Interest (0.6) (1.1) ---------------------------------------------------------------------------- Derivative & exchange losses: realized (0.6) (0.3) ---------------------------------------------------------------------------- Derivative loss: unrealized (7.1) (13.3) ---------------------------------------------------------------------------- Income tax recovery 0.9 0.7 ---------------------------------------------------------------------------- Net loss (4.2) (7.4) ---------------------------------------------------------------------------- /T/ The realized prices for copper, gold and silver sales during the Second Quarter 2009 were $2.33 per pound, $975 per ounce and $14.73 per ounce, respectively. These realized prices compare with the average London Metal Exchange copper price and the average gold and silver prices as published in Metal Bulletin during the Second Quarter 2009 of $2.12 per pound for copper, $922 per ounce for gold and $13.72 per ounce for silver. The realized prices incorporate the expected forward prices for the month of settlement. As at June 30, 2009 GlobeStar had approximately 2.9 million pounds of copper sales priced for July settlement. Statements of Cash Flows: Cash flows from operating activities were approximately $4.6 million during the Second Quarter 2009 and the first scheduled repayment of long-term debt of approximately $2.9 million was made on June 30, 2009. Pursuant to the requirements of GlobeStar's senior debt facility with Nedbank, the debt reserve account was fully funded during the Second Quarter 2009 in the amount of $5.6 million and GlobeStar was in compliance with all covenants under such facility at the end of the Second Quarter 2009. Exploration expenditures were approximately $0.6 million during the Second Quarter 2009 with activities focused on diamond drilling in the Bayaguana gold-copper district and IP geophysical surveys in the vicinity of the Cerro de Maimon Mine. Geological mapping was ongoing in both of these areas throughout the quarter. During the Second Quarter 2009, 10 diamond drill holes totalling 1,750 metres were drilled at the Cerro de Maimon Mine at a cost of approximately $0.2 million. Expenditures on sustaining capital projects and construction related to completing the water ponds at the Cerro de Maimon Mine were approximately $1.4 million during the Second Quarter 2009. The following condensed Statements of Cash Flows outline GlobeStar's cash flows during the Second Quarter 2009 and the First Half 2009. /T/ ---------------------------------------------------------------------------- Statements of Cash Flows (in U.S. $millions) Three Months Six Months Ended Ended June 30, 2009 June 30, 2009 ---------------------------------------------------------------------------- Cash flows from operating activities 4.6 9.4 ---------------------------------------------------------------------------- Repayment of long-term debt (2.9) (2.9) ---------------------------------------------------------------------------- Funding of debt reserve account (5.6) (5.6) ---------------------------------------------------------------------------- Exploration expenditures (0.6) (1.0) ---------------------------------------------------------------------------- Drilling at Cerro de Maimon Mine (0.2) (0.2) ---------------------------------------------------------------------------- Sustaining capital expenditures (1.4) (2.2) ---------------------------------------------------------------------------- Other cash flow items including proceeds from pre-commercial production sales 1.8 3.2 ---------------------------------------------------------------------------- Increase (decrease) in cash (4.3) 0.7 ---------------------------------------------------------------------------- /T/ Balance Sheet Data: Cash, including restricted cash, and accounts receivable were approximately $13.4 million at June 30, 2009, an increase of $3.1 million during the Second Quarter 2009. Saleable metal inventories were approximately $1.5 million at June 30, 2009 versus $1.0 million at March 31, 2009. The amount outstanding on GlobeStar's senior debt facility with Nedbank totalled $42.2 million at the end of the Second Quarter 2009 after making the first scheduled repayment of $2.9 million on June 30, 2009. /T/ ---------------------------------------------------------------------------- Balance Sheets (in U.S. $millions) As at 30Jun09 As at 31Mar09 ---------------------------------------------------------------------------- Assets ---------------------------------------------------------------------------- Cash including restricted cash 9.4 8.1 ---------------------------------------------------------------------------- Accounts receivable 4.1 2.2 ---------------------------------------------------------------------------- Product inventory (at cost) 1.5 1.0 ---------------------------------------------------------------------------- All other assets 104.2 107.5 ---------------------------------------------------------------------------- 119.2 118.8 ---------------------------------------------------------------------------- Liabilities & Equity ---------------------------------------------------------------------------- Accounts payable and accrued liabilities 8.2 6.2 ---------------------------------------------------------------------------- Long-term debt 42.2 44.6 ---------------------------------------------------------------------------- All other liabilities 6.8 2.0 ---------------------------------------------------------------------------- Equity 62.0 66.0 ---------------------------------------------------------------------------- 119.2 118.8 ---------------------------------------------------------------------------- /T/ Operating Results A summary of the operating results for the three months ended March 31, 2009 (the "First Quarter 2009") and the Second Quarter 2009 are outlined in the following tables. During the Second Quarter 2009, the mine and sulphide plant operated satisfactorily, however, the tonnes of ore processed are lower than budget due to higher than expected moisture content in the ore and bottlenecks in the flotation section of the sulphide plant. Plans are being implemented to increase the sulphide ore throughput during the remainder of the year. The following table outlines the sulphide plant's operating statistics during the First and Second Quarters of 2009. /T/ ---------------------------------------------------------------------------- Sulphide Plant Three Months Three Months Ended Ended Operating Statistics June 30, 2009 March 31, 2009 ---------------------------------------------------------------------------- Sulphide ore processed (tonnes) 98,000 103,000 ---------------------------------------------------------------------------- Copper grade 3.2% 3.9% ---------------------------------------------------------------------------- Gold grade g/t, Silver grade g/t 1.0, 59 1.0, 87 ---------------------------------------------------------------------------- Copper, gold & silver recoveries 84%, 31%, 50% 86%, 45%, 67% ---------------------------------------------------------------------------- Copper concentrate produced (tonnes) 10,500 12,500 ---------------------------------------------------------------------------- Copper in concentrate (pounds) 5.9 million 7.6 million ---------------------------------------------------------------------------- Gold & silver in concentrate (ounces) 1,000, 93,000 1,600, 192,000 ---------------------------------------------------------------------------- /T/ During the Second Quarter 2009 the oxide plant's performance improved while processing approximately 50,000 tonnes of oxide ore versus 34,000 tonnes during the First Quarter 2009. Gold production, however, was lower than budget due to lower than budgeted head grades and lower than design tonnages due to high clay content in the ore which caused material handling difficulties. Steps are being taken to elevate gold production levels during the remainder of the year by increasing the cut-off grade of the gold ore processed in the mill and increasing throughput. The following table outlines the oxide plant's operating statistics during the First Quarter 2009 and Second Quarter 2009. /T/ ---------------------------------------------------------------------------- Oxide Plant Three Months Three Months Ended Ended Operating Statistics June 30, 2009 March 31, 2009 ---------------------------------------------------------------------------- Oxide ore processed (tonnes) 50,000 34,000 ---------------------------------------------------------------------------- Gold grade g/t, Silver grade g/t 1.1, 17 1.3, 65 ---------------------------------------------------------------------------- Gold & silver recoveries 80%, 54% 84%, 35% ---------------------------------------------------------------------------- Gold produced (ounces) 1,460 1,200 ---------------------------------------------------------------------------- Silver produced (ounces) 14,400 25,000 ---------------------------------------------------------------------------- /T/ Cerro de Maimon Exploration At the Cerro de Maimon Mine the initial phase of exploration drilling northwest of the open pit was completed in July 2009 after drilling approximately 2,133 metres in 13 diamond drill holes. This drill program intersected sufficient sulphide and oxide mineralization to require a follow up drill program, currently scheduled to commence in September 2009, to define possible additions to the current ore reserve. Bayaguana Exploration GlobeStar's Bayaguana district consists of 72 square kilometres of mineral concessions located approximately 60 kilometres east of the Cerro de Maimon Mine and hosts three geologically important copper and gold deposits. The largest mineral deposit is Dona Amanda which has a NI-43-101 compliant inferred mineral resource estimated at 128 million tonnes grading 0.31% copper, 0.19 grams of gold per tonne and 1.43 grams of silver per tonne at a cut-off grade of 0.15% copper. GlobeStar's 2009 exploration program has completed geological, geophysical and geochemical surveys in the eastern portion of the Bayaguana district and has drilled approximately 2,170 metres in 9 holes in La Palma East area. Partial assays have been received from three drill holes where sulphide mineralization has been encountered in narrow (less than 2 metres wide) horizons which have assayed up to 4% copper and minor amounts of gold and silver. These geologically encouraging results have resulted in a continuation of the drill program in the Mariposa area located northwest of La Palma East near the Dona Loretta mineral deposit which has a NI-43-101 compliant inferred resource of 8.2 million tonnes grading 0.5% copper at a cut-off grade of 0.25% copper. The drill program is expected to continue until the end of 2009 and will include exploration at Mariposa, Dona Loretta, Dona Amanda and then further west to the Cerro Kiosko deposit. The Cerro Kiosko deposit has a NI-43-101 compliant indicated and inferred resource of 4.9 million tonnes grading 0.98% copper, 2.0 grams of gold per tonne and 5.1 grams of silver per tonne at a cut-off grade of 0.35 grams of gold per tonne. The Kiosko mineral system remains open to the south and drilling later in 2009 will be directed towards increasing this resource. Cumpie Hill Nickel Laterite Deposit Coincident with the recent resurgence in the price of nickel, GlobeStar is evaluating the options available to reinitiate the development of the Cumpie Hill nickel laterite deposit located 4 kilometres from the Cerro de Maimon Mine. Cumpie Hill has a NI-43-101 compliant indicated and inferred resource of 6.2 million tonnes grading 1.5% nickel at a cut-off grade of 1% nickel containing an estimated 200 million pounds of nickel. Moblan Lithium Deposit The Moblan West lithium deposit located 112 kilometres north of Chibougamau, Quebec is 60% owned by GlobeStar and hosts a NI-43-101 compliant inferred resource of 5.3 million tonnes grading 1.5% Li2O at a cut-off grade of 0.43% Li2O. GlobeStar is currently determining the most advantageous approach for continuing the development of this important lithium resource. 2009 Outlook GlobeStar has used a copper price of $2.50 per pound, a gold price of $900 per ounce and a silver price of $13.00 per ounce for the second half of 2009 in developing this outlook. Based upon the actual production and sales history to date GlobeStar has revised its previously disclosed guidance for 2009 as described in press releases dated January 13, 2009 and April 8, 2009. Forecast of Operating Results: Copper production during 2009 from the Cerro de Maimon mine is expected to total approximately 25 million pounds from the processing of 400,000 tonnes of sulphide ore grading on average 3.4% copper. Gold and silver contained in the copper concentrate is forecast to total approximately 5,000 ounces and 440,000 ounces, respectively. The oxide plant is forecast to process approximately 200,000 tonnes of oxide ore producing approximately 7,000 ounces of gold and 113,000 ounces of silver in dore. The forecast production from the sulphide and oxide plants reflects current operating practices but GlobeStar is implementing plans to increase production in both plants as described in the Operating Results section of this press release. Forecast of Financial Results: The following forecast incorporates the actual realized metal prices for the First Half 2009 and the prices indicated at the beginning of this section for the second half of 2009. These metal prices are higher than was incorporated in the previously disclosed guidance for 2009 as described in press releases dated January 13, 2009 and April 8, 2009. Gross revenue from the sale of approximately 24 million payable pounds of copper, 9,000 ounces of payable gold and 490,000 ounces of payable silver is projected to be approximately $69 million. Operating earnings before depreciation, after $24 million of mine operating costs and $10 million of treatment, refining and freight charges, are forecast at approximately $35 million. Depreciation is projected to be approximately $9 million. Net income, after $5 million of general and administrative costs, $17 million of derivative losses, $2 million of interest costs and $2 million of taxes, is forecast at approximately $nil for 2009. Cash flow from operating activities is projected to be approximately $30 million. Exploration and sustaining capital expenditures are forecast to be approximately $3 million each. Debt and tax payments are projected to be $12 million and $3 million respectively. Working capital adjustments, proceeds from pre-production sales and other cash flow items are forecast at approximately $1 million. The net increase in cash for the year is projected to be approximately $8 million with year-end cash balances, including restricted cash, totalling approximately $11 million. Conference Call Details GlobeStar will host a conference call on Thursday August 13, 2009 at 9:00 a.m. (EDT) to discuss these results. The conference call may be accessed by dialing 1-888-789-9572 in North America or 1-416-695-7806 internationally. Please dial in the participant pass code 3375201. The archived conference call can be accessed by following the instructions in the investor relations tab on GlobeStar's website. A short presentation will be made during the conference call and the presentation slides will be available in the investor relations tab of GlobeStar's website at www.globestarmining.com. About GlobeStar GlobeStar Mining Corporation is a Canadian based mining and exploration company producing copper, gold and silver at its Cerro de Maimon Mine in the Dominican Republic. GlobeStar maintains a listing on the Toronto Stock Exchange GMI. A.E. Olson, M AusIMM, GlobeStar's Senior Vice President and COO and a Qualified Person as defined under Canadian National Instrument 43-101, supervised the preparation of and verified the technical information contained in this release. Cautionary Statements Concerning Forward-Looking Statements This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to as ''forward-looking statements''). Forward-looking statements include, but are not limited to, possible events and statements with respect to possible events. The words "plans," "expects," "is expected," "scheduled," "estimates," "forecasts," "projects," "intends," "anticipates," or "believes," or variations of such words and phrases or statements that certain actions, events or results "may," "could," "would," "might," or "will be taken," "occur," and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable to GlobeStar as of the date of such statements are inherently subject to significant risks and uncertainties and may not be appropriate for use other than as used herein. These estimates and assumptions include, but are not limited to: (a) the costs associated with the drilling program at the Cerro de Maimon Mine; (b) the accuracy of geologic interpretations and studies of the orebodies at the Cerro de Maimon Mine; (c) the content of the orebody in respect of the Cerro de Maimon Mine; (d) the ability of the sulphide plant to operate at its design capacity; (e) the ability of GlobeStar to implement changes to the oxide plant in order to resolve issues relating to clay content and elevated copper levels; (f) certain assumptions relating to the market price for copper, gold and silver and the expected levels of supply and demand for copper, gold and silver; (g) there being no significant disruptions affecting operations at the Cerro de Maimon Mine, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment, naturally occurring events or otherwise; (h) production at the Cerro de Maimon Mine being consistent with GlobeStar's current expectations; (i) the continued operation of the Cerro de Maimon Mine; (j) the costs associated with the drilling program at the Cerro Kiosko deposit; (k) the ability of GlobeStar to successfully continue its exploration activities in respect of the Cerro Kiosko deposit; (l) the accuracy of geologic interpretations and drill results in respect of the Cerro Kiosko deposit and (m) the ability of GlobeStar to successfully continue its exploration activities in respect of the Dona Amanda deposit. Because of these risks and uncertainties and, as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated, implied or indicated by these forward-looking statements. Although GlobeStar believes that the expectations reflected in its forward-looking statements are reasonable, we can give no assurances that the expectations of any forward-looking statements will prove to be correct. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in the "Risk Factors" section of our most recently filed Annual Information Form and our other filings with the securities regulators of Canada. These factors are not intended to represent a complete list of the factors that could affect GlobeStar. GlobeStar disclaims any intention, and assumes no obligation, to update or revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise, or to explain any material difference between actual events and such forward-looking statements, except as required pursuant to applicable securities laws.