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Magma Energy Corp Announces Fourth Quarter And 2009 Year End Results

09/14/2009


(All amounts in US dollars unless otherwise stated and all production figures are approximate)


Vancouver, B.C., Canada, September 14, 2009 -- Magma Energy Corp. (TSX:MXY) today reported its audited financial and operating results for the fourth quarter and fiscal year ended June 30, 2009. The Company also provided an update on its operations. This earnings release should be read in conjunction with the Company's MD&A, Financial Statements and Notes to Financial Statements for the corresponding period, which are available on the Company's website at www.magmaenergycorp.com and have been posted on SEDAR at www.sedar.com.

Commenting on today's announcement, Ross Beaty, Chairman and CEO, said: "Magma Energy had a great first full year of operations. We put together a world-class exploration and operating team, raised more than $130 million in tough financial markets, acquired one producing asset in Nevada, built up a large land position of geothermal exploration properties in Nevada, Idaho, Oregon, Peru, Chile and Argentina and, just after year-end, entered into agreements to acquire a minority interest in another producing asset in Iceland. Magma ended the year with a successful initial public offering and listing on the Toronto Stock Exchange and is entering its second full year in healthy condition."

Financial Results

 

For the Three
Months Ended
June 30,
2009 *

For the Three
Months Ended
June 30,
2008 *

For the Year
Ended
June 30,
2009

 

For the
Period from
Inception
(January 22,
2008) to
June 30,
2008

 

 

 

 

 

Total revenue

$          1,256,612   

  $                       -

$          4,485,130

$                    -

Direct cost of energy production

               612,391

                           -

            3,003,285

                      -

Gross profit

               644,221

                           -

            1,481,845

                      -

Expenses

            1,261,567

               633,433

            4,965,669

          684,055

Other income (expenses)

         (1,259,422)

                   4,207

            (975,732)

            22,715

Net loss

         (1,876,768)

            (629,226)

         (4,459,556)

        (661,340)

Loss per share (basic and diluted)

                  (0.01)

                  (0.01)

                  (0.03)

              (0.01)

Total assets

          43,779,529

          12,908,970

          43,779,529

     12,908,970

Total liabilities

            4,581,854

               721,001

            4,581,854

          721,001

Cash and cash equivalents

            4,482,693

          12,708,947

            4,482,693

     12,708,947

Working capital

            2,747,685

          12,121,592

            2,747,685

     12,121,592

 

 

 

 

 


* Expenses incurred during the respective three month periods are not reflective of expenses that will be incurred in the future and comparisons of revenues and expenses between these periods are not meaningful due to the timing and nature of the Company's activities since effective commencement of operations in February, 2008.

For the fourth quarter ended June 30, 2009, Magma reported a net loss of $1,876,768 or ($0.01) per share. Revenues from energy sales were $1,256,612 and gross profit from the Soda Lake plant operations was $644,221. Net income from plant operations was $288,415, after deducting amortization, accretion and depletion expenses. Net loss for Magma's geothermal exploration and corporate activities during the fourth quarter was $2,165,183, which included a write-off of $1,086,822 of expenditures incurred on the Carrán property in Chile, which was relinquished at year-end.

For the year, Magma reported a net loss of $4,459,556 or ($0.03) per share. Total revenues included energy sales of $3,963,167 from the date of the Company's acquisition of its Soda Lake operation on October 3, 2008 to June 30, 2009 and $521,963 from the sale of portfolio energy credits. Gross profit from operations for the same period was $1,481,845. Net income from plant operations, after deducting amortization, accretion and depletion expenses, was $430,165.

Expenses incurred by the Company in connection with geothermal exploration and corporate activities during the year were $4,889,721. Significant expenses included general and administrative costs of $1,524,452 and the write-off of $1,086,822 of expenditures incurred on the Carrán property in Chile.

On a cash basis for the year ended June 30, 2009, the Company spent $1,318,494 on operating activities and $38,228,140 on investing activities, including investments of $17,556,726 to acquire the Soda Lake operation and $15,396,112 to acquire and explore the Company's portfolio of exploration projects. At June 30, 2009, Magma had cash and cash equivalents of $4,482,693 and working capital of $2,747,685. Subsequent to the year end, the Company completed an IPO and raised net proceeds of $88 million. The Company had no long-term debt at year-end and an undrawn credit facility of C$20 million.

Soda Lake Operation

Magma acquired a 100% interest in the Soda Lake geothermal operation in October, 2008. The operation produced an average of 11 megawatts ("MW") during the year, yielding 8 MW of net production after accounting for internal load. In early 2009 Magma began engineering work on an $18.2 million plan to double Soda Lake's capacity to 23 MW gross (16 MW net). This plan includes drilling of two new production wells, which were completed in July and August 2009 to depths of 4,468 and 8,995 feet respectively, and upgrading and refurbishing the existing power plant equipment. Magma is now evaluating options in order to optimize the field's production/reinjection strategy and continuing with engineering work on the plant expansion, which is now targeted for completion in early 2010.

Exploration Activities

By year-end, Magma had assembled a portfolio of five advanced-stage geothermal exploration properties and 12 early-stage properties located in Nevada, Idaho, Oregon, Chile, Peru and Argentina. Most of the Company's exploration activities occurred on its Chilean properties. Early work on the Carrán property was not promising and the property was relinquished at year end. However, work on the Maule property was very successful, with encouraging geophysical results in a March survey followed by successful drilling of a slim hole in June, which encountered plus-200ºC water at a depth of only 650 meters. A report by the Company's consultants SKM indicates the existence of an inferred geothermal resource at Maule capable of producing 140 MW of electrical generation for at least 30 years. In July 2009, Magma submitted a plan to Chilean authorities for an initial 50 MW power project on the Maule property.

Other exploration activities have mostly focused on the Company's extensive US properties, and include permitting and geological, geochemical and geophysical exploration, followed by planned slim hole and production drilling in coming years. In July 2009 Magma acquired an additional 7 geothermal exploration properties in the 2009 Bureau of Land Management lease auction and also applied for $25 million in grants under the US government's American Recovery and Reinvestment Act programs for shared exploration expenditures.

In addition to the Company's active exploration programs, acquisition reviews were made of a number of geothermal projects in Indonesia, New Zealand, Iceland and other jurisdictions, culminating in the Company's pending acquisition of a minority stake in a large producing geothermal operation in Iceland.

Outlook

In the upcoming year, Magma Energy expects to increase its electricity production at its Soda Lake operation from 11 MW gross (8 MW net) to 23 MW gross (16 MW net) and close its purchase of a 43% stake in Icelandic geothermal company HS Orka, which will add to Magma's interest 75 MW of net geothermal production and 107.5 MW of planned net production over the next six years. The purchase of the Company's interest in HS Orka will be financed by cash on hand and the credit facility available to it, or from other sources of capital available to the Company. In addition to these operating activities, Magma plans a very aggressive year of geothermal exploration activities on its assets in North and South America, and continuing acquisition reviews of advanced and producing geothermal assets. Its two-year goal remains to produce in excess of 100 MW by the end of 2010 and hold geothermal properties with independent estimates of more than 1,000 MW of geothermal production capacity.

Magma's Chairman and CEO, Ross Beaty, concluded: "Magma's mission to become one of the world's pre-eminent geothermal power companies will be achieved by success in exploration, project development, plant operations and acquisitions. We were active in all those areas in the fiscal year just-ended and we will remain so in the year ahead, while maintaining our strong financial condition. I especially look forward to working with our new colleagues and stakeholders in Iceland and to advancing our great exploration portfolio in the USA and Chile. Geothermal energy is a wonderful source of clean and sustainable energy and I am really pleased to be working with a great team in building a large new company in such an important industry."

About Magma Energy Corp.

Magma Energy Corp. is a geothermal power company which is actively engaged in operating, developing, exploring and acquiring geothermal energy projects. We currently have one operating power generation plant (the Soda Lake Operation in Nevada), and an extensive portfolio of exploration properties throughout the western United States, Chile, Argentina and Peru.

Magma Energy will host a conference call to discuss financial and operating results on Tuesday, September 15, 2009 at 11:30 am ET (8:30 am PT). North American participants dial 1-866-223-7781 and International participants dial 1-416-340-8018. The call will also be broadcast live on the Internet at http://www.investorcalendar.com/IC/CEPage.asp?ID=149527. Listeners may also gain access by logging on at www.magmaenergycorp.com. The call will be available for replay for one week after the call by dialing 1-416-695-5800 (for North American and International callers) and entering replay pin number 3280413.

For further information please contact:
Alison Thompson, Vice President, Corporate Relations
Magma Energy Corp.
Phone: 604.646.1882
Email: athompson@magmaenergycorp.com



Cautionary Note regarding Forward-Looking Statements and Information

This news release contains certain "forward-looking information" within the meaning of Canadian securities laws, which may include, but is not limited to, statements with respect to future events or future performance, management's expectations regarding our growth, results of operations, revenues, requirements for capital, future demand for and prices of electricity, business prospects and opportunities, exploration and development, geothermal resources, recoverable geothermal energy or energy generation capacities. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.

A number of known and unknown risks, uncertainties and other factors, may cause our actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. The forward-looking information is based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions about: the success and timely completion of planned exploration and expansion programs, the growth rate in net electricity consumption; support and demand for non-hydroelectric renewables; government initiatives to support the development of renewable energy generation; the accuracy of reserve estimation methodology and analysis used to estimate the quantity of potentially recoverable thermal energy; geological, geophysical, geochemical and other conditions at our properties; the reliability of technical data, including extrapolated temperature gradient, geophysical and geochemical surveys and geothermometer calculations; capital expenditure estimates; availability of capital to fund exploration, development and expansion programs; and general economic conditions. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur.

There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, we assume no obligation to update or revise such forward-looking information to reflect new events or circumstances.