Magma Energy reports net income of US$13m for Q1 2011

Magma Energy reports net income of US$13m for Q1 2011 Soda Lake plant of Magma Energy, Nevada/ Nevada (source: Magma Energy)
Alexander Richter 16 Nov 2010

Magma Energy Corp releases results for Q1 of 2011 ended September 30, 2010, reporting a net income of US$13m and the increase of Magma's interest in HS Orka to 98.5% in September 2010.

Magma Energy Corp. (TSX:MXY) today reported its financial and operating results for the first quarter of 2011 ending September 30, 2010. The highlight of the quarter was the increase of Magma’s interest in HS Orka in Iceland to 84.21% on August 17 and to 98.53% on September 3. Magma’s financial results include both equity income and the consolidated results of HS Orka subsequent to Magma obtaining control. These first quarter results are not reflective of financial results in the future which will report fully consolidated results and therefore comparisons of revenues and expenses are not meaningful this quarter.

Ross Beaty, Chairman and CEO, commented, “Magma continued its rapid production and resource growth in the first quarter of 2011 with active drilling programs in Nevada and Chile and with completion of our acquisition of 98.5% of HS Orka in Iceland. These activities have increased Magma’s overall geothermal power production to 190 MW, our geothermal Indicated Resources to 181 MW and Inferred Resources to 990 MW. Our first quarter statements are unusually complex due to the accounting rules for our multi-stage HS Orka transaction, but future results will be more straightforward and will demonstrate to Magma’s stakeholders the outstanding long-term value of this acquisition.”

Revenues from energy sales were $8.0 million and gross profit was $1.2 million for the first quarter of fiscal 2011. The net income for the period was $13.4 million or $0.05 per share. EBITDA for the quarter was $5.9 million compared to an EBITDA loss for the same period last year of $2.5 million.

It is estimated that Magma’s revenues, had HS Orka been consolidated at the beginning of the quarter, would have been approximately $15 million, net income would have been approximately $22.6 million and EBITDA would have been $8.8 million. HS Orka’s revenues are approximately 7% higher than in the same period of last year. Approximately 46% of HS Orka’s revenues are sold under power purchase agreements with prices indexed to the price of aluminum, resulting in higher revenues as aluminum prices increase. The average London Metal Exchange aluminum price for the three months ended September 30, 2010 was $2,107 per tonne versus $1,842 per tonne for the same period last year.

The increase in net income for the quarter of $16.0 million compared to the same quarter last year was primarily related to $8.4 million equity income from Magma’s investment in HS Orka earned before attaining control of HS Orka on August 17, 2010, gains from changes to fair value of debt and derivatives of $7.6 million and higher foreign exchange gains of $6.0 million offset by higher finance costs of $2.4 million and higher future income tax expense of $3.4 million.

On a cash basis for the quarter ended September 30, 2010, the Company spent $43.6 million on investing activities, including investments of $29.5 million to acquire the additional interest in HS Orka, $6.3 million to acquire and explore the Company’s portfolio of exploration projects and $8.5 million on the Soda Lake and HS Orka expansions. During the quarter, Magma issued 40,334,628 common shares for net cash of $41.3 million. Magma used these proceeds along with a $CDN 10 million credit facility to acquire an additional 52.35% of HS Orka. At September 30, 2010, Magma had cash and cash equivalents of $46.2 million, working capital of $5.6 million, and long-term non-recourse debt of $275.0 million.”

The company also reports on developments at HS Orka, Soda Lake and additional exploration activities in Chile, as well as in Peru.

Concluding on the outlook, Ross Betay says “Our current focus is to continue our rapid production and resource growth by boosting production at HS Orka and Soda Lake and advancing our Mariposa project in Chile to large-diameter drilling. We are reviewing opportunities to finance these activities through partnerships, while continuing to aggressively build our global exploration portfolio.”

Source: company release