RNS Number:2909E
Avocet Mining PLC
27 November 2002
AVOCET MINING PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2002
HIGHLIGHTS
* Pre-tax profit increased by 33% to #1,147,000
* Record first half gold production of 54,380 ozs from Penjom, Malaysia
* North Lanut gold project in Indonesia advanced to full feasibility
* Acquisitions increase potential gold resources to over 5,000,000 ozs
* Agreement reached to sell tungsten assets
6 months to Year to 6 months to
30 Sep. 2001 31 Mar. 2002 30 Sep. 2002
#'000 #'000 #'000
Turnover 12,819 25,465 12,089
Gross profit 1,865 2,798 2,163
Operating profit/(loss) 1,247 (10,264) 1,489
Pre-tax profit/(loss) 862 (10,933) 1,147
Earnings/(loss) per share 0.94p (16.63)p 1.24p
Average spot gold price US$272/oz US$291/oz US$313/oz
Gold production (ozs) 52,580 107,340 54,380
Average total cash cost US$231/oz US$225/oz US$212/oz
__________________________________________________________________________________________________
For further information please contact:
Avocet Mining PLC 4C Communications Ltd
John Catchpole (Chief Executive and Finance Director) Carina Corbett
Jonathan Henry (Executive Vice President) 020 8949 7171
020 7907 9000 020 7907 4761
www.avocet.co.uk
CHAIRMAN'S STATEMENT
Since its last financial year ended 31 March 2002, the group has made
considerable progress towards its corporate objective and focus of expanding its
gold mining business in Asia while at the same time realising improved financial
results. Key achievements included the following:
* Continuing improvement in the performance of the Penjom gold mine in
Malaysia;
* The rapid completion of positive pre-feasibility studies on the North
Lanut gold project in North Sulawesi, Indonesia, acquired earlier in the year
from Newmont;
* The acquisition on 11 November 2002 of a controlling interest in
Zeravshan Gold Company, a gold producer in the Republic of Tajikistan;
* A new bank financing commitment comprising a US$5 million line of
credit.
Also, subject to regulatory approvals, an agreement was reached on 18 September
2002 to sell the group's residual tungsten assets that primarily include the
Beralt mine in Portugal. Beralt, therefore, which was fully written down last
year, is noted in the group's accounts as a discontinued operation.
Financial Results
For the six months ended 30 September 2002, the group made an after-tax profit
of #0.8 million compared to #0.6 million earned for the six months ended 30
September 2001. As a result, earnings per share improved by 32% to 1.24p.
Turnover was #12.1 million (2001: #12.8 million) and was predominantly from gold
sales of 50,600 ozs (2001: 53,600 ozs) all sold at spot prices, which averaged
US$313/oz. For the prior period, the group realised an average gold price of
US$281/oz that included #0.3 million from liquidating a hedged position. The
group still maintains a hedging position of 80,000 ozs representing only 7% of
the group's gold resources at its operations in Malaysia and Tajikistan. This
position would realise a current gold price of US$298/oz. Nevertheless,
deliveries at that price are deferrable for at least the next two years.
Gross profit increased to #2.2 million (2001: #1.9 million) and included #0.3
million of Malaysian exploration costs that were expensed. The profitability
improvement was largely as a result of lower production expenses at Penjom which
were accounted for as equivalent to US$208/oz (2001: US$235/oz) inclusive of a
reduction in depreciation to US$30/oz (2001: US$43/oz) because of an increase in
ore reserves.
Pre-tax profit increased 33% to #1.2 million (2001: #0.9 million) even though
Beralt contributed an operating loss of #0.1 million (2001: #0.2 million
profit). Administrative costs rose by 9% to #0.7 million due to transactional
activities, and net interest costs fell by 10% to #0.3 million due to lower
interest rates and favourable exchange differences.
Operating cash flow reduced to #1.8 million (2001: #2.1 million). Net cash
inflow increased to #0.5 million (2001: #0.2 million) resulting from reduced
capital expenditures of #0.8 million (2001: #0.9 million) of which half were
spent on the North Lanut project, and lower financing repayments of #0.3 million
(2001: #0.4 million).
Penjom, Malaysia
6 months to Year to 6 months to
30 Sep. 2001 31 Mar. 2002 30 Sep. 2002
Production Statistics:
Tonnes Mined 10,795,000 20,630,000 7,986,000
Waste:Ore Ratio 37 29 26
Tonnes Processed 272,000 539,000 257,000
Grade Processed (g/t) 6.9 7.1 7.5
Recovery Rate 88% 87% 88%
Gold Produced (ozs) 52,580 107,340 54,380
Cash Costs (US$/oz):
Mining 144 142 131
Processing 56 51 51
Admin. & Royalties 31 32 30
Total Cash Costs 231 225 212
The Penjom mine had a record first half gold production of 54,380 ozs, an
increase of 3% over the six months ended 30 September 2001. This was achieved
from higher than expected ore grades which more than offset a 6% decline in ore
tonnes processed. The lower throughput was due to a trend towards harder ores
being mined and the desire to maintain ore crushing sufficient to sustain
recovery rates. A return to higher throughput rates is expected once the
installation of a secondary ball mill is completed in December 2002. Also, there
were continuing refinements to and expansions of the unique resin-in-leach
systems developed by Penjom for the processing of its predominantly carbonaceous
ore.
Total cash costs of production declined by 8% to US$212/oz owing principally to
a reduction in unit mining costs. This reduction results from a lowering of
Penjom's waste:ore stripping ratio that commenced last year and is expected to
continue for the mine's current ore reserves. This is reflected as a US$34/oz
(2001: US$39/oz) deferred cost in the group's accounts representing an estimate
of waste mining costs in excess of the average expected over the mine's current
life.
North Lanut, Indonesia
Pre-feasibility studies were completed in October 2002 and were sufficiently
encouraging for the company to proceed to full feasibility. Studies focused on
bringing the 800,000 oz mineral resource base estimated by Newmont to a status
acceptable under international standards, and on confirming that portion of the
resource that would be amenable to low cost heap leaching of uncrushed ore,
known as dump leaching.
Independently verified results to date indicate that one deposit, Riska,
contains a mineral resource of 468,000 ozs of gold at a grade of 1.4 g/t.
Approximately 85% of this resource could be dump leached with an average gold
recovery rate of more than 70% and would be mineable at a low waste:ore ratio of
1:1. These results do not include the latest data from additional drill holes
and metallurgical test work.
Zeravshan Gold Company, Tajikistan
The company's interest in ZGC was acquired after 30 September 2002, and,
therefore, is not part of the group's accounts for the period. This interest
amounts to a 44% shareholding in ZGC with a further 5% to be acquired from the
International Finance Corporation. Under agreements with the government of
Tajikistan, which owns the remaining interest, the company has management
control and an interest in 90% of ZGC's cash flows.
Since commencing production in 1996, ZGC has produced over 500,000 ozs of gold
from an open pit at the Jilau deposit. This production is now transitioning to
an underground operation at Jilau and to nearby surface deposits. As a result,
cash operating costs are averaging approximately US$275/oz, which is above
historic levels. ZGC also has exploration rights over 3,000 sq kms in the region
surrounding Jilau where past Soviet exploration has identified numerous gold
deposits containing over 8 million ounces of gold including two partially
developed underground mines, Taror and Chore.
Gold Resources & Exploration
Tabulated below are the company's own estimates of the group's drill indicated
gold resources at its operations and projects, and of the gold reserves which
are currently projected to be mined from such resources.
Mineral Resources Mineable Reserves
Gold (ozs) Grade (g/t) Gold (ozs) Grade (g/t)
Malaysia:
Penjom 700,000 4.7 530,000 6.7
Buffalo Reef 100,000 2.5
Tajikistan:
Jilau 500,000 1.2 360,000 1.4
Taror* 2,000,000 6.6
Chore 900,000 4.4
Indonesia:
N. Lanut 800,000 1.2 350,000 1.4
Total 5,000,000 4.5 1,240,000 3.7
* includes copper on a gold equivalent basis
After some years of limited activity, a new exploration programme was initiated
under the management of an experienced chief geologist hired earlier in the
year. This programme was largely focused on evaluating the group's existing
resources for their reserve potential and identifying exploration targets in and
around existing operations and projects. The Buffalo Reef prospect near Penjom,
which had been largely written off, is one target that will be the subject of
renewed focus. The results of the programme's first phase, for which
expenditures have been US$0.4 million to date, are expected early next year.
Outlook
Nine months ago we announced a new corporate objective of becoming a pure gold
company in Asia with the goal of attaining over 300,000 ozs/year of gold
production before 2006. In a remarkably short period of time, the foundations
for this goal have been established.
Penjom should again exceed 100,000 ozs of gold production for the year. With the
now proven performance of its process plant and declining mining costs, Penjom
is an assured source of increasing cash flow for the group. Extending this
asset's life beyond its current 4 to 5 years is our highest priority and, we
believe, achievable.
We expect that North Lanut's mineable reserves will be expanded with the latest
exploration and metallurgical data. Our objective is to place the project in
production in early 2004. Although preliminary, our feasibility results indicate
the potential for the project to be developed at a capital cost below US$10
million, and to produce over 50,000 ozs/year of gold at a total cash cost below
US$150/oz.
Our largest and most immediate challenge with respect to ZGC is the reduction of
Jilau's operating costs and the expansion of its reserves with the objective of
increasing gold production to over 100,000 ozs/year and decreasing costs to
below US$250/oz. Once this is assured, we will focus on using ZGC's cash flows
to realise the excellent potential of its other extensive ore resources. We do
not expect ZGC to be a cash drain on the group.
Perhaps the most important asset that the enlarged Avocet group now has is the
experience and expertise of its personnel which heightens our confidence in
developing a highly profitable and professional gold mining company.
Nigel McNair Scott
27 November 2002
Avocet Mining PLC
Consolidated Profit and Loss Account
6 months to 6 months to Year ended
30 September 30 September 31 March
2002 2001 2002
Unaudited Unaudited Audited
#000 #000 #000
Turnover
Continuing operations 10,395 10,820 21,820
Discontinued operations - (see note 4) 1,694 1,999 3,645
12,089 12,819 25,465
Cost of sales (9,926) (10,954) (22,667)
Gross profit 2,163 1,865 2,798
Provision for impairment of tangible fixed - - (11,874)
assets
Other administrative expenses (674) (618) (1,188)
Total administrative expenses (674) (618) (13,062)
Operating profit/(loss)
Continuing operations 1,595 1,035 (10,209)
Discontinued operations - (see note 4) (106) 212 (55)
Operating profit/(loss) 1,489 1,247 (10,264)
Net interest and similar charges (342) (385) (669)
Profit/(loss) on ordinary activities before 1,147 862 (10,933)
taxation
Tax on profit/(loss) on ordinary activities (360) (254) (9)
Profit/(loss) on ordinary activities after 787 608 (10,942)
taxation
Equity minority interest 27 7 15
Profit/(loss) for the financial period retained 814 615 (10,927)
Earnings/(loss) per share 1.24p 0.94p (16.63p)
Earnings per share before non-recurring items 1.24p 0.94p 1.44p
Avocet Mining PLC
Consolidated Balance Sheet
30 September 30 September 31 March
2002 2001 2002
Unaudited Unaudited Audited
#000 #000 #000
Fixed assets
Intangible - deferred exploration costs 924 568 811
Tangible assets 11,376 25,181 12,337
12,300 25,749 13,148
Current assets
Stocks 5,500 4,540 5,496
Debtors due within one year 749 963 1,002
Debtors due after more than one year 3,728 3,896 2,833
Cash at bank and in hand 2,526 1,754 2,267
12,503 11,153 11,598
Creditors: amounts falling due in less than one (8,325) (6,267) (6,239)
year
Net current assets 4,178 4,886 5,359
Total assets less current liabilities 16,478 30,635 18,507
Creditors: amounts falling due after more than (6,818) (10,253) (9,982)
one year
Provision for liabilities and charges (2,305) (3,116) (2,591)
7,355 17,266 5,934
Capital and reserves
Called up share capital 16,424 16,424 16,424
Share premium account 23,600 23,600 23,600
Other reserves 12,590 12,590 12,590
Profit and loss account (45,078) (35,192) (46,526)
Equity shareholders' funds 7,536 17,422 6,088
Equity minority interests (181) (156) (154)
7,355 17,266 5,934
Avocet Mining PLC
Consolidated Cash Flow Statement
30 September 30 September 31 March
2002 2001 2002
Unaudited Unaudited Audited
#000 #000 #000
Net cash inflow from operating activities 1,811 2,093 3,989
Returns on investment and servicing of finance
Interest received 15 46 81
Interest paid (270) (413) (728)
Net cash outflow from returns on investment and
servicing of finance (255) (367) (647)
Taxation (9) - (73)
Capital expenditure and financial investment
Purchase of fixed assets (807) (873) (1,770)
Acquisition of a subsidiary - - (164)
Net cash outflow from capital expenditure and
financial investment (807) (873) (1,934)
Financing
Repayment of borrowings (170) (531) (408)
Capital repayments on finance leases (120) (119) (256)
Net cash outflow from financing (290) (650) (664)
Increase in cash 450 203 671
Avocet Mining PLC
Other Primary Statements
30 September 30 September 31 March
2002 2001 2002
Unaudited Unaudited Audited
#000 #000 #000
Statement of total recognised gains and losses
Profit/(loss) attributable to shareholders 814 615 (10,927)
Exchange translation adjustments 634 (347) (139)
Total recognised gains and losses 1,448 268 (11,066)
Prior year adjustment - - (991)
Total recognised gains and losses
since the last financial statements 1,448 - (12,057)
-
Reconciliation of movements in group
Shareholders' funds
Total recognised gains and losses 1,448 268 (11,066)
Net change in shareholders' funds 1,448 268 (11,066)
Opening shareholders' funds 6,088 17,154 17,154
Closing shareholders' funds 7,536 17,422 6,088
Notes:
1. The calculation of earnings per share is based on after-tax profits of
#814,000 (2001: profit #615,000) and on the weighted average of 65,696,530
shares in issue (2001: 65,696,530). The calculation of earnings per share before
non-recurring exceptional items is based on after-tax profits of #814,000 (2001:
profit #615,000) and on the weighted average of 65,696,530 shares in issue
(2001: 65,696,530).
2. The interim 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, except as
stated below:
3. The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.The financial information for the year ended 31 March 2002 is an abridged
version of the full accounts, which received an unqualified auditors' report and
have been filed with the Registrar of Companies.
4. The profit and loss account shows Beralt, the group's tungsten operation,
as a discontinued operation. On 18 September 2002 the group signed an agreement
to sell all its tungsten assets, including Beralt to Salish Ventures Inc. This
agreement is subject to completion of the Canadian TSX Venture Exchange's
qualifying transaction criteria.
5. This statement is being sent to Shareholders and will be available from
the company's Registered Office.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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