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Vancouver, BC – Cabo Mining Enterprises Corp. (“Cabo” or the “Company”) (TSX-V:CBE) today reported a second quarter loss before stock-based compensation and taxes of $76,000 ($0.003 per common share – basic) and net loss after stock-based compensation and taxes of $772,000 ($0.028) per common share – basic); compared to a loss of $101,000 (0.011 per common share – basic) recorded in the second quarter of 2004.

“Essentially, Cabo was near break even before interest, amortization, foreign currency losses, stock based compensation, and taxes were taken into account” says John Versfelt, Chairman, President and CEO of Cabo.


(CDN $000s, except earnings per share)

3 months ending 

3 months ending 
Dec 31-04

6 months ending 
Dec 31-05

6 months ending 
Dec 31-04


$4,693  $ - $9,985 $ -

Net Earnings (loss) before interest, amortization,
foreign exchange, loss on termination of contracts,
stock compensation and taxes

 3 (98) 441 (126)

Net Earnings (Loss) Before Stock-based Compensation and Taxes

 (76) (101) 303 (160)

Net Earnings (Loss) After Stock-based Compensation and Taxes

 (772) (101) (416) (16)

Earnings (Loss) per Share ($) Basic Before Stock-based Compensation and Taxes

(0.003) (0.011) 0.011 (0.017)

Earnings (Loss) per Share ($) Basic After Stock-based Compensation and Taxes

 (0.028) (0.011)  (0.015)  (0.017) 

Gross Margin %

 14.7%  - 16.4%  -

Working Capital (deficiency)

 7,304 (241)  7,304  (241)

The Company recorded:

  • Second quarter fiscal 2005 revenues of $4,693 million compared with $5.292 million in the first quarter of fiscal 2005, and $0 for the second quarter fiscal year 2004.
  • Loss for the second quarter fiscal 2005 was $76,000 before stock-based compensation and taxes and $772,000 after stock-based compensation and taxes resulting in earnings (loss) per share of ($0.003) and ($0.028) respectively. This compares with first quarter fiscal 2005 profit of $438,000 beforestock-based compensation and taxes and $356,000 after stock-based compensation and taxes resulting in earnings per share (basic) of $0.016 and $0.013 respectively.
  • Overall gross margin percentage for the second quarter fiscal 2005 of 14.7%, compared with gross margin of 17.9% in the first quarter fiscal 2005 and 0% in previous quarters.
  • Entry into the geotechnical and environmental drilling sectors with the acquisition of Stratacan.
  • Inroads into the Mexican mineral drilling market.
  • The acquisition of Advanced Drilling, a major presence in Western Canada’s mineral drilling sector
  • A letter of intent to acquire Forages de Montreal.
  • A current asset balance of $10.05 million and working capital in excess of $7 million.

The second quarter of the current fiscal year marks Cabo’s six months as an operating mineral drilling services and exploration company. During the second quarter we continued to gain new muscle and new momentum as Cabo has shifted direction from that of an organization exclusively concentrating on
mineral exploration to one that also focuses on providing mineral drilling services.

“The markets for mineral drilling services in central and eastern Canada strengthened during Q2. We also saw an accelerated demand for international drilling services,” said Mr. Versfelt. “Strong gold and improving base metal prices have translated into improved demand for our services and subsequently we
have experienced a significant increase in the volume of bid requests. In fact, the volume of mineral drilling business is such that we anticipate strong upward pressure on prices in coming fiscal periods resulting in improved gross margins.”

Seasonal factors resulted in Q2 being the weakest quarter in mineral drilling services. Cold weather had an adverse impact on productivity and two to four weeks of holiday breaks resulted in higher job costs as crews were demobilized and remobilized. Because rigs were available for maintenance, we also incurred
additional maintenance costs and higher than normal expenses were incurred in ramping up for anticipated increased demand in following quarters. Cabo incurred higher hiring and training expenses and experienced reduced productivity as our new crews and supervision gained experience working together. The Company also incurred onetime expenses as recent acquisitions were integrated

Looking ahead to our third quarter, the continuation of the winter season will initially impede productivity, but warming temperatures and the absence of the holiday break should see overall top and bottom line improvements. Top line growth is anticipated through our continued international expansion
where premium margins are obtained, and as a result of the integration of
Advanced Drilling. In addition, the improved pricing environment and further acquisitions should also enhance top line growth. Bottom line growth is expected as a result of the realization of operating synergies, improvement in new driller
productivity as experience is gained, and improved pricing conditions in the marketplace.

“With the Advanced Drilling acquisition, we are now the third largest mineral drilling services company in Canada,” continued Mr. Versfelt. “We trust that the continued strength in the mineral sector and our plan of market share expansion through acquisition should lead to continued and improving shareholder

Second Quarter ended December 31, 2004

The Company’s second quarter revenue of $4,693 million was lower than revenue earned in the previous quarter. This decrease can be attributed to the seasonality of the industry as drilling operations are impacted by the winter holidays and the extreme winter conditions in December. It is expected that with the holidays past, and improving weather conditions, increased drilling activities will be less disruptive which will in turn result in higher revenues and increased gross margins.

The integration of Heath & Sherwood Drilling (1986) Inc. and Petro Drilling (Maritimes) Limited into the Company’s operating portfolios is meeting expectations. During the quarter, the Company also finalized the acquisition of Stratacan Inc., Stratacan (Quebec) Inc. and integrated their operations into Cabo’s
portfolio of drilling companies.

The Company remains fully committed to the mineral exploration aspect of its business. During the quarter, it finalized a one million dollar flow-through financing whereby the Company issued 1,250,000 common shares at $0.80 per share. Cabo maintains that its mineral properties have good potential to discover mineral reserves that will add further asset value. The Company remains committed to funding and operating its exploration activities separately from its drilling operations.

Cabo remains in a strong financial position and this strength is reflected on the balance sheet with a current asset balance of $10.05 million and working capital in excess of $7 million. The Company’s growth plans include the ability to offer its existing customers other value added services. Through the acquisition of companies that specialize in different aspects of drilling, Cabo plans to become an industry leader in providing drilling services.

Results of Operations – Second Quarter Ended December 31, 2004

At the beginning of the fiscal year, Cabo embarked on a new beginning as it shifted direction from an organization exclusively concentrating on mineral exploration to one that also focuses on providing mineral and specialty drilling services. The diversification is anticipated to provide a source of cash flow
to the Company that will better insulate it from the cyclical nature of the mineral exploration business. Prior period comparatives are not applicable because of the addition to the Company’s business.

Total revenue for the second quarter was $4.693 million. Surface drilling revenue was $3.137 million compared to the $1.476 realized from underground drilling activities for the three months ended December 31, 2004. Sundry sales totalled $0.80 million for the period.

The overall gross margin percentage for the quarter was 14.7 percent. The decreased margin in the quarter (relative to 17.9% realized in Q1-05) can not only be attributed to the additional costs of the holiday season, but also to the higher than normal ratio of demobilizing the drill rigs from projects completed in December to mobilizing them to new projects that will begin in January 2005. In addition, as drill rigs demobilized, maintenance costs increased as the Company took advantage of the opportunity to service the drill rigs and other equipment without interrupting their future availability to generate revenue. The Company is also in the process of hiring new drill operators, resulting in increased training
expenses and decreased productivity. It should be noted that the gross margin has shown improvement compared with the gross margins of the Company’s subsidiaries prior to their acquisition by Cabo. This improvement in gross margin is driven primarily from improvements in the mineral drilling industry which continues to benefit from the sustained rise in metals prices over the last 3 years.

During the three months ended December 31, 2004, general and administrative expenditures totalled $0.688 million, an increase of $0.165 million from the previous quarter of $0.523. This increase can be largely attributed to the increased marketing and investor relations costs, additional professional and administrative costs as a result of acquisition and integration, and increased administrative costs occurring due to an internal system review to better consolidate operational and administrative functions within the Company upon integration of the drilling subsidiaries.

Additional costs incurred during the quarter also included a charge of $0.666 million for stock-based

Mineral Properties

Mineral exploration expenses and mineral property expenditures for the three months ended December 31, 2004 totalled $0.181 million compared to $0.756 million for the first quarter of the fiscal year. During that period, a lump sum payment of $0.599 million was made to Prairie C to acquire a 100% interest in their Cobalt, Ontario property.

Future Developments

Going forward, the Company anticipates that current mineral and metal prices should remain buoyant which bodes well for Canadian and international exploration and mine development projects and consequently, the mineral drilling services sector. Cabo anticipates further acquisitions of drilling services companies and is forecasting improved revenues as a result. These acquisitions will also result in additional acquisition and integration expenses. Management of Cabo remains committed to good, sound fiscal management practices that provide value to its shareholders.

The Company’s mission, to be the first choice for mineral exploration and mining customers for drilling and exploration services by offering the best value in the industry, remains key to sustaining Cabo’s success. We continue to be committed to our most valuable resource –our employees – and strive to develop and maintain a safe, stable and rewarding work environment that will attract and retain dedicated workers. Furthermore, our goal is to develop a Company that will be a leader in the industry in all aspects of service delivery as well as corporate governance.

A copy of the Quarterly Report is available through SEDAR ( and the Company’s website (

Cabo Mining Enterprises Corp. is a drilling services and mineral exploration company headquartered in North Vancouver, British Columbia, Canada. The Company, presently with more than 100 drills and more than 225 staff, provides drilling services through it subsidiaries Heath & Sherwood Drilling (1986)
Inc., of Kirkland Lake, Ontario; Petro Drilling Company Limited of Springdale, Newfoundland; Stratacan Inc. of St. John’s, Newfoundland; Stratacan (Quebec) Inc. of St. Julie, Quebec; and Advanced Drilling Ltd., of Surrey, British Columbia. Cabo’s mineral exploration properties are located near Cobalt, Kenora,
and Sudbury, Ontario, Canada. The Company’s common shares trade on the TSX Venture Exchange under the symbol: CBE.


“John A. Versfelt”

John A. Versfelt
Chairman, President and CEO

Further information about the Company can be found on the Cabo website ( and SEDAR ( or by contacting Investor Relations Mr. Garett Greene or Mr. John A. Versfelt, Chairman, President & CEO of the Company at 604-984-8894.

* * * *

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, potential mineral recovery processes and other business transactions timing. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

Last Updated: 03/01/2005