TVI Pacific 2013 Year End Results and Operational Performance

TSX : TVI  OTCQX: TVIPF

CALGARY, March 19, 2014 /CNW/ - TVI Pacific Inc. (TSX: TVI) (OTCQX: TVIPF) ("TVI" or "the Company") today announced its audited, consolidated financial and operational results for the year ended December 31, 2013.

For a thorough explanation of the points discussed in this news release, shareholders are encouraged to read the audited consolidated financial statements, prepared in accordance with International Financial Reporting Standards ("IFRS"), and the management's discussion and analysis for the years ended December 31, 2013 and 2012.  These documents were filed with certain securities regulators in Canada on March 19, 2014, and are available on our web site (www.tvipacific.com or under our profile on SEDAR www.sedar.com).

2013 Year-End Highlights

• Total net revenue of $48.2 million.
• Earnings before interest, tax, depreciation, share of loss of associates and non-recurring losses of $3.09 million.
• Net loss of $14.4 million.
• Cash balance of $2.4 million at December 31^st, 2013.
• No debt owing.
• A working capital surplus of $9.5 million.

As discussed further in this news release, TVI signed various definitive agreements on December 11, 2013, with Prime Resources Holdings, Inc. ("PRHI") relating to the private placement in TVI and third party investment in its indirectly held Philippine assets ("Transactions").  The Transactions are expected to occur in multiple closings and TVI continues to work toward the final close that will result in TVI receiving total proceeds of US$10.65 million and US$11.85 million for TVIRD and various subsidiaries, each before tax and related fees.  As a result of the Transactions, TVI continues to hold a 30.66% indirect interest in TVIRD and the assets owned by TVIRD (including Canatuan, Balabag, the Agata Mining and the Agata Processing Joint Ventures, and various exploration properties), a 15.51% equity interest in Foyson Resources Limited ("Foyson"), a 14.4% equity interest in Mindoro Resources Ltd. ("Mindoro"), 100% of TG World Energy Corp., and a 10% interest in the Amazon Bay Iron Sands project (for which the exploration license is held by Titan Mines Limited, a company in which Foyson holds 50% shareholding and has an option to acquire the remaining 50%).

Financial Highlights

The mining segment generated net revenues of $46.9 million from the sale of concentrates, net of treatment, refining and penalties, and a further $1.2 million from drilling and other services to third party customers.  During the year ended December 31, 2013, there were five shipments of copper concentrate and one shipment of zinc concentrate for a total of 26,572 dry metric tonnes and 5,202 dry metric tonnes, respectively, wherein TVI's affiliate, TVI Resource Development (Phils.), Inc. ("TVIRD"), realized average prices of US$3.32 for copper and US$0.85 for zinc.  This compares with net revenues of $77.1 million realized through 2012 resulting from seven shipments of copper concentrate and three shipments of zinc concentrate with average prices of US$3.60 for copper and US$0.89 for zinc.  Revenues have been affected by both the volume of metal production available for sale as well as the decline in metal prices experienced through 2013.

Mining, milling and other expenses for the year ended December 31, 2013 were $38.2 million, down from $48.6 million incurred during 2012, primarily due to the lower volume of concentrates shipped (18,211,542 Cu lb eq as compared to 27,992,885 Cu lb eq in 2012) as well as a reduction in contracted services resulting from less blasting and a lower strip ratio and less costs associated also with diesel and the continuing non-use of cyanide. All mining related costs have further been reduced at year end as mining of the sulphide deposit has been completed.

TVIRD recorded an additional gain through the year resulting from $1.6 million of net smelter return ("NSR") payments earned through Rapu Rapu Processing, Inc.  This gain was offset through the period by the recording of an impairment loss of $2.0 million due to the write-down of TVI's investment in the SC54A oil and gas joint venture, the net write-off of TVI's investment in the Foyson New Britain JV ($623K) and a $2.3 million loss on deconsolidation of TVIRD and various subsidiaries, in relation to which a further $2.2 million impairment in the remaining carrying value of the joint venture in TVIRD has also been recognized.

Net income breakdown

Adjusting for non-recurring and non-cash items, net income before interest, taxes, depreciation, share of loss of associates and non-recurring items is $3.09 million at December 31, 2013.  The share of loss of associates represents TVI's proportionate share of losses recognized through the year by Foyson and Mindoro, in which TVI currently holds a 15.51% and 14.4% interest, respectively.  The share of loss of associates relates primarily to the impairment of investments held directly by Mindoro.  As noted earlier also, TVI has recorded impairment losses of $4.29 million due to the write-down of investments in the SC54A oil and gas joint venture and TVI's remaining interest in TVIRD, in addition to the write-off of Foyson New Britain expenditures and a loss on disposition of interest in TVIRD to PRHI.

Investing and Financing Transactions

TVI completed on January 10, 2014, a further closing ("Second Close") of various investment and financing transactions involving PRHI, a Philippine corporation, with whom various definitive agreements were signed on December 11, 2013, relating to the private placement in TVI and third party investment in its indirectly held Philippine assets ("Transactions").  The Transactions are expected to occur in multiple closings and TVI continues to work toward the final close that will result in TVI receiving total proceeds of US$10.65 million and US$11.85 million for TVIRD and various subsidiaries, each before tax and related fees.  After giving effect to all transactions, PRHI will hold approximately 5% of the total number of issued and outstanding common shares of TVI and 68.42% of the total number of outstanding voting shares of TVIRD, while TVI will continue to indirectly hold 30.66% of the issued and outstanding shares of TVIRD, its investment in shares of Mindoro Resources Ltd. and Foyson Resources Limited, further earning rights in the Amazon Bay project (Papua New Guinea, "PNG"); and its investment in shares of TG World Energy Corp.  The Transaction includes an agreement between the parties to seek a listing for the shares of TVIRD on the Philippine Stock Exchange.

The initial closing ("First Close") occurred on December 13, 2013, and included the following:

The Second Close followed the approval on December 27, 2013, of the application for the increase in authorized capital stock of TVIRD by the SEC, resulting at that time the subscribed TVIRD ordinary shares to be issued to PRHI and PRHI assuming joint control of TVIRD with TVI.  Consequently, TVIRD and the Philippine subsidiaries were deconsolidated and a $2.3 million loss was realized by TVI in the consolidated financial statements, resulting in a further $2.2 million impairment in the remaining carrying value of the joint venture in TVIRD.

As at the current date, TVI has received US$5.33 million as a result of the transaction, while TVIRD has received US$11.64 million and US$5.53 million remains in escrow until completion of the third and final close as outlined within the Investment Agreement.

Operational Highlights

During 2013, mill throughput at TVIRD's Canatuan operation averaged 2,701 dry metric tonnes per day, for a total of 985,772 tonnes for the year, down 2% from the 968,069 tonnes processed through 2012.  The mill feed consisted of ore mined from within the ore reserve block model as well as additional materials found and mined during the period.  This material, consisting of banded sulphides with low-grade chlorite schists, was used as a blending material to optimize mill recoveries and was located both inside and outside the pit shell and not included in the original ore reserves.  On January 20, 2014 TVIRD has stopped milling operations at its Canatuan mine after having exhausted its remaining stockpile, pending the results of assessing various mine life extension and expansion opportunities

The average copper feed grade through 2013 was 0.66% copper, down 26% from the 0.89% copper realized in the prior year.  In addition to the predicted decline in metal grades deeper in the deposit, ore blending to reduce penalty element levels in the concentrate also contributed to lower feed grades.  The average copper recovery in the year was 76%, almost equivalent to the average copper recovery of 78% experienced through 2012.

On January 7, 2014, TVIRD completed the final shipment of 5,069 dry metric tonnes of zinc concentrate and on January 26, 2014 the final shipment of 4,118 dry metric tonnes of copper concentrate, bringing total shipments of copper concentrate to 39 and zinc concentrate to 7.  The copper and zinc operations at the Canatuan mine have provided a 5.9 year mine life as compared to an initially anticipated 5 to 6 year mine life, but actual mill throughput has been much higher than planned.

Canatuan is owned 100% by TVIRD.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest in Canatuan through TVIRD.

Cash Position

As December 31, 2013, TVI has fully repaid all debt facilities.

Cash balances fluctuate between reporting periods as cash is used for operating purposes and capital requirements.  Cash reported at December 31, 2013 now includes only cash held at the level of TVI and not within its subsidiaries, and includes also only the proceeds received from PRHI through the First Close; a further US$5.53 million remains in escrow until completion of the third and final close with PRHI, US$5.32 million of which will be provided directly to TVI while the balance will be released to TVIRD.

As at December 31, 2013, TVI subsidiaries have a cash balance of $6.4 million but this balance has been reclassified to Investment in Joint Venture in the consolidated financial statements, in proportion to interest retained by TVI, as a result of the transaction with PRHI through which PRHI has assumed joint control of TVIRD with TVI.

2014 Outlook

Agata Direct Shipping Ore ("DSO") Operation

On April 10, 2013 TVI filed an updated National Instrument 43-101 ("NI 43-101") technical report entitled "Independent Report on the Nickel Laterite Resource - Agata North, Philippines."  The updated NI 43-101 reflects an updated and reclassified resource estimate for the Agata North nickel laterite resource that provides a robust foundation for moving forward, initially, with a DSO operation of high-iron limonite (upper laterite horizon), followed by atmospheric leach processing of the underlying saprolite horizon.

Highlights of the updated NI 43-101 include:

• An increase in Measured and Indicated resources to 33.9 million dry metric tonnes at 1.1% nickel as compared to the previous 31.8 million dry metric tonnes at 1.05% nickel;
• Inferred resources are 2.0 million dry metric tonnes at 1.04% nickel;
• Estimated contained nickel is 391 thousand tonnes.

At a cut-off grade of 44% iron, there are an estimated 7.0 million dry metric tonnes or approximately 10 million wet metric tonnes at 48.5% iron and 0.94% nickel - a DSO product grade currently much in demand in China.

As at October 17, 2013, 100% of land required for the road network has been acquired in coordination with the local government unit while 90% of land required under the current design of the Port facility has been acquired.  The planning and design of port construction, as well as for roads and other infrastructure, is proceeding.

The Agata DSO Project is well into the permitting stage with the Environmental Protection and Enhancement Program and the Final Mine Rehabilitation and Decommissioning Plan under review by the Mine Rehabilitation Fund Committee.  Final approval of the Declaration of Mining Project Feasibility ("DMPF") is then expected to follow, which will allow the project to move into development. Timing of receipt of this permit, however, is uncertain. The Agata high iron DSO project already has an existing Environmental Compliance Certificate ("ECC").

The Agata DSO Project falls within the Agata Mining Joint Venture, in which TVIRD has an option to earn a 60% interest upon commencement of commercial production subject to (i) TVIRD having expended a minimum of $2 million within 12 months of the date of the Agata Mining Option and Joint Venture Agreement ("AMVI Agreement"), and (ii) commercial production at Agata having commenced within 3 years of the date of the AMVI Agreement. Under the AMVI Agreement, TVIRD is required to fund all expenditures associated with the establishment of the Mining Operation.

As at December 31, 2013, TVIRD has incurred a total of $2,172,244 and earned 59% of shares in the Agata Mining Joint Venture, which remain in escrow until satisfaction of other requirements.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest through TVIRD in the interest to be earned in the Agata Mining Joint Venture.

Agata Nickel Processing Project

Pilot plant testing commenced in May 2013 at the Beijing General Research Institute of Mining & Metallurgy ("BGRIMM") facility in China and was based on the results of the comprehensive program of laboratory bench-scale testing, which was previously carried out at BGRIMM and at TVIRD's Metallurgical Laboratory in the Philippines.  Pilot plant testing is intended to further define the technological parameters to be used in producing a Bankable Feasibility Study with the goal of building a commercial processing plant.  The process technology TVIRD is developing, and which has produced these results, aims to achieve maximum nickel recovery and low acid consumption which translates into increased metal production and lower operating costs.

Pregnant Leach Solution ("PLS") recovered from the slurry after leaching at the BGRIMM pilot plant was divided into two batches, with 8,000L for shipment to the continuously operating pilot plant installed and commissioned at TVI's metallurgical testing facility in the Philippines for production of a Nickel Hydroxide Product ("NHP") and 1,000L for production of an alternative Mixed Hydroxide Product ("MHP").  Testing at the two facilities will allow NHP and MHP processes and products to be compared and a final process route chosen.  The TVIRD pilot plant has now processed all of the 8,000L of PLS received from BGRIMM and NHP filter cake was successfully produced February 7, 2014 with a 52% to 54% Ni grade.

The Agata Nickel Processing Project is part of the Agata Processing Joint Venture, in which TVIRD has the right to earn a 60% interest upon delivery of a definitive feasibility study respecting nickel processing at Agata, subject to TVIRD having expended a minimum of $2 million within 12 months of the date of the Agata Processing Option and Joint Venture Agreement ("API Agreement") and completing the definitive feasibility study within 4 years of the date of the API Agreement. Under the API Agreement, TVIRD is required to fund all required expenditures associated with preparation of the definitive feasibility study.

As at December 31, 2013, TVIRD has incurred a total of $3,589,622 and earned 45% of shares in the Agata Processing Joint Venture, which remain in escrow until satisfaction of other requirements.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest through TVIRD in the interest to be earned in the Agata Processing Joint Venture.

Balabag

An updated independent NI 43-101 technical report was completed and filed in 2013 to further support the NI 43-101 compliant scoping study (titled "Scoping Study of the Balabag Project") filed in 2008 and the previous resource report filed in 2007 (titled "NI 43-101 Technical Report for the Mineral Resources at the Balabag Project of TVI Pacific Inc.").  All studies are available on SEDAR at www.sedar.com.

During the first half of 2013, TVIRD completed 18 additional infill or extension drill holes equivalent to 1,221 meters (4,005 feet). In addition, mapping and sampling activities were carried out in the underground workings, and trenching and soil grid geochemical surveys were done over the eastern and southern part of the Balabag hill. The discovery of multi-directional veining has increased the potential of finding more veins.  To date, including pre-2010 and post-2010 drill programs, a total of 296 holes have been drilled for a total of 34,156 meters at Balabag.

TVIRD has acquired all the necessary local government resolutions supporting TVIRD's intended operations from the province, the municipality of Bayog, and the four primary impact barangays and six other barangays' Resolutions Supporting TVIRD's Intended Operations in Balabag.  In October 2013, TVIRD has received the ECC for the Balabag Project, which represents a critical milestone towards starting development of the Project, which will commence once approval is received of the DMPF by the Philippines Mines and Geosciences Bureau ("MGB") of the Department of the Environment and Natural Resources ("DENR"). All required documents have been submitted to the MGB. Timing as to the issuance of this required permit continues to be uncertain.

TVIRD has established a pilot plant at its nearby Canatuan mine site in 2013 to carry out metallurgical test work on samples of the different types of mineralization at Balabag.  The principal objectives of the pilot plant test work are to confirm the results obtained in previous laboratory cyanide leaching tests, optimize the metallurgical processing under an environment that more closely resembles actual operations, provide design parameters for engineering, and to start training personnel in operations and metallurgical process control.

TVIRD continued its pre-development work at Balabag, including:

• Completion of an all-weather 16km access road to the mine that will serve as the main access for  equipment and product transport; and
• On-going design work on the CIL-Merrill-Crowe process based on the favorable test results, completion of plant design and equipment sizing.

The plan is to continue to pursue the development of the starter mine, which is indicating robust stand-alone economics.

Surface geology exploration at Balabag, west of the current Balabag hill, has also commenced as planned. This is part of the overall goal to explore the full potential of the entire MPSA area.

An independent NI 43-101 technical report has been completed and filed on SEDAR (www.sedar.com) on August 15, 2012. Based on drilling completed to the end of June 2011, the independent qualified person estimates an indicated mineral resource of 1.78 million tonnes averaging 2.34 grams per tonne of gold and 72.3 grams per tonne of silver containing 134,262 ounces of gold and 4,148,196 ounces of silver. Readers are cautioned that such estimates remain conceptual in nature and mineral resources that are not mineral reserves do not have demonstrated economic viability.

Balabag is owned 100% by TVIRD.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest in Balabag through TVIRD.

Greater Canatuan Tenement Area (GCTA)

Exploration work at TVI's GCTA was suspended pending approval of the required permits.

Processing and approval of MPSA applications continued to be on hold because of the ongoing moratorium on new permit applications imposed by the Secretary of the DENR. In March 2013, the DENR lifted the moratorium on application for exploration permits, but the moratorium on MPSA's and financial or technical assistance agreements is still in effect despite the signing of the much awaited Executive Order by the President of the Philippines.  Timing as to the issuance of the required permits continues to be uncertain.

Exploration Permit Application 61 (EXPA-000061-IX) is also affected by the moratorium and therefore there were no new activities in the area.

The GCTA is owned 100% by TVIRD.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest in the GCTA through TVIRD.

Tamarok Copper and Gold Prospect

Tamarok exploration work has been suspended since January 2012 as the initial scout drilling results were not encouraging. A decision was made to suspend further work on Tamarok and focus exploration resources on other projects.

Tamarok is owned 100% by TVIRD.  After giving effect of the PRHI transaction, going forward TVI has a 30.66% indirect ownership interest in Tamarok through TVIRD.

About TVI Pacific Inc. (TSX:TVI) (OTCQX:TVIPF)

TVI Pacific Inc. is a Canadian resource company focused on the production, development, exploration and acquisition of resource projects in the Philippines and Southeast Asia.  TVI's affiliate, TVIRD, has to date produced copper and zinc concentrates from its Canatuan mine and is advancing its Balabag Gold-Silver project and its Agata Nickel DSO operation.  TVI is a direct or indirect participant/operator in several joint venture projects in the Philippines and Papua New Guinea and also has an interest in an offshore Philippine oil property.

Jake Foronda, Vice President for Operations, TVIRD, a qualified person as defined by NI 43-101, has approved the scientific and the technical information contained within this press release.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Cautionary Statement - Forward-Looking Information

Certain statements in this Press Release constitute forward-looking information. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "should", "believe", "schedule" and similar expressions. Forward-looking statements are based upon the opinions and expectations of TVI as at the effective date of such statements and, in certain cases, information received from or disseminated by third parties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from or disseminated by third parties is reliable, it can give no assurance that those expectations will prove to have been correct. Forward-looking statements are subject to certain risks and uncertainties (known and unknown) that could cause actual outcomes to differ materially from those anticipated or implied. These factors include, but are not limited to, such things as general economic conditions in Canada, the Philippines and elsewhere; volatility of prices for precious metals, base metals, oil and gas; commodity supply and demand; fluctuations in currency and interest rates; inherent risks associated with the exploration and development of mining properties; inherent risks associated with the exploration and development of oil and gas properties; ultimate recoverability of reserves; production, timing, results and costs of exploration and development activities; political or civil unrest; availability of financial resources or third-party financing; new laws (domestic or foreign); changes in administrative practices; changes in exploration plans or budgets; and availability of personnel and equipment (including mechanical problems).

Forward-looking statements regarding forward production costs and shipping and refining costs are based on current and previous mineral reserve and resource estimates, current mining and processing activities, prior experiences of management with mining and processing activities, the current development and operating plan, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change). Forward-looking statements regarding the remaining mine life and resources/reserves of the Canatuan deposit are based on current and previous mineral reserve and resource estimates, current mining and processing activities, prior experiences of management with mining and processing activities, the current development and operating plan, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change). Forward-looking statements respecting the copper and zinc concentrate shipping volumes and the timing of future shipments are based on the Company's previous experience with concentrate shipments, current mining and processing activities, current and previous mineral reserve and resource estimates, discussions to date with the off-take partner, efficiency and effectiveness of the sulphide plant, and the Company's overall plans, budget and strategy for Canatuan (which are all subject to change).  Forward-looking statements regarding the timing and nature of exploration and drilling activities in the Greater Canatuan Tenement Area (including EXPA 61, Malusok and SE Malusok), Tamarok and the Company's other tenements in the Philippines and Papua New Guinea are based upon current and previous exploration activities, management's experience with other exploration programs undertaken in the Philippines, Papua New Guinea and elsewhere, and the Company's overall plans, budget and strategy (which are all subject to change). In certain cases, the timing of exploration activities in the Philippines and Papua New Guinea is dependent upon the receipt of free prior informed consent from indigenous communities and regulatory approvals from the governments of the Philippines and Papua New Guinea. Forward-looking statements regarding expectations that the Company will be able to find additional ore in the Greater Canatuan Tenement Area (including EXPA 61, Malusok and SE Malusok) and that this ore can be economically transported to the existing Canatuan mill are based upon current and previous exploration activities, management's experience with other exploration programs undertaken in the Philippines and elsewhere, management's current and previous experience with mining and processing activities at Canatuan, and the Company's overall plans, budget and strategy (which are all subject to change). Forward-looking statements regarding the Company's expected metal production and capital expenditures for 2014, and its ability to continue to generate revenue from its operations are based on current mining and processing activities at Canatuan, current throughput of the sulphide plant, anticipated recoveries, efficiency and effectiveness of the sulphide plant, management's prior experiences with mining and processing at Canatuan, the estimated copper and zinc mineralization of the sulphide zone at Canatuan, current and previous exploration, and the Company's overall plans, budget and strategy (which are all subject to change). 

The forward-looking statements set out in this news release include information relating to interests that may be earned by TVIRD in the Agata and Pan de Azucar joint ventures; opportunities for exploration, development and commercialization of the Agata Mining Project (including the High Fe and Limestone DSO/Lime Production Facility and the Agata Nickel Processing Plant).  Related risks and uncertainties include, but are not limited to:  (A) results of further work in pursuing the conceptual planning described in this MD&A not supporting current expectations as to the opportunities outlined; (B) TVIRD not funding the necessary expenditures at Agata or Pan de Azucar to advance the projects or earn an interest under the joint venture agreements due to, among other things (i) changes in TVIRD's strategic priorities, due diligence findings, changes in laws or regulations affecting mining operations in the Philippines (including the profitability of such operations), and other factors, (ii) changes in TVIRD budgets and (iii) limited availability of funds; (C) a determination on the part of TVIRD not to pursue projects contemplated by one or more of the joint venture agreements noted above for technical, economic, legal or other reasons (including, without limitation, a failure to obtain required permits or other governmental or regulatory approvals);  and (D) certain other risks identified elsewhere in TVI's public filings, including, without limitation, those risk factors set forth at pp. 46-52 of TVI's Annual Information Form dated  March 19, 2013. 

This news release also includes forward-looking statements respecting certain transactions provided for in definitive agreements entered into with PRHI (the "Transactions") and are based upon the terms of these definitive agreements.  With respect to the Transactions, those risks and uncertainties include a failure to close one or more of the Transactions on the terms outlined in the definitive agreements entered into with PRHI due to the failure to satisfy one or more conditions, such as conditions relating to the receipt of any necessary corporate or regulatory approvals.

Accordingly, readers should not place undue reliance upon the forward-looking statements contained in this news release and such forward-looking statements should not be interpreted or regarded as guarantees of future outcomes.

The forward-looking statements of the Company contained in this News Release are expressly qualified, in their entirety, by this cautionary statement.  Various risks to which the Company is exposed in the conduct of its business are described in detail in the Company's management's discussion and analysis for the year ended December 31, 2012 which was filed on SEDAR on March 19, 2013 and is available under the Company's profile at www.sedar.com.  Subject to applicable securities laws, the Company does not undertake any obligation to publicly revise the forward-looking statements included in this news release to reflect subsequent events or circumstances.  

SOURCE TVI Pacific Inc.