Titanium Corporation Inc. released its results for the three and nine-month periods ended September 30, 2020.
The COVID-19 pandemic and the collapse of oil demand and prices in 2020 has introduced unprecedented uncertainties for Canada’s oil sands industry and the Canadian economy. In recent months, there has been a second wave of the pandemic and the duration and the extent of the impact of these events is not known but could adversely affect the progress and timing of the CVW™ Horizon Project (the “Project”). In response, the Company has taken measures to protect its balance sheet by reducing costs and conserving cash.
During the first nine months of 2020, the Company and Canadian Natural Resources Limited’s (“Canadian Natural”) joint project engineering team has continued work on the Project utilizing internal resources, performing post-front end engineering design (“FEED”) engineering reviews, validation and optimization of the Project as well as continuing on-going minerals analysis programs. The main focus of the Project team in 2020 has been the optimization of the concentrator facility and the design and engineering of a tailings thickener and associated facilities. Optimization of the minerals facility, including further work by an external minerals engineering firm, commenced in the fourth quarter 2020 and will continue into 2021. In parallel, the Company has been providing updates to the Alberta and Federal government agencies who have awarded grant funding for the Project, working with them toward finalizing funding contracts and assessing new, recently announced programs, for potential additional funding for the Project.
“While we are all experiencing the on-going uncertainties and challenges of the pandemic and the economy, our joint Project team has remained very focused on advancing our Project, completing another successful quarter of facility engineering and minerals development,” commented Scott Nelson, Titanium’s President and Chief Executive Officer. “We were pleased to complete the ERA funding agreement during the quarter and are now working on other government funding programs to support the Project. Our Project is highly relevant to government and industry objectives of reducing climate changing emissions, particularly methane, and supporting shovel-ready projects that will stimulate Alberta and Canada’s economic recovery.”
Certain highlights for the three and nine-month periods ended September 30, 2020 are set out in more detail below:
FINANCIAL OVERVIEW
Titanium is focused on achieving long-term financial success by implementing its innovative CVW™ technologies in commercial operations at oil sands sites. The Company is working with Canadian Natural on engineering optimization and detailed engineering for the potential implementation of its technology at Canadian Natural’s Horizon site. However, until post-FEED and optimization Project activities are completed to the satisfaction of the parties, commercial arrangements and investment decisions are made, and facilities constructed and operating, the Company expects to continue to incur losses. Currently, quarterly (losses)/income are comprised of research and development (“R&D”) project costs, and general and administrative (“G&A”) expenditures.
Net (Loss) Income – For the three and nine-month periods ended September 30, 2020, the Company reported net loss of $0.78 and $2.3 million, respectively. This resulted in a $0.01 loss per share for the current quarter and a $0.03 loss per share for the nine-month period ended September 30, 2020. The net loss for the three month period ended September 30, 2020 consisted primarily of G&A ($0.34 million) and R&D ($0.44 million) expenses in the current quarter compared to net income of $0.3 million for the three-month period ended September 30, 2019 as the Company received Project contributions for the FEED Project in the prior period which exceeded Project costs incurred and G&A expenses. For the nine-month period ended September 30, 2020 net loss of $2.4 million consisted primarily of G&A ($1.3 million) and R&D ($1.2 million) expenses compared to net income of $0.75 million for the nine-month period ended September 30, 2019. As noted above, the receipt of Project contributions related to the FEED Project in the prior period exceeded G&A and R&D expenses. For a development stage company, the net loss was in line with expectations.
Research & Development – R&D spending in the current quarter consisted primarily of compensation for technical staff, on-going minerals testing and evaluations, and post-FEED optimization engineering work. Compensation and deferred compensation costs were lower due to the salary reduction initiatives implemented on April 1, 2020. Project costs were higher by $0.2 million for the three-month period ended September 30, 2020 compared to the same period in 2019 due to minerals product development and ongoing testing, and the Company’s share of joint project costs for engineering work by Canadian Natural. Recovery of project costs was nil for the three-month period ended September 30, 2020 compared to $1.0 million for the three-month period ended September 30, 2019. The recovery in 2019 related to the collection of FEED contributions from ERA and Canadian Natural for the final FEED project milestones. Based on the level of post-FEED activity, R&D costs were in line with expectations.
General & Administrative – G&A expenses for the three-month period ending September 30, 2020 were 29% lower at $0.34 million as compared to $0.48 million for the three-month period ended September 30, 2019. For the nine-month period ending September 30, 2020, G&A expenses were 19% lower at $1.3 million compared with $1.6 million in the comparable 2019 period. Management made voluntary salary reductions effective April 1, 2020 and significantly reduced other variable compensation to preserve cash and deal with the ongoing impact of the COVID-19 pandemic and the economic uncertainty related to the decline in oil prices. Professional fees in the quarter increased due to legal costs related to contract reviews for grant funding agreements offset by zero travel expenses due to COVID-19 related restrictions. For the nine-month period ended September 30, 2020, the increase in consulting and professional fees related to legal fees for shareholder matters and regulatory reporting requirements due to the COVID-19 pandemic. Investor relations costs increased during the nine-month period due to costs related to hosting the annual shareholder meeting in a virtual format to comply with public health measures. G&A cash expenses were lower by $39,000 during the quarter primarily related to compensation and travel reductions, offset by professional fees and regulatory costs as compared to the three-month period in the prior year. Deferred and equity-based compensation costs were lower during the three-month and nine-month periods ended September 30, 2020 as the Company did not grant stock options in the current fiscal year and voluntarily reduced deferred compensation programs. These on-going initiatives together with rent reductions, group benefit premium reductions, workers compensation premiums refunds and other initiatives will continue to reduce G&A throughout the balance of the year.
Cash Position – The Company had an aggregate of $3.2 million in cash at September 30, 2020 consisting of cash and interest-bearing cash accounts as compared to $5.1 million at December 31, 2019. The decrease in cash and short-term investments of $1.9 million is the result of funding the Company’s post-FEED Project activities, general and administrative and public company expenditures. While the Company has enough cash to cover normal operating cash costs for the next twelve months, the ability to cover detailed engineering programs will depend on the approved programs for 2021 and the amount of government funding the Company is able to secure for those programs. Once there is more certainty with respect to the approved program and the supporting government funding, the Company will evaluate the funding requirements to determine the timing and required capital to support the continued development of the project.
To view the Company’s management discussion and analysis and interim unaudited financial statements for the three and nine-month periods ended September 30, 2020, please visit our website at www.titaniumcorporation.com or SEDAR at www.sedar.com.
For further information, contact: Scott Nelson President & CEO Tel: (403) 561-0439 Jennifer Kaufield Vice President Finance & CFO Tel: (403) 874-9498