RNS Number:4350H
Avocet Mining PLC
25 July 2001
Avocet Mining PLC
Preliminary audited results for the year ending 31 March 2001
HIGHLIGHTS
* Turnover increased by 11% to #24.8million
* First full-year pre-tax profit since listing in 1996: #195,000
* Gold production up 11% to record 99,750 ozs.
* Tungsten production up 63% to 91,300 mtus
* Tungsten concentrate prices substantially higher
For further information:
Avocet Mining PLC
John Catchpole (Chief Executive and Finance Director)
Jonathan Henry (Executive Vice President) 020 7907 9000
4C Communications Ltd.
Carina Corbett 020 8949 7171
CHAIRMAN'S STATEMENT
I am pleased to report that the company made its first annual profit since it
was listed in 1996. Although the year's pre-tax profit of #195,000 was a
modest improvement over the prior year's loss of #452,000, the company's
operational and financial performance represented a stabilisation of its
business and the establishment of a sustainable future for rebuilding the
company's fortunes.
Penjom, the company's gold mine in Malaysia, had a record year in terms of
production, producing just under 100,000 ozs. of gold, an 11% improvement over
last year. The average realised price on gold sales was US$274/oz., a 5%
decline from last year's average price which benefited from hedged sales. The
hedging position remaining at the beginning of the year was liquidated at a
profit. Cash costs of production, including royalties and overheads, were
US$225/oz.
Production from Beralt's Panasqueira tungsten mine in Portugal improved by 63%
to 91,300 mtus of concentrates bringing it towards its current capacity which
is being expanded. Beralt also purchased and resold at a profit 53,600 mtus of
its concentrate stocks held by the mine's previous owner. Average market
prices for concentrates increased by 33% to US$51.4/mtu. Cash costs of
production approximated last year's at US$44.8/mtu.
The closure and reclamation of the company's tungsten operation at Bishop in
California proceeded on schedule. Associated costs were covered by proceeds
from asset sales including the liquidation of remaining tungsten stocks.
Finance
Turnover at #24.8 million was up 11% largely because of increased gold sales
while a 97% increase in sales by Beralt more than offset Bishop's loss of
revenues. Excluding the prior year's recognition of ore stockpile values at
Penjom, gross profit increased by #1.4 million mainly because of a reduction
in losses experienced by the tungsten business. Both administrative and
interest expense were virtually unchanged. Net borrowings decreased by #2.6
million. During the year, the company's principal creditor agreed to defer
US$3.0 million of current repayments on US$12 million of bank debt. Addressing
the overall level of indebtedness continues to be one of the company's primary
challenges. Discussions are under way with financial institutions which we
look forward to bringing to a satisfactory conclusion.
Gold
Gold prices were yet again disappointing with the average spot price falling
by 5%. However, the company took advantage of a brief price rally in May 2001
to hedge forward 50,000 ozs. at an average price of $286/oz. Market sentiment
on the future of gold prices has become more positive due to the near record
gap between mine production and fabrication demand, a potential weakening of
the US dollar, and the pending liberalisation of the Chinese gold market.
Penjom's increased gold production was achieved with the first full year's
successful operation of facilities specially developed to process the mine's
carbonaceous ores and to retreat tails. Recovery rates, which at one time were
less than 50%, were improved to 78% excluding an additional 6,600 ozs. from
tails retreatment. Throughput was also increased with a reduction in
processing costs. This permitted Penjom to process previously sub-economic
grades of ore, reducing average head grades from 7.9 g/t to 6.4 g/t.
Unit cash operating costs increased by 20% due to the deepening of open pits,
increased rock blasting, and, more importantly, an increase in waste-to-ore
stripping ratios to over 30:1. The cash cost for such waste stripping in
excess of the average projected for the current remaining life of Penjom's ore
resources is US$17/oz. which has been deferred in the company's accounts.
A thorough independent evaluation of Penjom's ore resources was completed in
October 2000. This evaluation concluded that local geology was more complex
than previously assumed with the indication that ore resources were contained
within higher grade but smaller and more discrete zones. Consequently, a more
conservative approach was taken in assessing that portion of current ore
resources that was economically recoverable for mine planning purposes. After
assuming a lower, long run gold price of $270/oz., and discounting those
resources which require more definition by exploration, Penjom should sustain
current gold production rates for at least the next three years at an average
total cash cost of $180/oz. This is approximately one year less than the prior
year's estimate.
Tungsten
The long anticipated recovery in tungsten prices was finally realised during
the year with average market prices for tungsten concentrates rising by over
50% in the second half of the year to US$71/mtu at year end and beyond. This
is the highest sustained price in more than 15 years and reflects the apparent
end of substantial stockpile releases, and actions by China, which dominates
the market, to rationalise its tungsten industry, both of which have been the
principal causes of depressed prices for so long. The resultant demand for
Beralt's concentrates was only partially satisfied by the stocks it purchased
and increased production. Realised prices increased by 11% to $46.80/mtu.
However, they were lower than market because of sales commitments at prices
fixed before and during the price rally. Since then, Beralt has renegotiated
all of its sales contracts such that most of its production is committed for
up to one year at the greater of market or minimum prices.
Reasonable progress was made during the year to increase Beralt's production
to an interim and sustainable target of 109,000 mtus per year. Obstacles that
have had to be overcome include the recruitment and retention of skilled
labour, and capacity constraints due to a lack of advance underground
development and incomplete capital and maintenance projects that had been
deferred because of unfavourable market conditions. The financial results of
Bishop's closure and reclamation were better than expected.
Another project that has been initiated by Beralt is an investigation of the
exploration potential of its properties where mining has been active for over
a hundred years but little effort had been made in the search for new
orebodies in a possibly rich environment.
Outlook
Having placed its operations on a more assured footing, the company's
objectives are now to build an increasingly profitable mining business by
optimising the performance of its existing operations and by providing growth
through acquisitions and strategic alliances that complement the strengths of
the company. These strengths include the experiences gained from the
discovery, establishment and operation of a gold mine whose success has relied
on the development of unique process systems that have applications elsewhere,
and on being the western world's largest supplier of high quality tungsten
concentrates in a stabilised market environment.
Gold production for the first three months of the current year was 25,000 ozs.
which is above expectations. At current gold prices Penjom is expected to
generate modest cash flow for this year as the stripping of waste rock
continues at above average rates. However, this stripping will expose more of
the mine's ore resource for an exploration programme that will not only be
directed at areas where ore resources require better definition for mine
planning purposes, but also at possible ore extensions and other targets that
have been identified from our improved understanding of local geology. We are
confident that this programme will extend future gold production. Potential
additions to our gold business and possible joint ventures on exploration in
the region are currently under consideration.
Completion of Beralt's interim expansion is expected by the end of 2001 when
the mine should also start benefiting from lower costs. A further 40%
expansion of production is likely to be initiated during the year. To underpin
the investment required, Beralt is on the verge of completing renegotiations
of its sales contracts for longer terms and higher minimum prices. With our
strong market position, we are evaluating a number of opportunities to add to
our tungsten business. An agreement completed for the sale of land at Bishop
should reduce its remaining reclamation obligations.
The company's objectives will not be achieved without the continuing efforts
and skill of all of our employees worldwide, to whom on behalf of the Board
and shareholders I give my sincere thanks for the successes achieved so far.
Nigel McNair Scott
24 July 2001
"mtu": metric tonne unit - one tonne of ore concentrate containing 1%
of the desired product
The full report and accounts for the year ended 31 March 2001 will be
mailed to shareholders in the week beginning 6 August 2001.
AVOCET MINING PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2001
Note 2001 2000
#000 #000
Turnover
Continuing Operations 23,661 18,831
Discontinued Operations 1,109 3,510
24,770 22,341
Cost of Sales (22,160) (19,563)
Gross profit 2,610 2,778
Administrative expenses (1,292) (1,377)
Operating profit/(loss)
Continuing Operations 1,318 2,330
Discontinued Operations - (929)
1,318 1,401
1
Exceptional loss on termination of operations in USA - (1,254)
Net interest and similar charges (1,123) (599)
Profit/(loss) on ordinary activities before taxation 195 (452)
Tax on profit/(loss) on ordinary activities (84) (7)
Profit/(loss) on ordinary activities after taxation 111 (459)
Equity minority interest 15 37
Earnings/(loss) for the financial year retained 126 (422)
Earnings/(loss) per share 2 0.2p (0.6p)
AVOCET MINING PLC
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2001
2001 2000
#000 #000
Fixed assets
Intangible - deferred exploration costs 538 479
Tangible assets 26,816 26,279
27,354 26,758
Current assets
Stocks 4,694 4,517
Debtors 1,334 1,010
Debtors due after more than one year 2,440 834
Cash at bank and in hand 1,596 2,901
10,064 9,262
Creditors: amounts falling due in less
than one year (7,339) (7,003)
Net current assets 2,725 2,259
Total assets less current liabilities 30,079 29,017
Creditors: amounts falling due in more
than one year (9,699) (8,866)
Provisions for liabilities and charges (2,384) (2,952)
17,996 17,199
Capital and reserves
Called up share capital 16,424 16,424
Share premium account 23,600 23,600
Other reserves 12,590 12,590
Profit and loss account (34,469) (35,281)
Equity shareholders' funds 18,145 17,333
Equity minority interests (149) (134)
17,996 17,199
AVOCET MINING PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES AND
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 MARCH 2001
2001 2000
#000 #000
Statement of total recognised gains and losses
Profit/(loss) for financial year 126 (422)
Exchange translation adjustments 686 (319)
Total recognised gains and losses 812 (741)
Reconciliation of movements in group shareholders' funds
Total recognised gains and losses 812 (741)
Net change in shareholders' funds 812 (741)
Opening shareholders' funds 17,333 18,074
Closing shareholders' funds 18,145 17,333
AVOCET MINING PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2001
2001 2000
#000 #000
Net cash inflow from operating activities 3,339 4,718
Returns on investment and servicing of finance
Interest received 162 27
Interest paid (1,136) (1,009)
Net cash outflow from returns on investment
and servicing of finance (974) (982)
Taxation (37) (1)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,376) (2,026)
Proceeds from disposal of tangible fixed assets - 164
Deferred exploration costs (20) (165)
Net cash outflow from capital expenditure
and financial investment (1,396) (2,027)
Financing
Repayments of borrowings (2,308) (482)
Capital repayments on finance leases (268) -
Net cash outflow from financing (2,576) (482)
(Decrease)/increase in cash (1,644) 1,226
AVOCET MINING PLC
Notes to the Financial Statements
1. Exceptional loss on termination of operations in USA
The prior year exceptional loss on termination of operations in North America
represents the directors' best estimate of the amount required to
satisfactorily close the Bishop facility and the Pine Creek mine.
2. Earnings/(loss) per ordinary share
The calculation is based on profits of #126,000 (2000: #422,000 loss) and on a
weighted average of 65,696,530 shares in issue (2000: 65,696,530).
3. Financial Information
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The summarised balance sheet at 31 March 2001 and the summarised profit and
loss account, summarised cash flow statement and associated notes for the year
then ended have been extracted from the Group's 2001 statutory financial
statements (which have not yet been filed with Companies House) upon which the
auditors opinion is unqualified, and does not include any statement under
Section 237 of the Companies Act 1985.
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