Intrepid Mines Limited Management’s Discussion & Analysis FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2012 All dollar values are expressed in United States dollars unless otherwise stated Level 1 490 Upper Edward Street Spring Hill Qld 4004 T: +61 7 3007 8000 W: www.intrepidmines.com 26 July 2012 Report to shareholders Three and six months ended 30 June 2012 Intrepid Mines Limited ASX and TSX : “IAU” Inquiries regarding this report and Company business may be directed to: Brad Gordon Managing Director Chief Executive Officer, Brisbane, Australia (office) +61 7 3007 8000 or Greg Taylor Investor Relations Toronto, Canada (office) +1 905 337 7673 (mobile) +1 416 605 5120 [email protected]Intrepid Mines Limited’s (‘Intrepid’ or the ‘Company’) principal activity is the exploration and evaluation of the Tujuh Bukit Project (‘Tujuh Bukit’ or the ‘Project’), in which the Company has an 80% economic interest. CORPORATE Shareholding changes in Tujuh Bukit licence holder and joint venture partner, PT Indo Multi Niaga (‘PT IMN’), noted. Identification of the new PT IMN shareholders advised post period end. A dispute notice is being prepared in relation to breaches of the Project agreements by the original PT IMN shareholders and PT IMN. EXPLORATION Activity on site ceased post period end, on 19 July 2012, at the instruction of PT IMN. 54 drill holes (13,621 metres) completed in the three months to 30 June 2012 (109 drill holes – 28,641 metres in the six months to 30 June 2012). OXIDE PROJECT STUDY In-fill drilling complete. Updated Mineral Resource estimate on schedule for late August 2012. PORPHYRY PROJECT STUDY Updated Mineral Resource estimate on schedule for September 2012. Preliminary Economic Assessment (‘PEA’) targeted for March 2013 quarter. FINANCE Exploration expenditure for the Project for three and six months to 30 June 2012 was $9.6 million and $18.7 million respectively, bringing the Project total to $95.0 million. Provision raised against $9.2 million loan to PT IMN. Treasury cash and term deposits - $125.5 million at 30 June 2012. For personal use only
Transcript
Intrepid Mines Limited
Management’s Discussion &
AnalysisFOR THE THREE AND SIX MONTHS
ENDED 30 JUNE 2012
All dollar values are expressed in United States dollars unless otherwise stated
Level 1 490 Upper Edward Street
Spring Hill Qld 4004 T: +61 7 3007 8000
W: www.intrepidmines.com
26 July 2012
Report to shareholders
Three and six months ended 30 June 2012
Intrepid Mines Limited
ASX and TSX : “IAU”
Inquiries regarding this report and Company business may be directed to:
Brad Gordon Managing Director Chief Executive Officer, Brisbane, Australia (office) +61 7 3007 8000
Intrepid Mines Limited’s (‘Intrepid’ or the ‘Company’) principal activity is the exploration and evaluation of the Tujuh Bukit Project (‘Tujuh Bukit’ or the ‘Project’), in which the Company has an 80% economic interest.
CORPORATE
�� Shareholding changes in Tujuh Bukit licence holder and joint venture partner, PT Indo Multi Niaga (‘PT IMN’), noted.
�� Identification of the new PT IMN shareholders advised post period end.
�� A dispute notice is being prepared in relation to breaches of the Project agreements by the original PT IMN shareholders and PT IMN.
EXPLORATION
�� Activity on site ceased post period end, on 19 July 2012, at the instruction of PT IMN.
�� 54 drill holes (13,621 metres) completed in the three months to 30 June 2012 (109 drill holes – 28,641 metres in the six months to 30 June 2012).
OXIDE PROJECT STUDY
�� In-fill drilling complete.
�� Updated Mineral Resource estimate on schedule for late August 2012.
PORPHYRY PROJECT STUDY
�� Updated Mineral Resource estimate on schedule for September 2012.
�� Preliminary Economic Assessment (‘PEA’) targeted for March 2013 quarter.
FINANCE
�� Exploration expenditure for the Project for three and six months to 30 June 2012 was $9.6 million and $18.7 million respectively, bringing the Project total to $95.0 million.
�� Provision raised against $9.2 million loan to PT IMN.
�� Treasury cash and term deposits - $125.5 million at 30 June 2012.
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Management’s Discussion & Analysis
Table of ContentsManagement Discussion & Analysis for the Three Months Ended 31 March 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OverviewIntrepid Mines Limited’s principal activity is the exploration and evaluation of the Project, in which the Company has an 80% economic interest.
The shareholding of PT IMN changed during the period under review, with the new shareholders receiving new shares giving them 80% of the expanded equity.
Intrepid immediately sought to identify and make contact with both the new and original shareholders of PT IMN in order to manage short term procedural and administrative matters and ascertain medium term Project expectations. Attempts to have productive discussions have been unsuccessful.
Post period end, on 19 July 2012, PT IMN suspended exploration activities at Tujuh Bukit without reference to Intrepid and requested several members of local management, including all expatriate employees seconded to PT IMN from Intrepid, to leave site. These actions are in contravention of the agreements in place between Intrepid, PT IMN and the original shareholders. A dispute notice is being prepared in relation to breaches of the Project agreements by the original PT IMN shareholders and PT IMN. The Company is reviewing its legal remedies and commercial alternatives.
At the date of this report there is no exploration activity at the Tujuh Bukit site. Technical work to progress the Mineral Resource estimates and engineering studies for the Oxide and Porphyry projects continues off-site.
The Company continues to seek to engage in discussion with PT IMN, the new shareholders and their advisors. The identity of the new PT IMN shareholders was made public on 24 July 2012.
In the absence of a formal acknowledgement, and given the applicability of accounting standard AASB 139 Financial Instruments: Recognition and Measurement, the Company has raised a provision against the carrying value of the loan to PT IMN. Refer to page 5 of this report for further discussion.
Further, the Company is exploring with its advisors and relevant government departments the potential impact of Indonesian Government Regulation Number 24 of 2012, which imposes a progressive national divestment requirement on foreign mining licence holders, commencing after the fifth year of commercial production (see news release of 20 March 2012 for details of the new legislation). Also refer to page 2 of this report for further discussion.
More Information about Intrepid Mines Limited . . . . . . . . . . . . . . . . . . . . . 27
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Management’s Discussion and Analysis for the Three and Six Months Ended 30 June 2012
During the quarter ended 30 June 2012, Intrepid Mines Limited was an international precious and base metals developer and explorer operating in Indonesia and the Americas.
The principal activity of Intrepid and its controlled subsidiaries (collectively referred to as the ‘consolidated entity’ or ‘Group’) during the quarter was the exploration of the Tujuh Bukit Project in Indonesia (in which the Company has an 80% economic interest) and the pursuit of additional precious metal projects and exploration assets.
The Company is listed on the Australian Securities Exchange (‘ASX’) and the Toronto Stock Exchange (‘TSX’) under the symbol ‘IAU’.
This Management’s Discussion and Analysis (‘MD&A’) provides a discussion and analysis of the operating results and financial condition of the consolidated entity for the three and six months ended 30 June 2012 and should be read in conjunction with the consolidated entity’s Interim Financial Report for the six months ended 30 June 2012 as well as Intrepid’s consolidated financial statements for the year ended 31 December 2011.
The Interim Financial Report and related notes have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (‘AIFRS’). Intrepid’s presentation currency is United States dollars (‘US$’ or ‘$’.)
Additional information, including press releases, has been filed electronically on the ASX online lodgement system at www.asx.com.au and in Canada through the System for Electronic Document Analysis and Retrieval (‘SEDAR’) at www.sedar.com.
Announcements for the Period Ended 30 June 2012
January Second tranche of CEO’s restricted shares totaling 1.5 million vested
Quarterly Activities Report ( December 2011) released
National Instrument 43-101 report on updated oxide resource filed
February Highest copper and gold intersection at Tujuh Bukit reported
Full Year Statutory Accounts (December 2011) released
Management’s Discussion and Analysis (December 2011) released
March Annual Information Form (2011) filed
Response to ASX query on price and volume lodged
Indonesian Government mining regulations amendment published
Clarification of divestment regulations in Indonesia released
Drill results from first drill hole at Salakan, Tujuh Bukit released
Company insight – Explanation of Indonesian divestment regulations released
April Notice of Annual General Meeting/Proxy Form dispatched.
Quarterly Activities Reports (March 2012 ) released
Management’s Discussion and Analysis (March 2012 ) released
Interim Unaudited Financial Statements (March 2012) released
June Change to Joint Venture Partner Shareholding
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Management’s Discussion & AnalysisPage 2
Overview of the Three and Six Months Ended 30 June 2012Tujuh Bukit, Indonesia 80% Economic Interest
On 20 January 2012, the Company announced that the technical report entitled “Tujuh Bukit Project Report on Mineral Resources, located in East Java, Indonesia, Technical Report for Intrepid Mines Limited,” (’the Report’) dated 20 January 2012, had been filed on SEDAR (www.sedar.com) as well as with the ASX, following the announcement of an increase to the porphyry copper-gold resource at Tumpangpitu (see news release dated 7 December 2011.)
The Report was prepared by independent consultants H&S Consultants in accordance with the JORC Code and Canadian National Instrument 43-101, who estimated an expanded Inferred Resource of 1.7 billion tonnes at 0.41% copper and 0.46 grams/tonne (‘g/t’) gold, at a cut-off grade of 0.2% copper, for the known porphyry copper-gold zone within the Tumpangpitu area of the Project, in which the Company has an 80% economic interest.
On 27 February 2012, the Company reported that assay results from deep drill hole GTD-11-248, in the on-going drilling program at the Tumpangpitu copper-gold porphyry, have returned the highest grade copper and gold intersection to date from a position east of the previously known porphyry mineralisation boundary.
The intersection is within an area previously identified by H&S Consultants as “geological potential” and can therefore be reasonably expected to provide a significant increase in metal inventory to the global resource.
This intersection occurs at a higher level (RL) than, and to the east of, the 1.7 billion tonne Inferred porphyry resource (at 0.41% copper and 0.46 g/t gold) noted above. It is possible this intersection represents a separate intrusion and associated stockwork vein system.
Drill hole GTD-11-248 is collared east of the porphyry resource and drilled toward the east, away from known mineralisation. The hole location is 160 metres (‘m’) north west of GTD-11-208, which had an intercept of 602 m at 0.70% copper and 0.52 g/t gold, including a high-grade
zone of 146 m at 1.06% copper and 0.87 g/t gold. GTD-12-286 is currently being drilled 160 m south of GTD-11-208. The next hole to the northwest, GTD-10-172, intersected wide zones of mineralisation, including 336 m at 0.47% copper and 0.14 g/t gold from 276 m, in high sulphidation-style mineralisation. Two of three holes planned to follow-up GTD-11-248 were commenced during the reporting period. All assays are outstanding.
On 20 March 2012, the Company provided further clarification of Indonesian Government Regulation Number 24 of 2012 (the ’Regulation’), publicly released on 6 March 2012.
The Regulation is aimed at further delineating aspects of the revised Indonesian Mining Law, and follows a series of earlier implementing regulations promulgated since 2010. Amongst other things, the Regulation amends existing divestment requirements for foreign-owned companies holding mining licences in Indonesia, such that the ownership participation of Indonesian entities or nationals shall not be less than 51% after ten years of production (see section “Foreign divestment requirements after initial operation” for details.)
The Tujuh Bukit mining licences are held by PT IMN, a wholly-Indonesian-owned company, and the Company will continue to pursue, notwithstanding recent changes to the PT IMN share register, the execution, of a shareholder agreement, which will allow for it to implement its rights under existing agreements to acquire an 80% direct equity interest in PT IMN, subject to government approvals. The remaining 20% of the shares in PT IMN will be held by the Company’s existing Indonesian joint venture partners.
Since the divestment requirements only actualise in the sixth year following production, they have no immediate impact on the Company’s ability to achieve an 80% direct equity stake in PT IMN, and to retain that stake for at least five years following production at the Project. This allows a substantial window of time to evaluate the optimal operating and ownership structure for the Project going forward.
Whilst the Regulation is silent on the terms upon which divestment is to be made, informal enquiries made with officials of the Ministry of Energy and Mineral Resources suggest that the divestment would be done according to the principles applied in divestments made by Contract of Work holders. These divestments have historically been on terms agreed between the parties according to market principles.
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Importantly, the Regulation stipulates a tight timeframe for various levels of government to take a decision on acquiring a divestment stake (see section “Divestment Timeframe” for details). The rigour of the stipulated timetable allows for certainty about government intentions to be obtained within a reasonably short period of time.
The Company considers it unlikely that the national government or state-owned enterprises would be able or inclined to accept offers to take up shares in all affected foreign-owned mining operations. Historically there has been a concentration of local interest in coal operations over metal operations, since the latter are more capital intensive and developed over longer time horizons. There are existing examples of Contract of Work divestment offers which have not been taken up, and others which were taken up only after several years of repeated offerings.
The Company believes that its arrangements with its existing Indonesian partner ensures that the first divestment milestone has already been addressed, and in due course only a further 31% stake will be required to be divested, at an agreed value.
As the Regulation is newly-enacted, the Company is of the view that the Indonesian Government will provide greater clarity on implementation over time, following consultation with industry bodies and individual affected companies.
The release of Indonesian Government Regulation Number 24 had a significant negative impact on the Company’s share price. The Company is continuing to actively initiate direct and indirect representations to the relevant Indonesian Government departments and is participating with industry bodies to present a collective response to the National Government.
Foreign Divestment Requirements After Initial Operations
The Regulation envisages foreign divestment by foreign parties over a period of time so as to ensure the following levels of local ownership:
� sixth year after initial operations - 20%;
� seventh year - 30%;
� eighth year - 37%;
� ninth year - 44%; and
� tenth year - 51%,
(in each case, percentage of the total shares in the company holding the mining licence.)
Divestment Timeframe
The divestment process will follow the general steps as set out below:
� Within 90 days after the fifth anniversary of production, an offer of shares must be made to the national government, provincial government, regency government, state-owned enterprise and regional state-owned enterprise (with these government agencies enjoying sequential rights of prior refusal);
� The national government, provincial government, regency government, state-owned enterprise or regional state-owned enterprise must notify its interest within 60 days following the offer date.
� In the event that the various government bodies are not interested in purchasing the divested shares, then the shares are to be offered to national private business entities within 30 days.
� National private business entities must make notification of their interest within 30 days following the offer date. Should there be several interested private business entities, a tender process will be conducted.
� Payment for shares purchased by the Indonesian participants must be made within 90 days following the date of the notification of interest or determination of the tender award.
If divestment is not achieved despite the offering process having been followed, the same process shall be followed annually thereafter until the required divestment is achieved.
On 28 June 2012, the Company noted changes to the share register of PT IMN. The capital of PT IMN was expanded with the incoming shareholders holding 80% of the shares on issue.
On 28 June 2012, Mr Ian McMaster was appointed Deputy Chairman to lead negotiations in Jakarta.
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Management’s Discussion & AnalysisPage 4
Salakan Prospect On 23 March 2012, the Company reported assay results from the initial diamond drill hole at the Salakan prospect, within the Tujuh Bukit Project, have returned encouraging copper and molybdenum results, highlighting the existence of (one or more) porphyritic intrusions and high sulphidation systems approximately five kilometres north of the current Tumpangpitu prospect.
Diamond drill hole SAN-12-001 was the first of a planned ten hole drill program to test coincidental copper-gold-molybdenum soil anomalies, mapped outcrops of veined porphyry and induced polarity anomalies (resistivity and chargeability) at the Salakan prospect. This first drill hole intersected telescoped high sulphidation mineralisation from near surface to end of hole at 924.7 m (refer to page 11).
A total of five holes for 3,536.05 m have either been started or completed during the reporting period . Assays have been received for SAN-12-002, however, no significant values were returned. Assays are outstanding for the remaining holes.
Ecuador – Shyri ProjectExploration at Shyri continues to target porphyry copper-gold mineralisation. The results of the 2011 Phase 2 drilling at Gama were reviewed during the reporting period and a decision taken to fund a further $1.7 million exploration budget on the Shyri Project to complete, which are to include, amongst other activities, further Induced Polarity surveys and diamond drilling. After this additional expenditure, the Company will have earned a 60% project interest.
Results for Phase 2 drilling (holes GAD-11-012 to GAD-11-013) were released on 9 February 2012. Hole GAD-11-012 intersected 2 m at 0.50 g/t gold, while GAD-11-013 intersected 22 m at 0.17 g/t gold and 0.03% copper and some shorter intervals (4 m to 10 m) grading 0.11 to 0.17 g/t gold.
Hole GAD-11-012 was drilled to the northwest of target B, 500 m southwest of hole GAD-11-011, which intersected 26 m at 0.45 g/t gold in a fractured diorite porphyry. Hole GAD-11-012 intersected a very thick pile of andesitic tuffaceous units, presenting horizons of lower temperature, propylitic and argillic alteration. No intrusive phases were intersected in this hole, but the presence of some fragments of porphyritic intrusive rocks cut by quartz-magnetite veins support the proposed model for the mineralization.
Pyrite is the main sulphide encountered, and occurs as disseminations (0.2% to 4%) and occasionally as fracture fillings and veinlets (up to 8%). Minor quartz-calcite (B type) veins with trace molydite were observed.
The upper part of hole GAD-11-013 intersected tuffaceous volcanic rocks similar to those encountered in hole GAD-11-012, but intersected a dioritic intrusive at depth. Most of the hole shows moderate to intense advanced argillic alteration. The microdiorite intersected up to 1%, A and B type veining locally. Gold mineralisation is generally associated with silicified horizons and quartz-pyrite stockwork veinlets. Copper mineralisation is associated with disseminated enargite. The best mineralised interval returned 0.17 g/t gold and 0.03% copper over 22.0 m from 392.0 m to 414.0 m, and is hosted in altered volcanic rocks above the contact with the diorite intrusive.
In addition, a total of 1,923 soil samples (664 between 1 April and 30 June 2012), 65 rock chip samples (18 between 1 April and 30 June 2012), and 747 line kilometres of ground magnetics (205 line kilometres between 1 April and 30 June 2012) were collected.
Finance � Total loss after tax $19.4 million for the three months
and $32.0 million for the six months ended 30 June 2012 (includes discontinued operations);
� Interest income was $1.0 million for the three months and $2.1 million for the six months ended 30 June 2012;
� During the quarter, 1,368,628 options to acquire shares in the Company were exercised. The six month total is 1,931,128;
� Eligible employees were granted 159,236 options and 79,618 restricted share rights under the Company’s LTI Plan during the quarter ended 30 June 2012;
� During the quarter the consolidated entity advanced $2.2 million to PT IMN, Intrepid’s joint venture partner in Indonesia, to assist PT IMN to meet its 20% share of on-going exploration expenditure at Tujuh Bukit above the initial Intrepid sole funding commitment of A$50 million. For the six months to 30 June 2012 the amount advanced was $4.3 million. The total loan advanced to PT IMN at 30 June 2012 is $9.2 million;
� Subsequent to quarter end in preparation of the financial statements the directors have evaluated the recoverability of the PT IMN loan and has recognised an impairment provision against the loan receivable from PT IMN at 30 June 2012; and
� Cash balance and term deposits at quarter end totalled $125.5 million.
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Impairment Provision
Since early 2011, the Company has been in discussion with PT IMN and its shareholders regarding the conversion of PT IMN to a foreign investment company in which Intrepid would take up an 80% interest under the agreements between the parties. In June 2011, commercial terms were agreed in relation to the company conversion and issue of shares, and Intrepid continued to advance PT IMN’s share of project expenditure in order to facilitate ongoing negotiations around a shareholders’ agreement (‘SHA’) for PT IMN.
The Group continues to take all possible steps to reach out to PT IMN’s shareholders to complete the negotiations with the objective of finalising the SHA. As these negotiations have presently stalled, the Group has recognised an impairment provision against the loan receivable from PT IMN at 30 June 2012.
The Group will continue its efforts to engage with PT IMN and its shareholders with the objective of resolving the outstanding matters which are preventing the implementation of the agreements in place between the parties.
The Group expects to incur expenditure at a much reduced level in relation to the Tujuh Bukit Project in the coming quarters, largely comprising expenditure related to the Oxide and Porphyry studies. Expenditure during the first six months of 2012, on a 100% basis, was $22 million.
MILESTONES TARGETED FOR 2012For the remainder of 2012, the consolidated entity’s primary focus will be to resolve joint venture relationship and legal issues with PT IMN to achieve direct equity in the entity holding the Tujuh Bukit tenements.
When this is achieved Intrepid will resume its exploration and evaluation program, including:
� Using infill drilling to move the oxide resource from the Inferred category to the Indicated category as well as some Measured resource status in preparation for this phase of the Oxide Project;
� Testing the depth extensions of the main Tumpangpitu porphyry area and further increasing this resource;
� Continuing the Porphyry Project Scoping Study, in particular the completion of the testwork program and mine planning activities;
� Compiling the fourth resource estimate for the main Tumpangpitu porphyry;
� Continuing initial drill testing of Salakan prospects where geologic and geophysical studies have identified new targets; and,
� Progressing, together with PT IMN, a multi-faceted plan, that includes close liaison with relevant government officials and local leaders as well as a review of forest land status, all aimed at delivering the option to conduct open pit mining at Tujuh Bukit.
However, no certainty can be provided regarding the timeframe within which the joint venture issues may be resolved, or the resumption of normal exploration activities at the Project.
KEY PERFORMANCE INDICATORSThe financial performance of the consolidated entity is dependent upon the following key performance drivers:
� Positive exploration and feasibility study results;
� Adequate financing and investor support; and
� Commodity prices and foreign exchange rates.
Positive Exploration and Feasibility Study Results
The consolidated entity holds assets, which management believes provide good prospects for exploration success and management intends to advance these assets through progressing feasibility studies. Such success should lead to development opportunities and future production to sustain growth, subject to the necessary permits and licences being obtained. Resource growth has been significant over the last year and this improvement is expected to continue.
Adequate Financing and Investor Support
Historically, the major sources of liquidity have been the capital markets and project financing. With the current cash position, the consolidated entity expects to be able to meet its financial commitments and requirements for the coming year.
Commodity Prices and Foreign Exchange Rates
Commodity prices and exchange rates are largely outside the control of the Company. The longer term outlook for commodity prices may impact the future viability of exploration projects.
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SELECTED FINANCIAL INFORMATION
(Unaudited)
3 months to 31 March 2011
3 months to 30 June 2011
3 months to 30 September 2011
3 months to 31 December 2011
12 months to 31 December 2011
(Audited)
$000 $000 $000 $000 $000
Royalty Income 4,974 - - - 4,974
Other income 1,562 1,572 1,433 1,252 5,819
Total gross revenues 6,536 1,572 1,433 1,252 10,793
Net (loss)/profit after tax (2,975) (12,559) (1,267) (13,188) (29,989)
Net (loss)/profit per share (basic) (0.06) (3) (0.2) (2.5) (5.8)
Term deposits (three to twelve months to maturity 85,265 46,608 130,445 135,861 135,861
Total assets 201,934 196,250 180,050 173,897 173,897
Total liabilities 5,385 4,763 4,852 4,938 4,938
UNAUDITED
3 months to 31 March 2012
$000
3 months to 30 June 2012
$000
Other income 1,203 994
Total gross revenues 1,203 994
Net (loss)/profit after tax (12,618) (19,355)
Net (loss)/profit per share (basic) (2.4) (3.7)
Operating cash outflow (10,949) (10,527)
Cash 14,151 22,198
Term deposits (three to twelve months to maturity) 125,195 103,293
Total assets 165,905 143,772
Total liabilities 5,079 4,706
The decrease in trade and other receivable was chiefly the result of an as a result of taking up an impairment provision in respect of the receivable from PT IMN.
The impact of translating a stronger closing exchange rate at 30 June 2012 of A$/US$1.0191 compared to A$/US$1.0156 as at 31 December 2011 resulted in an increase of $0.6 million over total assets from the position at 31 December 2011.
Total liabilities decreased by $0.2 million to $4.7 million during the six months ended 30 June 2012, principally due to a reduction of tax liabilities of $0.6 million offset by an increase in payables of $0.3 million. Foreign exchange did not have a material impact on total liabilities.
Financial Results
� Group losses after tax of $19.4 million and $32.0 million for the three and six months ended 30 June 2012 compared with a loss of $12.6 million and $15.5 million for the three and six months ended 30 June 2011 (including discontinued operations). The increased loss in the six months to 30 June 2012 (when compared with the six months to 30 June 2011) was predominantly due to: the increased exploration expenditure at Tujuh Bukit; the impairment expense in relation to the loan advanced to PT IMN and nil royalty income; and
� Cash balance and term deposits at 30 June 2012 were $125.5 million.
Financial Position
Total assets decreased by $30.1 million to $143.8 million during the six months ended 30 June 2012. This was primarily attributable to the negative impact of a decrease in cash and cash equivalents and term deposits with greater than three months to maturity (‘cash and term deposits’) of $24.6 million and the negative impact of a decrease in trade and other receivables of $5.4 million.
The reduction in cash and term deposits was made up mainly as follows: cash outflow at Tujuh Bukit of $22.3 million (Intrepid share being $18.0 million and PT IMN share being $4.3 million); cash outflow in the Brisbane corporate office of $4.2 million; offset by cash inflow from interest income of $2.8 million.
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ExplorationIndonesia
Figure 1: Tujuh Bukit Project prospect locations.
Tujuh Bukit (Intrepid 80% economic interest) The aggressive exploration of Tujuh Bukit, in particular the Tumpangpitu copper-gold porphyry system and the Salakan prospect, continued during the reporting period. At the peak of activity a total of 12 diamond drill rigs were active on the property. For the bulk of the period, ten rigs conducted infill drilling of the oxide resource and/or infill/extension holes into the underlying copper-gold porphyry. The remaining two rigs were engaged in the ten hole, first pass drill program at Salakan. At the end of the reporting period, there were eight rigs on site, five conducting extension/infill drilling of the Tumpangpitu porphyry, two completing the Salakan first pass program and one completing additional oxide infill drilling. The locations of prospects drilled during the quarter are shown in Figure 1.
A total of 51 line kilometres of gradient array induced polarity (‘GAIP’), 36.3 line kilometres of diapole diapole induced polarity (‘DDIP’), 304 stream sediment samples and 507 soil samples were collected during the reporting period (51 line kilometres of GAIP, 13.7 line kilometres of DDIP, 304 stream sediment and 507 soil samples during the period 1 January to 31 March 2012).
Gross cash spend in respect of Tujuh Bukit for the June quarter was $11.5 million of which Intrepid’s share was $9.3 million and PT IMN’s share was $2.2 million. This compares with a cash outflow of $10.7 million for the March quarter of which Intrepid’s obligation was $8.7 million and PTIMN’s share was $2 million.
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Tumpangpitu
A total of 109 holes were either completed, initiated or initiated and completed at Tumpangpitu during the reporting period, for a cumulative total of 28,640.60 m. This drilling is part of the ongoing in-fill drilling of the oxide and porphyry resources, as well as the continued exploration for and definition of new porphyry mineralisation at Tumpangpitu. An update of drilling relative to the December 2011 resource outline is given in Figure 2.
The results of GTD-11-248 released to the market on 27 February 2012 are repeated below. GTD-11-248 ended in mineralisation. Details of significant porphyry results and collar co-ordinates for all porphyry drill holes during the reporting period are also provided on page 9.
Figure 2 Tumpangpitu Prospect drillhole collars and surface projection of the Porphyry inferred resource outline.
Table 1: Tujuh Bukit exploration activity by prospect
Prospect
Diamond Drilling
(m)Soil
Samples
Stream Sediment Samples
GAIP (line km)
DDIP (line km)
TumpangpituOxide
Jan - Mar 2012 Apr - Jun 2012
6,502.75 7,955.45
- -
- -
- -
- -
PorphyryJan - Mar 2012 Apr - Jun 2012
6,076.80 3,667.45
- -
- -
- -
- -
Gunung ManisJan - Mar 2012 Apr - Jun 2012
312.60 -
- -
- -
- -
- -
SalakanJan - Mar 2012 Apr - Jun 2012
1,738.25 1,797.80
507 -
304 -
51.0 -
13.7 22.6
GeotechnicalJan - Mar 2012 Apr - Jun 2012
389.50 200.00
- -
- -
- -
- -
Total for six months ended 30 June 2012) 28,640.60 507 304 51.0 36.3
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Table 2: Tumpangpitu significant results. All surveys are with DGPS and are reported in WGS84_50.
Hole ID From (m) To (m) Interval (m) Cu (%) Au (g/t) Ag (g/t) Mo (ppm) As (ppm)
The Salakan prospect is a large area (three kilometres by two kilometres), approximately four kilometres north-northwest of the Tumpangpitu resource. The area has been targeted with extensive soil and stream sampling surveys, which highlighted large anomalous copper-gold-molybdenum areas. These anomalies have been further refined with a number of campaigns of GAIP and DDIP surveys, resulting in a ten hole first pass diamond drilling program. Three diamond drill holes were completed and a further two holes started during the reporting period - (3,536.05 m completed). In addition to the SAN-12-001 results, which were announced on 22 March 2012, a summary of assay results for the period is presented below. A geological interpretation and collar location plan is presented as Figure 3.
Gunung Manis
A single diamond drill hole, GMN-12-017 was completed in January for 312.60 m. No significant assays were returned.
No additional work has been undertaken during the reporting period
Figure 3 Salakan Prospect Map.
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Studies
Development plan – Oxide Project
Intrepid continued to evaluate the gold-silver Oxide Project area with plans to advance it towards production as an open pit, heap leach mine, as soon as possible, subject to satisfactory direct equity negotiation and subsequently, to amongst other things, permitting. In-fill and definition drilling has recently been completed on the oxide resource area, which consists of three mineralised zones generally located above the Tumpangpitu porphyry. This near surface resource has been estimated at 130 Mt at 0.55 g/t gold and 18 g/t silver for 2.4 million ounces of contained gold and 80 million ounces of contained silver, at a cut-off grade of 0.2 g/t gold(see Intrepid news release of 14 December, 2010).
An updated Mineral Resource estimate on the Oxide Project is scheduled to be completed in late August 2012. This is to be followed by an Engineering Study, which is being prepared by AMEC and due during the March 2013 quarter. A PEA was released in April 2011, prepared by Kappes Cassiday and Associates (‘KCA’), of Reno, Nevada, based upon column leach and other metallurgical tests performed at their laboratory. That report estimated annual gold equivalent production from an open pit oxide mine of 143,000 ounces at a cash cost (net of silver credits) of $376 per ounce at a capital cost to first production of $204 million.
KCA are also involved in assisting AMEC with additional metallurgical testing and engineering activities during this current phase of the project’s development.
Table 4: Significant Salakan results. All surveys are with DGPS and are reported in WGS84_50.
Hole ID From To Interval Cu (%) Au (g/t) Ag (g/t) Mo (ppm) As (ppm)
Additional activities supporting the Oxide Project Engineering Study and the Porphyry Project Preliminary Economic Assessment include project area environmental and socio-economic baseline surveys, potential port location assessments, field geotechnical assessments for facility locations, more detailed metallurgical testwork programs and engineering activities.
Assisting AMEC in the preparation of the Oxide Project Engineering Study is Australian Mine Design and Development Pty Ltd (‘AMDAD’) and Golder Associates, who are responsible for the Oxide Project mine engineering and geotechnical assessments respectively. H&S Consulting, who have had an extensive association with the project, will continue to provide independent resource assessment services. PT Hatfield Indonesia have been engaged to progress the project’s environmental, social and health impact assessment (‘ESHIA’) activities which will culminate in the preparation and submission of the project AMDAL, the Indonesian equivalent of an environment impact statement.
The timing of the AMDAL submission will be closely linked with the forestry rezoning and project permitting activities.
Shareholder’s AgreementIntrepid has an 80% economic interest in the Tujuh Bukit IUPs, derived through contractual arrangements with the tenement holder, PT IMN.
Negotiations with PT IMN to finalise the shareholders’ agreement (the commercial terms upon which the conversion and share issue will be effected were agreed between the parties in June 2011) were ongoing but slow in progress during the six months ended 30 June 2012. Intrepid will continue to pursue, notwithstanding recent changes to the PT IMN share register, the execution of a shareholder agreement, which will allow for it to implement its rights under existing agreements to acquire 80% direct interest in PT IMN.
Project Drill Activity
At the period end there were currently eight drill rigs operating at Tujuh Bukit, including one which has just concluded infill drilling on the oxide resource, as well as five undertaking extension drilling on the main Tumpangpitu porphyry resource, and two more at Salakan. Prior to the suspension of exploration activities by PT IMN it was expected that the total number of drills will be reduced to six, when the fleet will be supplemented with the deep drill, which has a capability of drilling up to 2,000 m and will be the largest, helicopter-moveable, drill rig in the world.
Development Plan – Porphyry Project
These latest drilling results from Tumpangpitu will be incorporated into a third updated porphyry Mineral Resource estimate, scheduled for release in September 2012. At the same time, the Company’s technical team is continuing to prepare a PEA of the Tumpangpitu porphyry resource, which is due during the March 2013 quarter. AMEC has been engaged as the primary engineering consultant and will be responsible for the report preparation.
Meanwhile, deep drilling at Tumpangpitu, which has penetrated approximately 1,000 m from surface, has not yet delineated the limit of mineralisation at depth. A deep drill capable of penetrating approximately 2,000 m is currently being built and is expected to start drilling on the Project in October 2012.
On-going drilling at the Salakan prospect in the northern portion of Tujuh Bukit has intercepted copper and gold mineralisation but has not yet delivered the significant results that had been anticipated. This round of drilling, utilizing two of the eight drills currently on site, was expected to conclude in August 2012.
Further follow-up drilling is warranted at porphyry targets around Katak and Candrian once initial drilling is completed at Salakan. (See Intrepid releases of 22 March 2010 and 30 May 2011)
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Community InitiativesInformation meetings and site visits were hosted during the quarter for various non-government organisations, local media, community leaders and youth groups, including representatives of national and regional media organisations.
Employment opportunities were extended to the residents of Pancer village with the commencement of the exploration program at nearby Salakan. The regional infrastructure was upgraded with the construction of three bridges.
Employment opportunities included the hiring of 30 drill crew assistants and extra camp staff. Also, on average, 30 porters from the area are used on a daily basis.
The Project has also commenced the preparation of its inaugural sustainability report for 2011, which is due to be released in the September 2012 quarter.
Forestry PermittingThe Indonesian Forestry Law restricts non-forestry activities within protected forests and prohibits mining using an open pit method in protected forest areas. The Zone A, Zone B and Zone C oxide resources, as well as the Tumpangpitu porphyry resource, fall within a protected forest area. The Company, together with PT IMN, is compiling a multi-faceted plan regarding a review of forest land status under Indonesian legislation as part of the ongoing effort to allow for the option of conducting open pit mining.
Ecuador
Shyri Project (Option Agreement with Cornerstone Resources)Cornerstone Capital Resources Inc. (‘Cornerstone’) is managing exploration activities at the Shyri Project in Ecuador with technical direction from a joint Cornerstone-Intrepid team.
Exploration targets for the reporting period were reviewed in early September 2011 and a decision taken to follow-up the previously reported Phase 1 drilling program A total of 875 soil samples were collected during the January-March 2012 period, and a further 607 during the April-June 2012 period. Analysis of the results of these programs led to the identification of the Satoshyco porphyry prospect.
Additional prospecting work, including rock chip sampling (65 samples), geological and alteration mapping (2,400 ha), and 747 line kilometres of ground magnetics, was carried out during the reporting period. An additional budget of $1.7 million was approved during the reporting period to undertake induced polarity surveys and drilling on Satoshyco, plus limited additional follow-up elsewhere on the Gamma prospect.
Soil Sampling
Mapping (ha)
Ground Magnetics
Rock Chips
1 Jan – 31 March 875 1,200 367 36
1 April – 30 June 607 1,200 380 29
Total 1,482 2,400 747 65
The Option Agreement entered into between Intrepid and Cornerstone provides that Intrepid may earn a 60% interest in the Shyri concessions by spending $6 million over a five-year period, but may withdraw after making the initial $1 million expenditure. This expenditure milestone has been reached and Intrepid continues to fund exploration, with $4.6 million having been spent to date. Intrepid will have the right to earn an additional 20% interest in specific areas of the Shyri property of up to 5,000 ha, each defined as a Project Area. Upon designation of a Project Area, Intrepid would make a $750,000 private placement in Cornerstone. To earn the additional interest, Intrepid would complete a bankable feasibility study or incur expenditures of $20 million, whichever came first, and make a cash payment to Cornerstone of up to $5 million, based on the gold equivalent ounces in the mineral reserve. Each ‘stand-alone’ Project Area requires the same earn-in commitments and there is no limit to the number of Project Areas Intrepid may designate within the property.
Mexico
Taviche Joint Venture(Intrepid interest 30.1%) The Taviche silver-gold project is located in the state of Oaxaca, Mexico. Intrepid is not funding the current exploration activity and is diluting its interest. Aura Silver Resources Inc (‘Aura’) (TSX: AUU) is the project operator. The Company entered into a Settlement Agreement with Aura Silver Resources and Plata Panamericana (‘Plata’), terminating the original Taviche joint venture. Intrepid and Aura continue their joint venture in relation to the East Taviche and Alma Delia concessions (with Intrepid diluting) and Plata maintains all rights to the West Taviche concessions.
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Management’s Discussion & AnalysisPage 14
During the six months ended 30 June 2012, the consolidated entity was an international precious and base metal developer and explorer operating in Indonesia and the Americas. The overall financial performance of the Company was mainly driven by:
� exploration expenditure incurred at Tujuh Bukit (Indonesia) and Shyri (Ecuador);
� interest income from cash and term deposits; and
� foreign exchange effects as a result of the stronger Australian dollar.
Income Statement (Unaudited)
Notes
3 months to 30 June 2012
$000
3 months to 30 June 2011
$000
6 months to 30 June 2012
$000
6 months to 30 June 2011
$000
Revenue from continuing operations
Other revenue 1 994 1,572 2,197 3,134
994 1,572 2,197 3,134
Expenses
Exploration and evaluation expenditure 2 (10,494) (8,639) (20,165) (15,213)
General and administration expenses
- General 3 (1,947) (1,754) (3,874) (3,173)
- Share based payments expense 4 (211) (104) (469) (311)
Unrealised change in fair value of other financial assets 5 118 (645) (104) (133)
Loss before income tax from continuing operations (19,360) (12,640) (31,974) (20,306)
Income tax (expense)/ benefit 8 - 83 - (181)
Loss after tax from continuing operations (19,360) (12,557) (31,974) (20,487)
Net gain /(loss) from discontinued operations (net of tax) 9 5 (2) - 4,953
Profit/(loss) after tax attributable to members of the Company (19,355) (12,559) (31,974) (15,534)
Exchange difference on translation of foreign controlled entities and translation to presentation currency 7 (3,080) 7,232 940 10,531
Total comprehensive income/ (loss) attributable to members of the Company (22,435) (5,327) (31,034) (5,003)
Overall Financial Performance (Unaudited)
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Financial Notes:
1. Other income
Three months to June 2012
Continuing Operations
Other revenue includes interest income earned on bank, term deposits and other income. The interest income for the quarter ended 30 June 2012 was $1 million compared to interest income of $1.6 million for the June 2011 quarter. The decreased interest income for the three months ended 30 June 2012 was due to a lower cash balance held during the quarter and lower interest rates.
Six months to June 2012
Continuing Operations
Other revenue includes interest income earned on bank, term deposits and other income. The interest income for the six months ended 30 June 2012 was $2.2 million compared to interest income of $3.1 million for the six months ended 30 June 2011. The decreased interest income for the six months ended 30 June 2012 was due to a lower cash balance held during the six months and lower interest rates.
2. Exploration and evaluation expenditure
Three months to June 2012
Continuing Operations
Exploration and evaluation expenditure was $10.5 million for the quarter ended 30 June 2012 compared to $8.6 million for the quarter ended 30 June 2011. The increased expenditure levels were primarily due to ongoing operational expenditure associated with the Tujuh Bukit project.
Six months to June 2012
Continuing Operations
Exploration and evaluation expenditure was $20.2 million for the six months ended 30 June 2012 compared to $15.2 million for the six months ended 30 June 2011. The increased expenditure levels were primarily due to ongoing operational expenditure associated with the Tujuh Bukit project (drilling with a number of rigs which peaked at twelve during the six months to June 2012 compared to seven rigs for the same period in the previous year) offset by lower expenditure at Ecuador of $0.3 million.
3. General and administration expenses
Three months to June 2012
Continuing Operations
General and administrative expenses for the three months to 30 June 2012 of $1.9 million was on par with expenditure to 30 June 2011 of $1.8 million.
Six months to June 2012
Continuing Operations
General and administrative expenses for the six months ended 30 June 2012 were $3.9 million compared to the six months ended 30 June 2011 of $3.2 million.
The increase in costs of $0.7 million (22%) for the six months ended 30 June 2012 can be mostly explained by increases in Brisbane Corporate costs due to increased international travel and higher rent ($0.4 million).
4. Share based payments expense
Three months to June 2012
Continuing Operations
The share based payments expense for the quarter ended 30 June 2012 was $0.2 million compared to the expense incurred in the three months ended 30 June 2011 of $0.1 million. The increase in the expense for the June 2012 quarter is due to a increase in the number of options being amortised during the June 2012 quarter when compared to the June 2011 quarter.
The option value is expensed over a twelve, thirty six or forty eight month period. The expense in relation to options granted prior to 1 January 2011 is calculated using the Black-Scholes option valuation. The expense in relation to options granted after 1 January 2011 is calculated using the Monte Carlo simulation method of option valuation.
In addition, share rights value expense is the allocation (over the vesting period) of a Monte Carlo Simulation value to the share rights issued to employees under the Intrepid Mines Senior Executive Share Plan. F
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4. Share based payments expense (cont.)
Six months to June 2012
Continuing Operations
The share based payments expense for the six months ended 30 June 2012 was $0.5 million compared to the expense incurred in the six months ended 30 June 2011 of $0.3 million. The increase in the expense for the six months ended 2012 is due to an increased number of options being amortised over the six months ended 30 June 2012 when compared to the six months ended 30 June 2011.
The option value is expensed over a twelve, thirty six or forty-eight month period. The expense in relation to options granted prior to 1 January 2011 is calculated using the Black-Scholes option valuation. The expense in relation to options granted after 1 January 2011 is calculated using the Monte Carlo simulation method of option valuation.
In addition, share rights value expense is the allocation (over the vesting period) of a Monte Carlo Simulation value to the share rights issued to employees under the Intrepid Mines Senior Executive Share Plan.
5. Unrealised change in fair value of other financial assets
Three months to June 2012
Continuing Operations
The unrealised movement in other financials assets was due to the positive impact of the increase in value of financials assets held by the Group over the quarter ended 30 June 2012. The increase in value of financial assets during the three months ended 30 June 2012 resulted in the recognition of a gain of $0.1 million. This compares to the loss recognised in the June 2011 quarter of $0.6 million.
Six months to June 2012
Continuing Operations
The unrealised movement in other financial assets was due the decrease in value of financials assets held by the Group over the six months ended 30 June 2012. The decline in value of financial assets during the six months ended 30 June 2012 resulted in the recognition of an impairment expense of $0.1 million. This is on par with the loss recognised in the six months ended 30 June 2011 of $0.1 million.
6. Impairment expense
Three months to June 2012
Continuing Operations
The Group has recognised an impairment provision of $9.2 million against the loan receivable from PT IMN at 30 June 2012 as a result of the negotiations in respect of this loan not yet reaching a conclusion which is satisfactory to the Company’s directors and also as a result of post balance date actions where PT IMN suspended all site activities without prior consultation with the Company.
Six months to June 2012
Continuing Operations
The Group has recognised an impairment provision of $9.2 million against the loan receivable from PT IMN at 30 June 2012 as a result of the negotiations in respect of this loan not yet reaching a conclusion which is satisfactory to the Company’s directors and also as a result of post balance date actions where PT IMN suspended all site activities without prior consultation with the Company.
7. Foreign exchange movements
Three months to June 2012
Continuing Operations
With 47% of the Consolidated Entity’s cash and term deposits greater than three months denominated in US dollars, cash is re-valued to the functional currency of the individual subsidiaries maintaining the funds. The funds are generally maintained by the Company and Emperor Mines Pty Ltd, whose functional currency is Australian dollars.
With the fall of the Australian dollar against the United States dollar, an unrealised foreign exchange gain of $1.3 million has been recognised during the three months to 30 June 2012. The exchange rate for the fell 2% from A$/US$ 1.0402 at the end of the March 2012 quarter to A$/US$ 1.0191 at the end of the June 2012 quarter. By comparison the exchange rose by 4% from A$/US$ 1.0334 at the end of March 2011 to A$/US$ 1.0739 at the end of June 2011 resulting in a loss of $3.1 million.
This exchange gain of $1.3 million for the June 2012 quarter is offset by the exchange loss of $3.1 million which arises due to translation of the Consolidated Entity’s results from functional to presentation currency.
Financial Notes: (continued)
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7. Foreign exchange movements (cont.)
Six months to June 2012
Continuing Operations
With 47% of the Consolidated Entity’s cash and term deposits greater than three months denominated in US dollars, cash is re-valued to the functional currency of the individual subsidiaries maintaining the funds. The funds are generally maintained by the Company and Emperor Mines Pty Ltd, whose functional currency is Australian dollars.
With the rise of the Australian dollar against the United States dollar during the six months to 30 June 2012, an unrealised foreign exchange loss of $0.4 million has been recognised. The exchange rate of A$/US$ 1.0191 at 30 June 2012 compares with an opening rate of A$/US$ 1.0156 resulting in a $0.4 million exchange loss. This compares with the exchange loss of $4.6 million in 2011 year where the exchange rate rose 5.6% from A$/US$ 1.0151 on 31 December 2010 to A$/US$ 1.0739 at 30 June 2011.
This exchange loss of $0.4 for the six months to June 2012 is offset by the exchange gain of $0.9 million which arises on translation of the Consolidated Entity’s results from functional to presentation currency.
Financial Notes: (continued)
8. Income tax expense
Three months to June 2012
Continuing Operations
Income tax benefit for the quarter ended 30 June 2012 was nil compared with $0.1 million for the quarter ended 30 June 2011.
Six months to June 2012
Continuing Operations
The income tax expense for the six months ended 30 June 2012 was nil compared to $0.2 million for the six months ended 30 June 2011. The reduction was the result of the Company generating tax losses during the six months ended 30 June 2012.
9. Discontinued operations The sale of Paulsens (to Northern Star) was completed on 30 July 2010 .This division was reported in the financial statements for the year ended 31 December 2011 as a discontinued operation.
Financial information relating to the discontinued operation is set out below.
Three months ended 30 June Six months ended 30 June
Notes2012 $000
2011 $000
2012 $000
2011 $000
Results from discontinued operations
Revenue
Royalty income 10 - - 4,974
- - - 4,974
Expenses
Cost of gold and silver
Adjustment to gain on disposal 5 (2) - (21)
Profit after tax from discontinued operations 5 (2) - 4,953
Three months ended 30 June Six months ended 30 June2012 $000
2011 $000
2012 $000
2011 $000
Cash flows attributable to the discontinued operations
Cash flows from operating activities
Payment to/ (refunds from) suppliers - 176 - 9
Royalty Income - - - 5,222
Net cash (outflow)/inflow from operating activities - 176 - 5,231
Net Cash (decrease)/increase from discontinued operations - 176 5,231
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Financial Notes: (continued)
11. Operating activities
Three months to June 2012
Continuing Operations
The cash outflow from operating activities for the three months ended 30 June 2012 was $10.5 million compared to a cash outflow for three months to June 2011 of $9.6 million. The cash outflow in respect of the June 2012 quarter was predominantly due to the cash spend at Tujuh Bukit site of approximately $9.3 million. By comparison, in the three months to 30 June 2011, Tujuh Bukit accounted for $6.3 million.
Discontinued Operations
The cash inflow from operating activities for the three months ended 30 June 2012 was nil. In comparison, cash inflow for the three months ended 30 June 2011 was $0.2 million.
Six months to June 2012
Continuing Operations
The cash outflow from operating activities for the six months ended 30 June 2012 was $21.5 million compared to a cash outflow for six months to June 2011 of $17.7 million. Tujuh Bukit expenditure accounts for $18 million of the cash outflow and Ecuador $1 million outflow from operating activities for the six months ended 30 June 2012. By comparison, in the six months to 30 June 2011, Tujuh Bukit accounted for $14.4 million and Ecuador $1.7 million.
Discontinued Operations
The cash inflow from operating activities was nil for the six months ended 30 June 2012. In comparison, cash inflow for the six months ended 30 June 2011 was $5.2 million. Previous year cash inflow from operating activities was the result of the receipt of royalties pursuant to the Paulsens sale agreement.
Net increase/(decrease) in cash and cash equivalents 7,185 28,741 6,111 59,002
10. Royalty Income
Three months to June 2012
Discontinued operations
Royalty revenue for the three months ended 30 June 2012 and 30 June 2011 was nil.
Six months to June 2012
Discontinued Operations
Royalty revenue received for the six months ended 30 June 2012 was nil compared with $5.0 million for the six months ended 30 June 2011.
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12. Investing activities
Three months to June 2012
Continuing Operations
The cash inflow from investing activities for the three months ended 30 June 2012 was $17.2 million compared to a cash inflow for three months to 30 June 2011 of $38 million. The cash inflow in respect of each of the June 2012 and June 2011 quarters was the result of conversion term deposits into cash.
Term deposits with greater than three months to maturity does not meet the definition cash and cash equivalents under the Australian Accounting Standards. Accordingly term deposits are classified as investments until such time their maturity falls within three months of the investment date. When term deposits convert from being investments to cash and cash equivalents, the Consolidated entity must recognise a cash inflow from investment activities. During the quarter ended 30 June 2012 the proceeds from the conversion of term deposits to cash amounted to $19.5 million.
Discontinued Operations
The cash inflow from investing activities for the three months ended 30 June 2012 was nil. In comparison, cash inflow for the three months ended 30 June 2011 was $1.8 million, which was the receipt of proceeds pursuant to the Casposo sales agreement with Troy Resources NL.
Six months to June 2012
Continuing Operations
The cash inflow from investing activities for the six months ended 30 June 2012 was $26.9 million compared to a cash inflow for six months to 30 June 2011 of $71 million.
Term deposits with greater than three months to maturity do not meet the definition of cash and cash equivalents under the Australian Accounting Standards. Accordingly, term deposits are classified as investments where their maturity is greater than three months of the investment date. When term deposits convert from being investments to cash and cash equivalents, the Consolidated entity must recognise a cash inflow from investment activities. During the six months ended 30 June 2012 the proceeds from the conversion of term deposits to cash amounted to $31.2 million.
Discontinued Operations
The cash inflow from investing activities for the six months ended 30 June 2012 was nil. In comparison, cash inflow for the six months ended 30 June 2011 was $1.8 million which was the receipt of proceeds pursuant to the Casposo sales agreement with Troy Resources NL.
13. Financing activities
Three months to June 2012
Continuing Operations
The inflow for the three months ended 30 June 2012 was $0.5 million which related to net proceeds from the issue of new shares on exercise of options and issue shares to directors. In comparison proceeds from the issue of shares following the exercise of options and issue of shares to directors during the June 2011 quarter was $0.2 million. The main reason for the increase was the higher number of options exercised during the June 2012 quarter (1,368,628) when compared to the June 2011 quarter (310,000).
Six months to June 2012
Continuing Operations
The inflow for the six months ended 30 June 2012 was $0.7 million which related to proceeds from issue of new shares as a result of the exercise of share options and issue of shares to directors of $0.7 million. In comparison, the proceeds from issue of shares in the six months to June 2011 were $1.1 million. The reduction was the result of a greater number of options exercised in the six months to June 2011 (3,917,725) when compared with the six months to June 2012 (1,931,128).
Financial Notes: (continued)
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Liquidity and Capital Resources 30 June 2012 31 December 2011
$000 $000
Assets
Cash and cash equivalents A 22,198 14,240
Bank term deposits greater than three months to maturity
A103,293
135,861
Other current assets A 1,460 1,962
Non-current assets 16,821 21,834
Total Assets 143,772 173,897
Liabilities
Current liabilities B 2,440 2,690
Non-current liabilities 2,266 2,248
Total Liabilities 4,706 4,938
Working Capital (excludes assets and liabilities classified as held for sale)
A - B 124,511
149,373
BALANCE SHEET (Unaudited)
Cash, cash equivalents and bank term deposits greater than three months to maturity
At 30 June 2012, cash equivalents and term deposits greater than three months to maturity that represented $125.5 million, were held in the consolidated entity’s operating bank accounts ($151.1 million at 31 December 2011).
The cash position has been invested in term deposits of varying maturity and ensuring an approximate 50/50 split between Australian dollar and US dollar holdings to minimise the impact of foreign exchange fluctuations. The Company will continue to monitor cash resources against expenditure forecasts associated with implementation of the Company’s growth strategies and development plans to assess financing requirements.
Working capital position
As at 30 June 2012, the consolidated entity’s current assets exceeded its current liabilities by $124.5 million (current assets exceeded current liabilities by $149.4 million as at 31 December 2011).
Trade and other receivables
At 30 June 2012 current receivables were $1.5 million compared to $2.0 million at 31 December 2011. The decrease was the result of a lower interest receivable at 30 June 2012 when compared with 31 December 2011.
Non-current receivables decreased by $4.9 million to nil (December 2011: $ 4.9 million) as a result of the impairment of the Loan to PT IMN. Whilst the gross amount of the loan increased to $9.2 million as a result of advancing funds to meet Tujuh Bukit expenditure requirements to PT IMN in accordance with the Alliance Agreement entered into between the parties, an equal provision of $9.2 million has been raised to reflect the uncertain nature of the recoverability of this loan.
Mining properties
Mine properties consists of acquired exploration assets and mineral properties currently under development or in production, together with related mine development costs and capital assets.
Mining properties have increased immaterially to $16.5 million during the six months to 30 June 2012 as a result of foreign exchange movements.
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The mining property carried by the consolidated entity of $16.5 million represents current book value allocated to its Tujuh Bukit exploration property in Indonesia.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period. The amounts are generally unsecured. The liability of $2.1 million at 30 June 2012 is on par with the 31 December 2011 balance.
Provisions
Provisions reflect employee benefits.
The 30 June 2012 current provision balance was $0.4 million which was $0.1 million higher than the provision balance of $0.3 million as at 31 December 2011. The increase is due to an increase in the annual leave provision as a result of salary increases effective in January 2012.
The non-current leave balance increased immaterially to $0.1 million at 30 June 2012. This was the result of the passage of time increasing the consolidated entity’s liability to pay long service leave.
Deferred tax liabilities
A deferred tax liability at 30 June 2012 of $2.2 million ($2.2 million at 31 December 2011) reflects the recognition of a deferred tax liability on the acquisition of the Tujuh Bukit exploration asset.
Outstanding Share DataAs at 30 June 2012, issued securities consisted of:
� issued capital 525,885,308 ordinary shares (as at 26 July 2012 525,920,331);
� 4,710,972 unlisted options to acquire ordinary shares(as at 26 July 2012: 4,710,972) and
� 4,014,632 unlisted share rights to ordinary shares (as at 26 July 2012: 4,014,632)
Related Party TransactionsRefer to Note 19 of the Interim Financial Report for the six months ended 30 June 2012.
Commitments and ContingenciesCommitments and contingencies are detailed in Note 20 of the Interim Financial Report for the six months ended 30 June 2012.
Exploration areas of interest retention commitments
In order to maintain rights of tenure to mining tenements, the consolidated entity is required to outlay for tenement rentals and to meet the minimum exploration expenditure requirements.
Critical Accounting EstimatesEstimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Impairment of mining properties
Determining the recoverability of mining properties capitalised in accordance with the consolidated entity’s accounting policy (refer Note 2(k) of the Annual Financial Report (‘AFR’) requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective mining property will
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be achieved. Critical to this assessment are estimates and assumptions as to economically recoverable ore reserves, which represent the estimated quantity of product in an area of interest that can be expected to be profitably extracted, processed and sold under current and foreseeable economic conditions. Changes in these estimates and assumptions as new information about the presence or recoverability of an ore reserve becomes available may impact the assessment of the recoverable amount of mining properties. If, after having capitalised the expenditure under accounting policy 2(k) of the AFR, a judgment is made that recovery of the expenditure is unlikely, an impairment loss is recorded in the income statement in accordance with accounting policy 2(k) of the AFR. The carrying amounts of mining properties are set out in Note 16 of the AFR.
Income taxes
The consolidated entity is subject to income taxes in Australia and foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Deferred tax assets comprising temporary differences and tax losses have not been brought to account as the consolidated entity’s ability to recover these amounts is uncertain.
Changes in Accounting PoliciesThere have been no changes in accounting policies during the three months ended 30 June 2012. Refer to Note 2 of the 31 December 2011 AFR for a summary of the significant accounting policies.
Significant Developments / Subsequent EventsOn 20 July 2012 the Company reported that its Indonesian joint venture partner, PT Indo Multi Niaga (“PT IMN”), without reference to the Company, had suspended operations at the Tujuh Bukit Project with immediate effect. PT IMN requested several members of senior management, including all expatriate employees seconded to PT IMN from Intrepid, to leave site and this occurred.
This interruption will impact the Company’s timetable for delivery of an updated porphyry resource estimate and further, may impact work on the updated oxide resources.
Intrepid is attempting to establish discussions with both the new and original PT IMN shareholders (see news release of 28 June 2012) regarding arrangements which would allow the resumption of drilling activity at the earliest opportunity.
Intrepid’s immediate objectives are the completion of technical studies which will demonstrate the financial viability to develop a world class mine for the benefit of stakeholders – community and local, provincial and central government, alike.
The Company is pursuing its rights to legal remedies and commercial alternatives in response to these recent events.
The Company’s wholly-owned subsidiary, Emperor Mines Pty Limited (‘Emperor’), is preparing a dispute notice pursuant to the Tujuh Bukit Project Alliance Agreement and the Tujuh Bukit Joint Venture Shareholders’ Agreement (‘Agreements’), in relation to breaches of the Agreements by PT IMN and the original shareholders. The dispute resolution procedures in the Agreements provide for a 30- day negotiation period in which the parties are to try and resolve the dispute amicably. If the dispute is not resolved in this 30-day period, Emperor will be entitled to refer the dispute to arbitration under the rules of the Singapore International Arbitration Centre.
The outcome of these actions, including the Company’s attempt to establish discussions with both the new and original PT IMN shareholders, cannot be determined with certainty at the date of this financial report. Accordingly, a material uncertainty must be assumed to exist in relation to the Company’s ability to recover the carrying value of its mining property assets relating to Tujuh Bukit which total $16.5 million.
No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in a future financial period.F
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Risks and UncertaintiesThe Company employs an overall risk management program that seeks to minimise potential adverse effects on the Company’s performance. The program is carried out under policies approved by the Company’s Audit and Risk Committee and Board of Directors. Some of the key risks managed include, but are not limited to, the following:
Joint venture risksThe Company is a party to a number of joint venture agreements with PT IMN with respect to the Tujuh Bukit Project and other joint venture partners with respect to its other mineral properties, which govern the future exploration and development of such properties. The Company is therefore subject to risks normally associated with joint ventures, including its potential inability to exert control over strategic decisions and cash flows, disagreements with partners on how to develop and operate projects, the inability or failure of partners to meet their obligations under such joint venture arrangements, inability to enforce the joint venture agreements and disagreements or litigation with joint venture partners regarding joint venture matters, each of which could have an adverse effect on the Company’s interests and prospects.
Intrepid has an 80% economic interest in the Tujuh Bukit IUPs, derived through contractual arrangements with the tenement holder, PT IMN. Under the terms of those contractual arrangements PT IMN will be converted to a foreign investment company, in which Intrepid will acquire an 80% direct equity stake. The commercial terms upon which the conversion to a direct equity interest and the consequent share issue will be effected were agreed between the parties in June 2011. Despite Intrepid’s best efforts, negotiations to document those commercial terms have been protracted. Intrepid is diligently working towards achieving a satisfactory conclusion regarding the equity conversion.
Development risksThe Indonesian Forestry Law currently restricts non-forestry activities within areas classified as “protection forest”, including a prohibition against open pit mining. The Zone A, Zone B and Zone C gold-silver oxide resources and the Tumpangpitu porphyry copper-gold resources all fall within a “protection forest” area. The Company, together with its Indonesian alliance partner, PT IMN, is compiling a multi-faceted plan, which includes close liaison with relevant government officials and local leaders, to allow for a potential review of forest land status under Indonesian legislation, as part of the ongoing effort to enable the potential for open pit mining to be conducted. However, because there is no clear administrative process for the Company to follow in applying for the reclassification or rezoning land usage at the Tujuh Bukit Project, it is unclear as to how long any such process could take.
Until the relevant areas within the Tujuh Bukit Project are converted from “protection forest” to “production forest”, in which open pit mining is currently permitted to be conducted, or alternatively rezoned as non-forestry land, the Company may not be able to economically mine Zone A, Zone B and Zone C or the Tumpangpitu porphyry copper-gold resources using open pit methods. There is no guarantee that the relevant areas within the Tujuh Bukit Project will ever be converted to “production forest” or be rezoned to permit open pit mining and consequently, the Company may never be able to economically mine Zone A, Zone B and Zone C or the Tumpangpitu porphyry copper-gold resources.
Tenement riskUntil the introduction of the new Indonesian Mining Law of 2009 (the ‘Mining Law’) and its subsequent implementing regulations, foreign ownership was not permitted in entities holding Indonesian mining tenements (kuasa pertambangan, or ‘KPs’). Consequently, the Company does not have any direct rights to the Tujuh Bukit Project tenements and the Tujuh Bukit IUPs (the form of mining licence which replaced the KPs under the new Mining Law) are held by PT IMN. Instead, the Company, through a number of contractual arrangements with PT IMN, has acquired an 80% economic interest in the Tujuh Bukit Project. Since the Company has no direct rights in the IUPs, it is reliant on the observance by PT IMN, and its shareholders of the contractual arrangements in place and of legislation and permitting requirement related to the tenements. PT IMN is not currently fully observing the terms of the agreements in place with the Company. Pursuant to the new Mining Law, the Company is currently in the process of restructuring its joint venture arrangements with PT IMN such that PT IMN will be converted into a foreign capital investment company in which the Company, through a subsidiary, will ultimately hold a direct 80% interest and therefore a direct interest in the IUPs comprising the Tujuh Bukit Project. This restructuring process will require certain governmental approvals, which may include recommendations from the Bupati of Banyuwangi, BKPM (Indonesian investment Co-ordinating Board) and ESDM (Ministry of Energy and Mineral Resources) and there is no certainty that any such approvals will be obtained.
In March 2012, the Indonesian Government published government regulation 24 of 2012 which, inter alia, provides that the ownership participation of Indonesian entities or nationals in entities holding mining licences shall not be less than 51% after ten years of production. The terms of foreign-to-local divestment are not clearly stipulated and these terms may impact the economic profile of the Tujuh Bukit Project.
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Political riskAt the date of this report the primary operations of the Company are located in Indonesia. Indonesia is subject to a higher degree of political risk than that experienced in Australia or Canada. The Company is therefore subject to political, economic, social and other uncertainties, including the risk of civil rebellion, expropriation, nationalization, land ownership disputes, renegotiation or termination of existing contracts, mining licences and permits or other agreements, changes in laws or taxation policies, currency exchange restrictions, changing political conditions and international monetary fluctuations. The effects of these factors cannot be accurately predicted and any combination of one or other of the above may impede the operation or development of a project and even render it uneconomic.
The Bupati of Banyuwangi, the regency within which the Tujuh Bukit Project is situated, has requested consultations with PT IMN to consider a possible future divestment of a minority stake in Tujuh Bukit for the benefit of the local community. At the date of this report, no agreements have been made by the Company in respect of any such potential divestment.
Exploration, development and operating risksUnusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explosions, tailings impoundment failures, cave-ins, landslides and the inability to obtain adequate machinery, equipment or labour are some of the risks involved in the conduct of exploration programs.
The Company has relied on and may continue to rely upon consultants and others for exploration and development expertise. Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the deposit and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.
The Company believes that it, or its joint venture partners, hold all the necessary licences and permits under applicable laws and regulations and believes it is presently complying in all material respects with the terms thereof. However, there is no certainty that the Company will be able to obtain or maintain all necessary licences and permits that may be required to further explore and develop its properties.
The economics of developing mineral properties are affected by many factors including the cost of operations, variations in the grade of material mined and metals recovered, fluctuations in metal markets, costs of processing equipment, continuing access to refining facilities on acceptable terms and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and
environmental protection. There is no assurance that the Company’s mineral exploration, development and acquisition activities will be successful.
Resource estimatesThe Company’s reported mineral resources are only estimates. No assurance can be given that the estimated mineral resources will be converted to mineral reserves and be recovered.
Mineral resource estimates are based on limited sampling, and, consequently, are uncertain because the samples may not be representative. Mineral reserve and resource estimates may require revision (either up or down) based on actual production experience. Market fluctuations in the price of metals, as well as increased production costs or reduced recovery rates, may render certain mineral reserves and resources uneconomic and may ultimately result in a restatement of reserves and/or resources. Moreover, short-term operating factors relating to the mineral reserves and resources, such as the need for sequential development of deposits and the processing of new or different material grades, may adversely affect the Company’s profitability in any particular accounting period. No mineral reserves have been estimated or reported for the Tujuh Bukit Project.
Credit riskThe Company has significant concentrations of credit risk as noted in Note 3 of the AFR of the consolidated entity. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Company has policies that limit the amount of credit exposure to any one financial institution.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures on outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. In relation to other credit risk areas, if there is no independent rating, management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
Foreign exchange ratesStock exchange listings on the ASX and TSX and plans to develop projects in locations where the effective currency is U.S. dollars, has resulted in the Company adopting U.S. dollars as its presentation currency. Consequently, fluctuations in the U.S. dollar against the functional currencies of the individual subsidiaries could result in unanticipated changes in the Company’s financial results.
Failure to retain key employeesThe Company is dependent on a relatively small number of key employees, the loss of any of whom could have an adverse effect on the Company. The Company has taken key personnel insurance on the Chief Executive Officer and other key executives.
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Capital fundingWhile adequately funded for its near-term exploration and feasibility activities, the Company will require additional financing at the development stage. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. There can be no assurances that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company. If additional financing is raised by the issuance of shares from the treasury of the Company, and security holders may realize additional dilution of their investment in the Corporation.
Safety risks and other hazardsThe mining industry is exposed by nature to safety risks and other hazards. To minimize these risks the Company provides training, testing and awareness programs to its employees, to continuously improve work practices and the working environment.
Environmental regulation and liabilityThe Company’s activities are subject to laws and regulations controlling not only the mining of and exploration of mineral properties, but also the possible effects of such activities upon the environment. Environmental laws may change and make the mining and processing of ore uneconomic, or result in significant environmental or reclamation costs. Environmental legislation provides for restrictions and prohibitions on spills, releases, or emissions of various substances produced in association with certain mining industry operations. A breach of such legislation may result in the imposition of fines and penalties or the suspension or closure of mining operations. In addition, certain types of operations require the submission of environmental impact statements, bonding and approval thereof by government authorities.
Environmental legislation is evolving in a manner that may mean stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Permits from a variety of regulatory authorities are required for many aspects of mine development, operation and reclamation.
Future legislation and regulations could cause additional expense, capital expenditures, restrictions, liabilities and delays in the development of the Company’s properties, the extent of which cannot be predicted. In the context of environmental permits, including the approval of reclamation plans, the Company must comply with standards and laws and regulations which may entail costs and delays depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. The Company does not maintain environmental liability insurance.
The Company operates to ensure required environmental standards are met in all respects and has a strong commitment to ensure that environmental standards are fully integrated into the construction, commissioning and operation of the Company’s mining projects.
CompetitionThere is competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. The Company competes with other mining companies, many of which have greater financial resources than the Company, for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel.
Uninsurable risksExploration, development and production operations on mineral properties involve numerous risks, including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other environmental occurrences, and political and social instability. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks because of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate future profitability and result in increasing costs and a decline in the value of the securities of the Company. The Company does not maintain insurance against political or environmental risks.
Community risksIn addition to mineral tenure and environmental permitting, the Company engages local communities where it explores. Communities may respond differently to exploration and mineral development activities from region to region. Increasingly the exploration sector is required to engage in social contracts with local residents, communities and surface land owners. Factors affecting social acceptance of exploration are variable and can be unpredictable over time. Local opinions can change rapidly about exploration activities and opinions may not be related to the activity of the Company although its ability to enter an area and conduct its programs may be affected by shifts in perception.
Due to prevailing socio-economic conditions in the area in which the Tujuh Bukit Project is located, there is potential for small-scale illegal mining in areas located approximately four kilometres east, and six kilometres northwest, of the main project area. Illegal mining may result in injury, environmental incident and/or reputational impact. The Company is working with the local community to educate people on the risks and dangers associated with illegal mining as well as maintaining a stable local workforce to discourage such activities. F
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Disclosure Controls and ProceduresThe Company evaluated its disclosure controls and procedures as defined under National Instrument 52-109 for the quarter ended 31 December 2011. This evaluation was performed by the Chief Executive Officer and the Chief Financial Officer with the assistance of other Company employees to the extent necessary or appropriate. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.
Qualified PersonThe information in this report that relates to exploration results at Tujuh Bukit and Shyri Project is based on information compiled by or under the supervision of Gary Snow, who is a fellow of The Australasian Institute of Mining and Metallurgy as well as the Australian Institute of Geoscientists. Gary Snow is employed by Intrepid Mines Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” and is a Qualified Person as defined in the Canadian National Instrument 43-101 (standards of Disclosure for Mineral Projects). Gary Snow consents to the inclusion in this MD&A of the matters based on his information in the form and context in which it appears.
The information in this report that relates to mineral resources at Tujuh Bukit is based on information compiled by or under the supervision of Mr Robert Spiers, who is an independent consultant to Intrepid Mines Limited. Mr Spiers is a Member of the Australian Institute of Geoscientists and a full time employee of H&S Consultants. Mr Spiers has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as an Independent Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” and an Independent Qualified Person as defined in the Canadian National Instrument 43-101 (standards of Disclosure for Mineral Projects). Mr Spiers consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Mr Spiers has undertaken independent verification sampling and assaying of drill core with a close agreement of results with those previously reported.
Quality ControlTujuh BukitIntrepid exercises a strict chain of sample custody in its drilling program at Tujuh Bukit (Indonesia). PT IMN personnel remove the core from the drill rig and deliver it to a project geologist who logs the core and marks the core into two metre sample intervals. Intrepid and Joint Venture personnel supervise the immediate splitting, sawing and bagging of samples, and packaging of groups of samples for dispatch to the laboratory. The remainder of the split core remains on site.
Samples are securely packaged, batched, and then transported under supervision to Intertek’s laboratory facility in Jakarta. At the laboratory, the samples are prepared by crushing and pulverizing and a 30 gram charge is assayed for gold by conventional fire assay and/or atomic absorption methods. Multi-element ICP analysis is carried out using a multi-acid digestion process. All samples that contain silver and/or copper, lead, and zinc values that exceed the upper detection limits for ICP are re-analysed by conventional atomic absorption methods to determine the absolute values of these metals.
ShyriThe ACME preparation facility in Cuenca was audited by Cornerstone prior to the start of the drilling program and ACME is an ISO 9001:2008 qualified assayer that performs and makes available internal assaying controls. Duplicates, certified blanks and standards are systematically used as part of Cornerstone’s QA/QC program. Rejects, a 100 gram pulp for each core sample and the remaining half-core are stored in Cuenca for future use and controls.
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Internal Controls and ProceduresManagement, including the Chief Executive Officer and Chief Financial Officer, have assessed on balance date:
1. The design and evaluated the effectiveness of the Company’s disclosure controls and procedures; and
2. The design of the Company’s internal control over financial reporting as of 30 June 2012, pursuant to the certification requirements of National Instrument 52-109. Management has satisfied itself that no material misstatements exist in the Company’s financial reporting at 30 June 2012.
3. During the ongoing process of review and evaluation it was determined that certain weakness existed within the financial processes of PT IMN. The Company has been working with PT IMN to implement process controls. To date, these have included:
a. Appointment of three new site accountants;
b. Opening of a site bank account to manage cash calls more efficiently;
c. Increased support from corporate office; and
d. Major contract payments managed through the Company’s corporate office in Brisbane;
Management does not believe this process weakness has led to a misstatement of the financial results.
Forward-Looking StatementsThis release contains certain forward-looking statements relating to, but not limited to, Intrepid’s expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as ‘anticipate’, ‘believe’, ‘expect’, ‘goal’, ‘plan’, ‘intend’, ‘estimate’, ‘may’ and ‘will’ or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future outcomes, or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects, and timing of commencement of operations and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied.
Shareholders and potential investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Intrepid undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.
Statements relating to gold reserve and resource estimates are expressions of judgment, based on knowledge and experience and may require revision based on actual production experience. Such estimates are necessarily imprecise and depend to some extent on statistical inferences and other assumptions, such as gold prices, cut-off grades and operating costs, which may prove to be inaccurate. Information provided relating to projected costs, capital expenditure, production profiles and timelines are expressions of judgment only and no assurances can be given that actual costs, production profiles or timelines will not differ materially from the estimates contained in this announcement.
More Information About Intrepid Mines LimitedIn addition to the Company’s website, www.intrepidmines.com, readers are encouraged to view the Company’s Annual Information Form and other public regulatory filings. These can be found at www.sedar.com. Public filings may also be accessed through the Australian Securities Exchange website, www.asx.com.au
