RNS Number:6966Y
Avocet Mining PLC
17 July 2002
Preliminary audited results for the year ended 31 March 2002
HIGHLIGHTS
• Gold production up 8% to a record 107,340 ozs.; gold revenues up 17%.
• Developed gold resources increased by 43% to 581,500 ozs.
• Positive results for gold project at newly acquired Indonesian
property.
• New focus on gold, £11.9 million write down of tungsten business.
• Operating profit before tungsten provision up 22%.
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
1999 2000 2001 2002
£'000 £'000 £'000 £'000
Turnover 16,877 22,341 24,770 25,465
Operating cash flow (5,447) 4,718 3,339 3,989
Pre-tax profit before exceptional items (10,828) 802 195 941
Pre-tax profit after exceptional items (21,642) (452) 195 (10,933)
Gold produced (ozs.) 53,190 89,830 99,750 107,340
Tungsten produced (mtus) 140,000 113,000 91,300 89,900
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 7907 4761 / 020 8949 7171
CHAIRMAN'S STATEMENT
Avocet's fiscal year ending 31 March 2002 was a period of contrasts and a
watershed for the Company's business. The year started with gold prices close to
a twenty-two year low while tungsten concentrate prices had surged to a fifteen
year high. By the year-end, the fortunes of these metals had reversed with a
sustained recovery in gold prices and a halving of tungsten prices. Meanwhile,
the Company achieved a new record for gold production, acquired a highly
prospective gold property in Indonesia and reduced its planned tungsten
production.
At the time of its acceptance to the Official List of the London Stock Exchange
in 1996, the Company had built a significant investment in the tungsten mining
and processing industry in the expectation of a long-term improvement in a
market that had long been depressed by artificial market forces. However, as the
awaited market rallies have occurred and then disappeared, the Company has had
to reduce its tungsten business to the extent that it now accounts for less than
15% of the Company's turnover. The past year's performance of the tungsten
market was a final disappointment, and, as we recently announced, the Company
has decided to write down its remaining tungsten assets and focus on building
its gold business. To that end, the Company will shortly transfer its share
listing to London's Alternative Investment Market (AIM). AIM has matured in
recent years to become a market conducive to the growth of mining companies of
Avocet's size.
Financial Results
The Group's net loss for the year was £10.9 million, or 16.63p per share,
compared with the prior year's maiden net profit of £26,000 (0.04p per share).
Included in the year's loss was an exceptional provision of £11.9 million
against the tangible fixed assets of the Company's remaining tungsten operation,
the Panasqueira mine owned by its Portuguese subsidiary, Beralt Tin & Wolfram.
This provision effectively reduces the net worth of the Company's tungsten
assets to zero. Without the provision, the Company's financial results were an
improvement over the prior year owing largely to a better than expected
performance by the Company's Penjom gold mine in Malaysia.
Turnover increased slightly to £25.5 million. Record gold sales of 107,050 ozs.
combined with a 4% increase in average realised gold prices to US$291/oz.,
inclusive of hedging gains, lifted gold revenues by 17%. Although tungsten sales
benefited from a 32% improvement in realised prices, lower sales volumes caused
total tungsten revenues to fall by 40%.
Gross profit improved by 7% to £2.8 million, mostly on the strength of increased
gold sales while the tungsten business was almost breakeven. The cost of gold
sold increased by US$4/oz. to $250/oz. owing to higher depreciation. Excluding
the provision for Beralt, operating profit increased by 22% as the Company
further reduced its overheads.
A fall in interest rates during the year and a reduction in net borrowings
decreased the Group's net interest expense by £0.4 million. A £0.5 million
increase in capital expenditures included improvements at Penjom and the
acquisition of a gold property in Indonesia where the Company's North Lanut gold
project is undergoing feasibility studies.
At the year-end, the Group's liquidity position was significantly improved. Net
current assets increased from £2.7 million to £5.4 million, and cash balances
were up by £0.7 million to £2.3 million. The Company also rescheduled the
majority of its debt, a £8.1 million loan, due this year with principal
repayments now due over a two-year period commencing 30 June 2003.
Gold
Market Review
Spot gold prices rose from US$256/oz. at the beginning of the fiscal year to
above US$300/oz. by the year-end. This was the market's most encouraging rally
of the past few years. However, the year's average spot price of US$278/oz. was
little changed from the prior year and this permitted the Group to earn a US$13/
oz. premium on its hedging positions. The Company currently has 80,000 ozs. of
gold, or the equivalent of less than 10% of its developed and undeveloped gold
resources, hedged on a spot deferred basis. This allows the Company to sell its
gold at the greater of the spot price or the contracted price until contracted
deliveries are met. The current contracted price is US$296/oz.
Penjom
Gold production from Penjom was 107,340 ozs., an 8% increase over the prior
year's production. The principal reasons were better than expected ore grades
and process recovery rates which, together, increased recovered ore grades by
16%. Offsetting this improvement was a lower plant throughput owing to the
treatment of harder ores. Unit cash operating costs were unchanged at US$225/oz.
of which the largest portion was a mining cost of US$142/oz. resulting from the
removal of waste rock from the open pit at 2.4 times the average rate scheduled
for Penjom's remaining life.
In February 2002 the Company announced a new mineral resource estimate for
Penjom that has been independently audited to internationally recognised
standards. However, production results to date indicate that this resource is
underestimating gold content by 25%. Furthermore, approximately 100,000 ozs. of
gold were added to Penjom's open pit resource, and cut-off grades were lowered
in line with higher gold prices. Therefore, the Company has increased its
estimate of the balance of Penjom's mineable resource at 31 March 2002 by 43% to
581,500 ozs.
North Lanut
In March 2002 the Company announced the acquisition of a 460 square mile
exploration property in North Sulawesi, Indonesia, from Newmont Mining
Corporation. This property is now 80% owned by Avocet through an Indonesian
company with a local partner holding the remaining 20%. From the thirty-seven
gold occurrences identified by Newmont, the Company is focused on developing a
gold mine based on two adjacent deposits in an area known as North Lanut where
exploration drilling by Newmont identified a mineral inventory of 800,000 ozs.
Feasibility studies are ongoing to validate a mineable resource of at least
400,000 ozs. amenable to open pit mining and heap leach processing methods with
low capital and operating costs.
Gold Exploration
The Company conducted only limited gold exploration during the year. However, in
light of Avocet's new emphasis on gold, it has enhanced its exploration
capabilities with the recent hiring of an experienced chief geologist who was
previously Newmont's exploration manager for S.E. Asia. Under his management,
the Company has allocated £1 million for this year's exploration programme with
the objective of adding resources at Penjom and North Lanut, and evaluating
other prospects on the Company's exploration properties in Malaysia and
Indonesia.
Tungsten
Market Review
For most of the first half of the year, the London Metal Bulletin mid price for
tungsten concentrates was US$70.50 per metric tonne unit (mtu), which was the
first time in many years that prices had achieved a level which the Company
believed fairly reflected the industry's cost of production. Unfortunately, this
price level was short-lived and prices plummeted to US$35/mtu by the year-end.
Although part of the cause was reduced demand brought about by the events of
September 11, the price decline was exacerbated by market forces that have
typically plagued the industry. These included continuing stockpile releases by
the US Government and excess production from the world's dominant producer,
China. However, Beralt was able to take advantage of the higher price level by
entering into sales contracts that guarantee minimum prices above US$60/mtu
through December 2003.
Beralt
Market conditions caused Beralt to cancel a planned expansion of production,
which instead was reduced to the level of its new sales contracts. Therefore,
production of 89,900 mtus of tungsten concentrate was slightly below the prior
year's production rate. Total cash costs of production rose by 12% because of a
decline in ore grades caused by a lack of production areas within the
Panasqueira mine. This was remedied by the year-end with the completion of a
development programme that delineated sufficient mineral resources for the mine
to regain its historic 4-5 year production horizon.
Bishop
The closure of the Bishop tungsten facilities in California has been completed
with approval from the authorities for all areas except the mill site. The
directors still expect that funds held by Bishop will be sufficient to satisfy
any future environmental requirements, including long-term monitoring. However,
the directors consider it prudent at this time to retain the reclamation
provision of £1.2 million in the Group's accounts.
Outlook
The Indonesian acquisition, the move to AIM, and the write down of the tungsten
business are the first steps towards the Company's new objective of reaching at
least 300,000 ozs. of annual gold production within the next three years. As
part of this new focus, the Company will unveil a new corporate identity
supported by a new website at the time of the publication of its annual report
and accounts in August.
Penjom's first quarter production is estimated at 27,460 ozs. of gold and we
expect that the mine will produce in excess of 100,000 ozs. this year. Unit
costs of production at Penjom should fall slightly as the mine's rate of waste
rock removal starts a declining trend. Therefore, cash generation, even at
currently hedged gold prices, is expected to be adequate to fund the Company's
expenses for the year. These include its expanded gold exploration programme,
completion of gold mine feasibility studies in Indonesia, and a build up of cash
balances to meet debt repayments scheduled for next year.
Based on feasibility results to date, we believe that our North Lanut project in
Indonesia may support an operation producing a minimum of 50,000 ozs. of gold
per year at a cash cost below US$150/oz. A decision to proceed with the project
will be made before the end of 2002. If positive, the new mine will be a
profitable foundation for expanding production and resources in an area that is
highly prospective.
A number of other opportunities to add to the Company's gold mining and
exploration holdings in Asia are at the early stages of negotiation.
We do not expect Beralt to be a drain on the Company's financial resources while
it maintains its current sales contracts. In the meantime, a satisfactory
outcome to the divestment of the Company's tungsten assets will be pursued, with
discussions currently ongoing with a number of interested parties.
The Company recognises that its most valuable assets are its employees to whom,
on behalf of the Board and the Company's shareholders, I give my sincere thanks
for the successes of the past year, and my best wishes for years of success to
come.
Nigel McNair Scott
17 July 2002
The full report and accounts for the year ended 31 March 2002 will be mailed to
shareholders during August 2002.
AVOCET MINING PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2002
Note 2002 2001
restated
£000 £000
Turnover
Continuing operations 25,465 23,661
Discontinued operations - 1,109
25,465 24,770
Cost of sales (22,667) (22,160)
Gross profit 2,798 2,610
Provision for impairment of tangible fixed assets 3 (11,874) -
Other administrative expenses (1,188) (1,292)
Total administrative expenses (13,062) (1,292)
Operating (loss)/profit
Continuing operations (10,264) 1,318
Discontinued operations - -
Operating (loss)/profit (10,264) 1,318
Net interest and similar charges (669) (1,123)
(Loss)/profit on ordinary activities before taxation (10,933) 195
Tax on (loss)/profit on ordinary activities (9) (184)
(Loss)/profit on ordinary activities after taxation (10,942) 11
Equity minority interest 15 15
(Loss)/earnings for the financial year retained (10,927) 26
(Loss)/earnings per share 2 (16.63p) 0.04p
Earnings per share before non-recurring exceptional item 2 1.44p 0.04p
AVOCET MINING PLC
CONSOLIDATED BALANCE SHEET
as at 31 March 2002
2002 2001
restated
£000 £000
Fixed assets
Intangible assets 811 538
Tangible assets 12,337 26,816
13,148 27,354
Current assets
Stocks 5,496 4,694
Debtors 1,002 1,334
Debtors due after more than one year 2,833 2,440
Cash at bank and in hand 2,267 1,596
11,598 10,064
Creditors: amounts falling due in less than one
year (6,239) (7,339)
Net current assets 5,359 2,725
Total assets less current liabilities 18,507 30,079
Creditors: amounts falling due in more than one
year (9,982) (9,699)
Provisions for liabilities and charges (2,591) (3,375)
5,934 17,005
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 (46,526) (35,460)
Equity shareholders' funds 6,088 17,154
Equity minority interests (154) (149)
5,934 17,005
AVOCET MINING PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES AND
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 March 2002
2002 2001
restated
£000 £000
Statement of total recognised gains and losses
(Loss)/profit for financial year (10,927) 26
Exchange translation adjustments (139) 686
Total recognised gains and losses (11,066) 712
Prior year adjustment (991)
Total recognised gains and losses since the last financial statements (12,057)
Reconciliation of movements in group shareholders' funds
Total recognised gains and losses (11,066) 712
Net change in shareholders' funds (11,066) 712
Opening shareholders' funds (originally £18,154 before deducting the prior year 17,154 16,442
adjustment £991)
Closing shareholders' funds 6,088 17,154
AVOCET MINING PLC
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2002
2002 2001
£000 £000
Net cash inflow from operating activities 3,989 3,339
Returns on investment and servicing of finance
Interest received 81 162
Interest paid (728) (1,136)
Net cash outflow from returns on investment
and servicing of finance (647) (974)
Taxation (73) (37)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,699) (1,376)
Acquisition of subsidiary (164) -
Deferred exploration costs (71) (20)
Net cash outflow from capital expenditure
and financial investment (1,934) (1,396)
Financing
Repayments of borrowings (408) (2,308)
Capital repayments on finance leases (256) (268)
Net cash outflow from financing (664) (2,576)
Increase/(decrease) in cash 671 (1,644)
AVOCET MINING PLC
Notes to the Financial Statements
1. Financial Reporting Standards and Accounting Policies
The financial information complies with the relevant financial reporting
standards and the accounting policies are applied on a basis consistent with
those applied in the annual financial statements and in the prior year, except
as stated below:
FRS 19 "Deferred Taxation" affects the way the Group accounts for deferred
taxation and has been adopted for the first time in 2002. FRS 19 requires the
full, rather than the partial provision of future corporation tax liabilities
deferred by timing differences. This has resulted in a prior year adjustment
that has decreased shareholders funds at 1 April 2000 by £891,000 and to
increase the charge to taxation and reduce the profit after taxation for the
year ended 31 March 2001 by £100,000. There is no effect on the current year
charge, but the net assets of the Group have decreased by £991,000 as at 31
March 2002.
2. (Loss)/earnings per ordinary share
The calculation is based on losses of £10,927,000 (2001:£26,000 restated profit)
and on a weighted average of 65,696,530 shares in issue (2001: 65,696,530). The
earnings per share before the non-recurring exceptional item is based on profits
of £947,000 (2001:£26,000 restated profit) and on a weighted average of
65,696,530 shares in issue (2001: 65,696,530).
3. Provision for impairment of tangible fixed assets
Included are amounts for impairment of tangible fixed assets of the Group's
tungsten assets in Portugal resulting from impairment tests carried out at the
balance sheet date.
4. 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 2002 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 2002 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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