Claude Resources

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Claude Reports
2004 Financial Results

 

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Consolidated Statements of Earnings (Loss)
(Canadian Dollars in Thousands)
				Three Months Ended					Years Ended
				December 31					December 31
				2004		2003			2004		2003
						(restated - Note 2)					(restated - Note 2)
Revenues
	Gold		$	6,302	$	6,970		$	22,470	$	25,807
	Oil and gas:
		Gross revenue		2,544		1,407			9,745		9,368
		Crown royalties		(514)		(261)			(2,209)		(2,346)
		Alberta Royalty Tax Credit		125		125			442		539
		Overriding royalties		(1,190)		(724)			(4,618)		(4,077)
	Net oil and gas revenue			965		547			3,360		3,484
				7,267		7,517			25,830		29,291
Expenses
	Gold			4,304		4,389			15,904		18,041
	Oil and gas			377		375			1,574		1,260
	General and administrative			739		735			2,332		2,152
	Interest and other			11		9			(58)		101
	Provision for income taxes			(43)		5			-		63
				5,388		5,513			19,752		21,617
Earnings before the undernoted items				1,879		2,004			6,078		7,674
	Depreciation, depletion and accretion:
		Gold		2,006		1,592			6,023		5,369
		Oil and gas		156		148			653		507
Net earnings (loss)			$	(283) =====	$	264 =====		$	(598) =====	$	1,798 =====
Net earnings (loss) per share
		Basic and diluted	$	0.00 =====	$	0.00 =====		$	(0.01) =====	$	0.03 =====
Weighted average number of shares outstanding (000's)				60,558		55,299			59,769		53,851

 

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Consolidated Statements of Cash Flows
(Canadian Dollars in Thousands)
				Three Months Ended					Years Ended
				December 31					December 31
				2004		2003			2004		2003
						(restated - Note 2)					(restated - Note 2)
Cash provided from (used in):
Operations:
	Net earnings (loss)		$	(283)	$	264		$	(598)	$	1,798
	Non cash items:
		Depreciation and depletion		2,132		1,712			6,533		5,743
		Stock-based compensation		82		15			136		65
		Accretion expense of asset retirement obligation		30		28			143		133
	Net change in non-cash working capital:
		Receivables		930		(1,499)			845		(338)
		Inventories		1,489		1,546			(1,027)		(435)
		Shrinkage stope platform costs		(376)		(497)			(1,225)		(826)
		Prepaids		(121)		5			(105)		69
		Payables and accrued liabilities		(1,085)		926			15		2,625
	Cash from operations			2,798		2,500			4,717		8,834
Investing:
	Mineral properties			(2,690)		(3,688)			(13,306)		(14,864)
	Oil and gas properties			(679)		(983)			(1,964)		(1,828)
	Promissory note			(6,982)		-			(6,982)		-
	Short term investments			-		300			-		300
	Investments			(24)		(1,012)			968		(1,041)
	Increase in reclamation deposits			(71)		(282)			(111)		(525)
				(10,446)		(5,665)			(21,395)		(17,958)
Financing:
	Issue of common shares, net of issue costs			1,606		7,431			5,116		14,181
	Proceeds on sale of royalties			7,113		-			7,113		-
	Deferred revenue			906		-			906		-
	Demand loan repayment			-		-			-		(110)
	Capital lease repayment			(15)		(15)			(59)		(60)
				9,610		7,416			13,076		14,011
Increase (decrease) in cash position				1,962		4,251			(3,602)		4,887
Cash position, beginning of period				(2,305)		(992)			3,259		(1,628)
Cash position, end of period				(343)	$	3,259		$	(343)	$	3,259

Notes to Consolidated Financial Statements

Note 1 - General

The accompanying unaudited consolidated financial statements should be read in conjunction with the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2003. The unaudited financial statements include the financial statements of the Company and its subsidiary.

The unaudited interim consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of manage- ment, necessary for a fair presentation of the respective interim periods’ presented.

Note 2 - Change in Accounting Policy

Stock-based Compensation

Effective January 1, 2004, the Company adopted the new Handbook Section 3870, “Stock-based Compensation and other Stock-based Payments”. This section requires that a fair-value based method of accounting be applied for all stock-based compensation plans. The Company has adopted the fair-value method of accounting for employee stock options and other stock-based payments with retroactive restatement to January 1, 2002. The cumulative effect of the change in policy on the balance sheet at December 31, 2003 was to increase payables and accrued liabilities by $30,000, increase contributed surplus by $225,000 increase share capital by $144,000 and decrease opening retained earnings by $304,000. The effect of the change in policy on the statement of earnings for the year ended December 31, 2003 was a reduction in earnings of $95,000 (2002 - $304,000).

Note 3 - Shrinkage Stope Platform Costs

Shrinkage stope platform costs represent cost of the ore that is being used as a working stage, within the stope, to gain access to further ore. This ore is expected to be processed in the following 12 months. The processing of this broken ore occurs in accordance with a mine plan based on the known mineral reserves and current mill capacity. The timing of processing of ore has not been significantly affected by historic prices of gold.

Note 4 - Investments

At December 31, 2004, the quoted market value of the investments was $3.8 million (December 31, 2003 - $3.4 million).

Note 5 - Promissory Note

In December 2004, the Company sold a production royalty for proceeds of $7.1 million. As part of the transaction $7.0 million of the sales price was loaned to a financial institution and has been pledged to secure its obligations under the royalty agreement (Promissory note). Pursuant to the agreement, the Company received $.9 million in fees and interest for services performed in relation to the transaction, of which $.6 million and $.3 million was for the indemnification from any breach of the royalty agreement by Claude Resources and interest prepayment, respectively. The funds received pursuant to the indemnification have been presented as deferred revenue and will be recognized over the expected remaining life of the royalty agreement. The funds received for the interest prepayment will be recognized in 2005.

During the term of the royalty arrangement, up to ten years, repayments on the promissory note will be issued to make the royalty payments. In certain circumstances, but in no event later than December 2014, Claude will have the right to repurchase the royalty interest at no greater than the fair market value thereof at the time of repurchase. The repurchase price would be paid from amounts still owing to Claude at that time under the promissory note. Annual royalties, dependent upon sales volume, will be payable at rates ranging from CDN $1.00 to $24.53 per ounce.

In addition to the royalty, the Company has granted a net profits interest (“NPI”) for the years 2011 to 2014. The NPI ranges from 2.5% to 4% payable only when gold prices exceed CDN $800 per ounce. No NPI is payable until Claude recovers capital, development reserve and interest charges. These costs accumulate beginning December 29, 2004.

Note 6 - Share Capital

At December 31, 2004 there were 61,691,707 common shares outstanding.

Options in respect of 2,660,000 common shares are outstanding under the stock option plan. These options have exercise prices ranging from $.53 to $3.05 with expiration dates between April, 2006 and October, 2014.

Pursuant to a January 2003 private placement, 1,138,450 common share warrants were exercised for gross proceeds of $2,100,000.

On December 22, 2003, the Company completed a private placement of 2,500,000 units, each unit consisting of one common share and one half of one common share purchase warrant, at a price of $2.00, for gross proceeds of $5,000,000. Each whole purchase warrant will entitle the holder, upon exercise at any time up to and including June 23, 2005, and upon payment of $2.50, to subscribe for one common share. In partial consideration of the services provided to Claude in connection with the private placement, the Underwriters were issued 150,000 common share purchase warrants each of which will entitle the holder, upon exercise at any time up to and including December 23, 2004 and upon payment of $2.10, to subscribe for one common share. At December 31, 2004 there were 1,250,000 warrants outstanding.

On September 2, 2004, the Company entered into a flow-through share agreement for the issue of 1,000,000 common shares at a price of $1.50 per share for proceeds of $1,500,000. The Company must expend $1,500,000 in qualifying Canadian Exploration Expenses as defined in the Income Tax Act (Canada) prior to December 31, 2005.

On December 31, 2004 the Company entered into a flow-through share agreement for the issue of 1,150,033 units, each unit consisting of one flow-through common share and one common share purchase warrant, at a price of $1.50 per unit, for gross proceeds of $1,725,000 million. Each warrant will entitle the holder, upon exercise, to purchase one common share for a two year period following the date of issue at a price of $2.00 up to and including December 31, 2005 and $3.00 up to and including December 31, 2006. The Company must expend $1,725,000 in qualifying Canadian Exploration Expenses as defined in the Income Tax Act (Canada) prior to December 31, 2005.

Note 7 - Financial Instruments

The Company’s financial results are affected by the normal risks and capital expenditure requirements associated with exploration, development and production of mineral and oil and gas properties. Financial results are also affected by market prices for gold and oil & gas, changes in foreign currency exchange rates, interest and other operating risks. To manage risks associated with prices for gold, oil & gas and changes in foreign currency, the Company may use commodity and foreign currency derivative instruments

Except as discussed below, the fair market value of the Company’s financial assets and liabilities approximate net book value.

At December 31, 2004, the Company had outstanding forward gold contracts related to 2005 production of 4,000 ounces at an average price of US $417 per ounce with a market value loss inherent in these contracts of US $74,000. At December 31, 2003, the Company had outstanding forward gold contracts related to 2004 production of 6,000 ounces at an average price of US $388 per ounce with a market value loss inherent in these contracts of US $175,000.

At December 31, 2004, the Company had outstanding foreign exchange contracts to sell US $5.5 million at an average exchange rate of 1.2611 CDN$/US$ with a market value gain inherent in these contracts of US $263,000. At December 31, 2003, the Company had outstanding foreign exchange contracts to sell US $9.8 million at an average exchange rate of 1.3446 CDN$/US$ with a market value gain inherent in these contracts of US $342,000.

Note 8 - Subsequent Event

In February 2005, the Company borrowed $5.0 million in the form of a demand loan bearing interest at 5.99%, repayable in monthly principal and interest payments of $96,514 and maturing in February, 2010. The loan is secured by a general security agreement covering all assets of the Company, excluding oil and gas assets in Alberta.

Note 9 - Comparative figures

Certain prior year balances have been reclassified to conform to the current year financial statement presentation.

Note 10 - Differences from United States Accounting Principles

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada. See Note 20 of the Company’s audited financial statements for the year ended December 31, 2003 for a narrative explanation of the differences in Canadian and US GAAP.

Caution Regarding Forward-Looking Information

Some of the statements contained in this New Release are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals.  This includes words to the effect that the Company or management expects a stated condition or result to occur.  Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.  Actual results in each case could differ materially from those currently anticipated in such statements.

For further information please contact:

Neil McMillan
President & Chief Executive Officer
Claude Resources Inc.
Saskatoon, Saskatchewan
306.668.7505

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