Pasinex Announces Year-End 2019 Financial Results
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Pasinex Announces Year-End 2019 Financial Results
TORONTO, ON – June 10, 2020 – Pasinex Resources Limited (CSE: PSE) (FSE: PNX) (The
“Company” or “Pasinex”) today reports the Company’s financial and operating results for the three
months and year ended December 31, 2019.
Steve Williams, President and CEO of Pasinex, commented, “Pasinex had a difficult year in 2019
due to problems associated with the failure to receive any significant payment against the loan
receivable that our Turkish joint venture business, Horzum AS, has with our Turkish joint venture
partners, Akmetal. The underlying operating business in Turkey showed a positive net operating
income but the recording of an impairment on the loan receivable from Akmetal resulted in a net
loss for the joint venture. Pasinex is not happy with these results. We continue to actively pursue
the resolution of this problem with our partners in Turkey. We expect to see them start to return
monies owed and to put Horzum AS and Pasinex back into a positive cash position.”
Highlights - 2019 Year End
(1) Refer to Note 1
Year Ended December 31
2019 2018
Financial:
Equity gain (loss) from Horzum AS 672,139$ (4,098,639) $
Adjusted equity gain from Horzum AS (1)
3,965,688$ 5,489,452$
Dividend received from investment in Horzum AS 672,139$ 1,523,538$
Consolidated net income (loss) (1,032,850) $ (8,429,326) $
Adjusted consolidated net income (1)
2,260,699$ 2,845,365$
Basic net income (loss) per share (0.01) $ (0.06) $
Diluted net income (loss) per share (0.01) $ (0.06) $
Cash used in operating activities 292,330$ 1,006,264$
Weighted average shares outstanding 144,415,192 142,823,411
Horzum AS operational data (100% basis):
Zinc product mined (wet) tonnes 17,812 45,757
Zinc product sold (wet) tonnes 27,239 46,154
Zinc product sold grade 32% 33%
Gross margin (1)
34% 57%
CAD cost per tonne mined (1)
436$ 229$
USD cash cost per pound of zinc mined (1)
0.42$ 0.25$
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Financial and Operational
For the year ended December 31, 2019 Pasinex incurred a net loss of approximately $1.03 million,
compared with a net loss of approximately $8.4 million for 2018. The substantial decrease in net
loss in 2019 is largely due to the significant impairment of Akmetal Madencilik Sanayi ve Ticaret
A.S. (“Akmetal”) debt to Horzum Maden Arama ve Isletme Anonim Sirketi (“Horzum AS”), which
was recorded in 2018, resulting in an equity loss of $4.1 million, versus an equity gain of
approximately $0.67 million recorded in 2019. The equity gain in 2019 is equal to total of the cash
dividends paid in 2019 by Horzum AS to Pasinex Arama ve Madencilik Anonim Sirketi (“Pasinex
Arama”). In addition, the Company recorded an impairment to the Golcuk property in 2018. No
similar impairment was recorded in 2019. Finally, exploration and general & administration costs
are significantly lower in 2019 versus 2018.
The adjusted consolidated net income and adjusted equity gain (see non-GAAP measures) were
$2.3 million and $4.0 million, respectively, for 2019 compared with $2.8 million and $5.5 million,
respectively, in the same period in 2018. These non-GAAP measures reflect what the results of
the Company would be without the recording of the impairment charges in 2018 and 2019 (see
Review of Annual Consolidated Financial Statements and Loan receivable – Akmetal).
The operating income in Horzum AS decreased from $14.8 million in 2018 to $4.6 million in 2019.
This decrease was primarily due to lower sales in 2019.The gross margin (see non-GAAP
measures) for 2019 continued to be a healthy 34% although this represents a 23% reduction from
2018. The reduction is largely due to incurring similar fixed costs in both years, which were spread
over fewer tonnes produced and sold in 2019 compared with 2018.
During 2019, the Company received a net of $365,000 from related parties of the Company.
Subsequent to the end of the year the Company received an additional $355,500 from those
related parties.
Summary of Pasinex Situation in Turkey
Akmetal is a private Turkish company, which is controlled by the Kurmel family. The Kurmel family
has a conglomerate of companies (the “Kurmel Group”) that includes Akmetal, a carpet company,
an agricultural business, real estate assets and other minor businesses.
Several of the companies in the Kurmel Group have gone through financial distress during the
last three years. This has led to the growth of a large payable amount owed to Horzum AS by
Akmetal and one of its subsidiaries.
In November 2018, one division of the Kurmel Group together with certain family members of the
Kurmel family, entered into a Turkish court-controlled process called Concordat. The purpose of
this process is to allow a company with liquidity problems, but with assets greater than its debt,
time to sell some or all of its assets in order to reorganize and pay its debts. This process was
completed on February 21, 2020 and the division and those family members came out of the
Concordat process. Concurrent with the ending of this process the Kurmel Group arranged for a
loan with a Turkish bank.
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In May 2019, the Company entered into a Debt Agreement with Akmetal to resolve the
collectability of the trade receivable owing to Horzum AS. The terms of the Debt Agreement
include a minimum amount of repayments on a monthly basis plus the chance for additional
repayments from proceeds Akmetal would receive from the sale of its other assets (see Loan
receivable – Akmetal). Akmetal has not honoured the terms of the Debt Agreement and has not
been able to complete the sale of its other assets as it had planned. As a result, the financial
position of Horzum AS and the Company has weakened further.
The value of the loan receivable from Akmetal and one of its subsidiaries, to Horzum AS as at
December 31, 2019, is $35.1 million. The portion of the receivable owed by the subsidiary is
guaranteed by its parent, Akmetal. As at December 31, 2019, Horzum AS owes Pasinex Arama
$2.4 million that arose upon the declaration of a dividend in 2018.
Management has been in constant contact with senior executives of the Kurmel Group during and
subsequent to 2019, while the Kurmel Group have been working through the Concordat process.
Pasinex is expecting to receive the payment of the remaining dividend and other amounts owing
to Pasinex Arama following a payment of a portion of the Akmetal receivable, as a result of the
financial restructuring the Kurmel Group has undergone in the past few months. In addition, the
Company has been discussing the necessary management and structural changes at the Horzum
AS joint venture,
Other Highlights
In January 2019, the Company filed an amended National Instrument 43-101 technical report for
the Pinargozu mine. The report was filed to comply with National Instrument 43-101 and did not
contain any changes to the mineral resource estimate.
During the third quarter of 2019, the local tax office in Turkey sent a legal demand to the Turkish
based directors and officers of Horzum AS for late payment of taxes due. The Turkish tax
department has taken no further action against Horzum AS or the individuals associated with the
Company, as Horzum AS is waiting to continue negotiations with the Turkish tax department to
achieve a payment plan for its outstanding taxes due.
In September 2019, the underground workers at the Pinargozu mine in Turkey, commenced a
strike action for late payment of their wages. This action was resolved during the month of
October. Ore production at the Pinargozu mine resumed upon the workers return to work during
October 2019.
On September 11, 2019, the Company announced that it had changed the payment date on an
option payment due on the Spur Option Agreement. The payment was originally scheduled to be
made on September 11, 2019 and was changed to December 11, 2019. In addition, the remaining
2019 exploration obligations were deferred to 2020.
Personnel changes during the year included the appointed of a new Chief Financial Officer and
the resignation of the Company’s Vice President of Exploration.
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Note 1
Please note that all dollar amounts in this news release are expressed in Canadian dollars unless
otherwise indicated. Refer also to the year-end 2019 Management’s Discussion and Analysis
(MD&A) and Audited Financial Statements found on SEDAR.com for more information. This news
release includes non-GAAP measures, including adjusted equity gain from Horzum AS, adjusted
consolidated net income, gross margin, cost per tonne mined and US$ cash cost per pound of
zinc mined. A reconciliation of these non-GAAP measures to the GAAP financial statements is
included in the MD&A.
About Pasinex
Pasinex Resources Limited is a Toronto-based mining company which owns 50% of the
producing Pinargozu high grade zinc mine and, under a Direct Shipping Program, sells to zinc
smelters / refiners from its mine site in Turkey. The Company also holds an option to acquire 80%
of the Spur high-grade zinc exploration project in Nevada. Pasinex has a strong technical
management team with many years of experience in mineral exploration and mining project
development. The mission of Pasinex is to build a mid-tier zinc company based on its mining and
exploration projects in Turkey and Nevada.
Visit our web site at: www.pasinex.com
On Behalf of the Board of Directors
PASINEX RESOURCES LIMITED
“Steve Williams”
Steve Williams Evan White
President/CEO Manager of Corporate Communications
Phone: +1 416.861.9659 Phone: +1 416.906.3498
Email: [email protected] Email: [email protected]
The CSE does not accept responsibility for the adequacy or accuracy of this news release.
This news release includes forward-looking statements that are subject to risks and uncertainties. Forward-
looking statements involve known and unknown risks, uncertainties, and other factors that could cause the
actual results of the Company to be materially different from the historical results or from any future results
expressed or implied by such forward-looking statements.
All statements within, other than statements of historical fact, are to be considered forward looking. Although
Pasinex believes the expectations expressed in such forward-looking statements are based on reasonable
assumptions, such statements are not a guarantee of future performance and actual results or
developments may differ materially from those in forward-looking statements. Factors that could cause
actual results to differ materially from those in forward-looking statements include market prices, continued
availability of capital and financing, exploration results, and general economic, market or business
conditions. There can be no assurances that such statements will prove accurate and, therefore, readers
are advised to rely on their own evaluation of such uncertainties. We do not assume any obligation to
update any forward-looking statements.