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| UXG > SEC Filings for UXG > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
Overview
The following discussion updates our plan of operation as of November 6, 2009 for the foreseeable future. It also analyzes our financial condition at September 30, 2009 and compares it to our financial condition at December 31, 2008. Finally, the discussion summarizes the results of our operations for the three and nine months ended September 30, 2009 and compares those results to the three and nine month periods ended September 30, 2008. We suggest that you read this discussion in connection with the MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION contained in our annual report on Form 10-K for the year ended December 31, 2008.
Plan of Operation
Our plan of operation for the remainder of 2009 is to continue with our focused exploration and evaluation program at certain of our Nevada and Mexican properties.
The company-wide exploration budget for 2009 is approximately $8.3 million with approximately $2.4 million expected to be spent in the fourth quarter. $1.2 million is allocated for Nevada and $1.2 million is allocated for Mexico where a portion of the spending is contingent on the receipt of certain drilling permits over an expanded area at our property in Mexico. The exploration budget for 2010 will be evaluated once the complete results from the current year's programs in Nevada and Mexico have been fully assessed. On a preliminary basis, we would expect our 2010 exploration budget to be between $10-$12 million.
Liquidity and Capital Resources
As of September 30, 2009, we had working capital of $45,683,738, comprised of current assets of $47,772,155, which includes $2,738,845 of gold bullion purchased during the third quarter of 2009, and current liabilities of $2,088,417. This represents an increase of approximately $35,412,677 from the working capital of $10,271,061 at fiscal year end December 31, 2008.
On May 19, 2009, the Company issued 22,000,000 shares of common stock at a price of $2 per share (before the underwriters' commissions and expenses) in a public offering pursuant to a registration statement filed with U.S. securities regulators and a prospectus filed with Canadian securities regulators. In connection with the offering, the Company granted the underwriters a 30-day option to purchase up to 3,300,000 additional shares of common stock to cover over-allotments. On May 26, 2009, the underwriters exercised their over-allotment option to purchase 3,150,000 of the 3,300,000 shares of common stock at a price of $2 per share (before the underwriters' commissions and expenses).
Gross proceeds from the 25,150,000 shares issued in the offering totaled $50,300,000 with net recorded proceeds to the Company being $46,300,672, which is net of the underwriters' commissions and expenses, legal fees, securities listing costs, printing and other costs. During the third quarter, we invested $2,738,845 of our cash in gold bullion by purchasing 2,835 ounces of gold at an average price of $966 per ounce.
Our only sources of capital at present include cash on hand, gold bullion and the possible exercise of options and warrants since we are not generating revenue. Based on current spending projections, our cash balance on hand is expected to be sufficient to fund ongoing operations through to the end of 2011.
Net cash used in operations for the nine months ended September 30, 2009 decreased slightly to $14,319,972 from $14,367,155 for the corresponding period in 2008. Cash paid to suppliers and employees decreased slightly to $14,319,972 during the 2009 period from $14,811,260 during the 2008 period. Cash provided by investing activities for the nine months ended September 30, 2009 was $543,878, primarily due to proceeds from the sale of mining equipment in Mexico, compared to cash used in investing activities of $338,133 in the comparable period of 2008.
Cash provided by financing activities for the first nine months of 2009 was $46,442,006 from the public offering of 25,150,000 shares and exercise of stock options compared to $257,181 generated in the comparable period of 2008 from the exercise of stock options and warrants.
Results of Operations
Nine months ended September 30, 2009 compared to nine months ended September 30, 2008
For the nine months ended September 30, 2009, we recorded a net loss of $23,801,030, or $0.22 per share, compared to a net loss for the corresponding period of 2008 of $124,475,810 or $1.29 per share. Excluding the write-off of long-lived assets recorded during the third quarter of 2009 of $10,000,474 (net of future income taxes recovery), the net loss for the nine months ended in 2009 was $13,800,556 or $0.13 per share. Excluding the goodwill impairment charge recorded during the third quarter of 2008 of $107,017,283, the net loss for the nine months ended in 2008 was $17,458,527 or $0.18 per share.
General and administrative expense for the nine months ended September 30, 2009 decreased by $522,129 to $3,935,490 compared to $4,457,619 for the same period in 2008, primarily due to decreases in staff and salaries, fees related to accounting and tax related services, management service fees, Sarbanes Oxley compliance and audit expenses, partially offset by an increase in stock option expense as a result of new stock option grants and reduction in forfeitures during 2009, compared to 2008.
Property holding costs during the 2009 period decreased by $204,207 to $3,660,836 compared to $3,865,043 in 2008. Exploration costs during the 2009 period decreased by $1,664,545 to $6,154,901 as compared to $7,819,446 for the same period of 2008, reflecting a reduction in exploration activities in Mexico.
Total stock option expense in the 2009 period increased to $1,023,651 compared to $416,452 for the same period of 2008, reflecting a lower number of forfeitures in 2009 and increased expenses associated with recent option grants. Stock option expense is split between the general and administrative and exploration costs lines within the Consolidated Statements of Operations and Comprehensive Loss.
Accretion of the asset retirement obligation in Nevada and Mexico for the nine months ended September 30, 2009 decreased to $435,381 compared to $493,517 in the same period of 2008. Interest income in the 2009 period decreased to $80,405 compared to $543,122 in 2008, reflecting lower interest rates during the 2009 period. During the 2009 period, we recorded a foreign currency exchange gain of $1,226,254, reflecting a weakening US dollar against the Canadian dollar and its effect on the net monetary assets or cash that is denominated in Canadian dollars.
Total loss on sale of assets for the nine months ended September 30, 2009 was $345,518 compared to $1,351 in the same period of 2008. During the quarter ended September 30, 2009, we sold certain heavy mining equipment from our Mexico operation with a net book value of $918,398 for proceeds of $582,633, resulting in a loss on disposal of $335,765.
Three months ended September 30, 2009 compared to three months ended September 30, 2008
For the three months ended September 30, 2009, we recorded a net loss of $15,083,183, or $0.12 per share, compared to a net loss for the corresponding period of 2008 of $114,806,431 or $1.19 per share. Excluding the write-off of long-lived assets recorded during the third quarter of 2009 of $10,000,474 (net of future income taxes recovery), the net loss for the three months ended in 2009 was $5,082,709 or $0.04 per share. Excluding the goodwill impairment charge recorded during the third quarter of 2008 of $107,017,283, the net loss for the three months ended in 2008 was $7,789,148 or $0.08 per share.
General and administrative expense for the three months ended September 30, 2009 decreased slightly by $31,694 to $1,205,306 compared to $1,237,000 for the same period in 2008.
Property holding costs during the 2009 period increased by $419,683 to $1,866,408 compared to $1,446,725 in 2008, mainly due to increase in claim fees, utilities and mine site care and maintenance expenditures. Exploration costs for the third quarter of 2009 decreased by $1,819,744 to $2,530,859 as compared to $4,350,603 for the same period of 2008, reflecting an increase in exploration activities at the Gold Bar and Limo projects in Nevada which was partially offset by decreased exploration at Tonkin area projects in Nevada and in Mexico.
Total stock option expense in the 2009 period increased to $288,965 compared to $188,895 for the same period of 2008, reflecting a lower number of forfeitures in 2009.
Accretion of the asset retirement obligation in Nevada and Mexico for the three months ended September 30, 2009 decreased to $169,067 compared to $213,545 in the same period of 2008. Interest income in the 2009 period decreased to $20,725 compared to $168,803 in 2008, reflecting lower average levels of interest-bearing deposits during the 2009 period as well as lower interest rates. During the third quarter of 2009, we recorded a foreign currency exchange gain of $1,181,388, reflecting a weakening US dollar against the Canadian dollar and its effect on the net monetary assets or cash that are denominated in Canadian dollars.
Total loss on sale of assets for the three months ended September 30, 2009 was $343,702 compared to nil in the same period of 2008. During the quarter ended September 30, 2009, we sold certain heavy mining equipment from our Mexico operation with a net book value of $918,398 for proceeds of $582,633, resulting in a loss on disposal of $335,765.
Critical Accounting Policies
Critical accounting policies and estimates used to prepare the financial statements are discussed with our Audit Committee as they are implemented and on an annual basis.
There have been no significant changes in our critical accounting policies and estimates since December 31, 2008.
Forward-Looking Statements
This report contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:
† statements concerning the benefits that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as receipt of proceeds, increased revenues, decreased expenses and avoided expenses and expenditures; and
† statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the Securities and Exchange Commission ("SEC"). You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates" or similar expressions used in this report or incorporated by reference in this report.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions.
Risk Factors Impacting Forward-Looking Statements
The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in other reports we have filed with the SEC and the following:
† The success of our ongoing exploration program;
† Unexpected changes in business and economic conditions;
† Commodity price fluctuations;
† Technological changes in the mining industry;
† Any change in interest rates, currency exchange rates or inflation;
† The willingness and ability of third parties to honor their contractual commitments;
† Our ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the gold mining industry for risk capital;
† Our costs of exploration and production, if any;
† Environmental and other regulations, as the same presently exist and may hereafter be amended;
† Local and community impacts and issues;
† Our ability to secure permits needed to explore our mineral properties;
† Our ability to identify, finance and integrate other acquisitions; and
† Volatility of our stock price.
We undertake no responsibility or obligation to update publicly these forward-looking statements, but may do so in the future in written or oral statements. Investors should take note of any future statements made by or on our behalf.
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