TIDMTSG
RNS Number : 6671J
Trans-Siberian Gold PLC
30 June 2017
Trans-Siberian Gold plc
("TSG" or the "Company")
Final Results for the year ended 31 December 2016
Trans-Siberian Gold plc (TSG.L) is pleased to announce its
audited financial results for the year ended 31 December 2016.
Financial Highlights:
-- Revenue of $45.2 million (2015: $44.1 million)
-- Operating Profit of $10.7 million (2015: $8.8 million)
-- Profit Before Tax of $8.7 million (2015: $6.6 million)
-- Maiden dividend of $5.5 million
-- $3.5 million of debt repaid
-- Cash and cash equivalents of $13.1 million (2015: $12.6 million)
Operational Highlights:
-- Refined gold production of 35,366 oz. (2015: 37,984 oz.)
-- Cash cost(1) of $426/oz (2015: $473/oz.)
-- Average realised gold price of $1,248/oz (2015: $1,146/oz)
-- Asacha plant operated at 8.6% above its designed annual capacity of 150,000 tonnes
-- 95.2% average gold recovery (2015: 95.4%)
-- Ore extracted 179,000 tonnes (2015: 178,000 tonnes)
-- Ore processed 163,000 tonnes (2015: 161,000 tonnes)
-- Gold grades averaged 7.23 g/t (2015: 7.65 g/t)
Post Period End Developments:
-- The Company's subsidiary ZAO Trevozhnoye Zarevo ("TZ") agreed
two new loan facilities with VTB bank: a $15 million facility with
a 5 year term and 18 months grace period at an interest rate of
6.2% per annum, and a $5 million facility with a 3 year term, also
at an interest rate of 6.2% per annum.
-- The terms of the two new loan facilities are a significant
improvement; the interest rate per annum has been reduced by
approximately 30%.
-- Drawdown of the $15 million facility has facilitated
repayment of existing $14.8 million facilities
_________________
(1) Excluding depletion, net of the silver credit and excluding royalty
Charles Ryan, Non-Executive Chairman of TSG, commented:
"I am satisfied by our financial performance in 2016. We remain
cash-generative and financially robust at a time when the gold
industry is re-shaping. We will continue to seek efficiencies and
enhance our financial performance wherever practicable. In
particular, I am very pleased that we paid our maiden dividend of
$5.5m.
We emphasise our commitment to deliver returns for shareholders.
We are confident that we have an attractive investment case and are
re-doubling our efforts to communicate with the investment
community. As a low-yield investment environment persists, we
believe that the Company's commitment to an attractive and stable
dividend pay-out policy should increase interest in the Company's
shares and the Company more widely.
I take this opportunity to thank our shareholders for their
continued support during 2016. I also wish to express the Company's
appreciation of the efforts of our staff to deliver these results
and to continue to create the conditions for future success."
The Company confirms that copies of the Company's Annual Report
and Accounts have been sent to shareholders and are appended to
this announcement in their entirety.
Copies of the Company's Annual Report and Accounts are available
on the Company's website: www.trans-siberiangold.com
Ends
Contacts: TSG
+44 (0) 7770
Simon Olsen 484965
+44 (0) 7799
Stewart Dickson 694195
+44 (0) 207
Cantor Fitzgerald Europe 894 7000
David Porter David Foreman Craig
Francis
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the
publication of this announcement via Regulatory Information Service
('RIS'), this inside information is now considered to be in the
public domain.
Chairman's Statement
I am pleased to present the Company's annual report and accounts
for the year ended 31 December 2016. We have established a five
year track record as a gold producer and look to the future with
optimism.
Operations
We produced 35,366 oz. of refined gold (2015: 37,984 oz.) at a
cash cost of $426/oz. (2015: $473/oz.). The average realised gold
price increased by 9% to $1,248/oz., compared to $1,146/oz. in
2015. Our operating costs, discussed in more detail in the
Strategic Report, are well below industry peers but remain an area
of focus for the future.
The Asacha plant operated at 8.6% above its designed annual
capacity of 150,000 tonnes and achieved 95.2% average gold recovery
(2015: 95.4%). Ore extracted and processed in 2016 amounted to more
than 179,000 and 163,000 tonnes respectively. Gold grades averaged
7.23 g/t (2015: 7.65 g/t). The processed gold grade was affected by
the need to process some lower grade stockpile ore in order to
maintain plant throughput. This is discussed in more detail in the
Strategic Report.
Licensing
The current term of the Asacha mining licence runs until 1
September 2018, reflecting the seven year mine life envisaged by
the mine's original design documentation and Asacha's resources as
approved by the Russian State Geological Commission for Reserves
(GKZ) in 2002. In April 2017 we announced the re-approval of
mineral resources by GKZ, an important milestone in our application
for a mining licence extension. The licence extension (and
associated mine life development) is a key priority for the Company
this year.
Financial Performance
I am satisfied by our financial performance in 2016. We remain
cash-generative and financially robust at a time when the gold
industry is re-shaping. We will continue to seek efficiencies and
enhance our financial performance wherever practicable. In
particular, I am very pleased that we paid our maiden dividend of
$5.5m. Whilst exercising financial prudence, we are committed to
making sustainable dividend payments. Capital distribution is an
important part of our strategy for delivering shareholder
value.
Our gearing remains low and we have continued substantially to
reduce our net debt. During 2016 our total borrowings reduced by
17.3% to $16.7 million. As announced on 20 and 22 June 2017, we
have arranged new $20 million facilities with VTB Bank which have
facilitated the refinancing of our current $14.8 million debt on
significantly improved terms, including a 34% interest rate
reduction.
Industry trends
In 2016 gold performed strongly, the spot price increasing from
$1,060/oz. to $1,145/oz. and amassing multi-year record inflows
through physically-backed gold ETFs. As such it was one of the best
performing assets last year.
The World Gold Council believes that six major trends in the
global economy will support gold demand and influence its
performance this year: heightened political and geopolitical risks,
currency depreciation, rising inflation expectations, inflated
stock market valuations, long-term Asian growth and the opening of
new markets. Our view is that gold remains an asset of choice for
investors. This has been reflected in the spot price of gold rising
steadily from $1,145/oz. at the beginning of 2017 to $1,293/oz. on
8 June 2017.
The performance of the Russian economy is closely linked to
international oil prices. After seven quarters of negative growth,
GDP increased by 0.2% in fourth quarter 2016, but contracted by
0.2% for the year as a whole. Headline economic and financial
trends and indicators are now picking up. Economists project that
the Russian economy will expand by 1.3% in 2017. The Russian rouble
reversed some of its earlier losses, appreciating by 16.3% against
the US dollar in 2016, with a further 7% strengthening in the first
four months of 2017.
We affirm that Russia remains an attractive place to do
business. Amongst other things, the Company benefits from a long
established presence and our major shareholder's deep understanding
of the country. Russia is the third largest gold producer in the
world. As such we are able to access highly experienced labour to
conduct our mining activities.
Outlook and priorities
During 2016, the Company's share price rose by 167.8%. By way of
comparison, the AIM Basic Materials Index increased by 43.6% over
the period. We emphasise our commitment to equity capital markets
and to deliver returns for shareholders. We are confident that we
have an attractive investment case and are re-doubling our efforts
to communicate with the investment community. As a low-yield
investment environment persists, we believe that the Company's
commitment to an attractive and stable dividend pay-out policy
should increase interest in the Company's shares and the Company
more widely.
I take this opportunity to thank our shareholders for their
continued support during 2016 and Simon Olsen, TSG's Finance
Director since 2004 who is retiring from the Board at the 2017
Annual General meeting, for his significant contribution. I also
wish to express the Company's appreciation of the efforts of our
staff to deliver these results and to continue to create the
conditions for future success.
Charles Ryan
Chairman
29 June 2017
Strategic Report
Asacha
Key performance indicators
The following table sets out the key performance indicators
monitored by the TSG Board of directors:
Reference 2016 2015
Refined gold sales oz. 35,550 37,801
Average realised gold price $ Financial Review 1,248 1,146
Cost of sales per oz. gold $ Financial Review 763 742
Cash cost, inc depletion, per oz. gold $ Financial Review 499 522
Cash cost per oz. gold $ Financial Review 426 473
Ore extracted tonnes ('000) 179 178
Ore processed tonnes ('000) 163 161
Average dilution % 34.0 40.4
Average gold grade g/t 7.23 7.65
Gold recovery rate % 95.18 95.40
Employee numbers 677 583
Reported injuries 1 1
Gearing ratio % Note 18 4.4 8.9
The inclusion of depletion in the cash cost metric stems from
the amortisation of some mining properties costs over short periods
as discussed in the Financial Review on page 7.
Production
Asacha's fifth full year of operation produced 35,366 oz. (2015:
37,984 oz.) of refined gold and 51,428 oz. (2015: 49,398 oz.) of
refined silver. Average processed ore gold grade 7.23 g/t was 5.5%
below the 2015 average 7.65 g/t, principally as a result of mining
in low grade stopes in the 3(rd) quarter and because of the lower
proportion of rich stoping ore delivered to the plant. In 2016
stoping ore accounted for only 41.2% of the total ore volume
delivered to the plant (2015: 54.5%). The decrease of volumes of
ore cutting (stoping) was caused by a delay in mine development
(mainly because of problems with mobile underground equipment)
resulting in a shortage of new stoping spaces. In order to maintain
annual plant throughput at 150,000 tonnes it was necessary to
process more lower grade material mined earlier and some tonnage
from poor grade ore stockpiles to supplement new stoping ore.
Average dilution excluding rockfalls improved from 40.4% in 2015 to
34.0% in 2016.
Ore processing at the Asacha plant involves:
-- two-stage grinding with semi-autogenous grinding at the first
stage, ball milling at the second stage, pulp classification in
hydrocyclones by 0.75mm size and hydrocyclones' slurry thickening
in a high-capacity thickener;
-- cyanidation and carbon-in-leach process;
-- electric elution of loaded carbon by basic solutions under
pressure using IPS technology, acid treatment and thermal
regeneration of carbon;
-- melting of cathode deposits into dore alloy; and
-- cyanide destruction of slurry tailings by chlorination and
storing of neutralised tailings as diluted slurry.
Mining and production at Asacha in 2016 is shown in the
following table:
2016 2015
Mine development (metres) 4,926 3,937
Ore extracted ('000 tonnes) 179 178
Ore processed ('000 tonnes) 163 161
Average gold
grade (g/t) 7.23 7.65
Average silver
grade (g/t) 12.71 12.28
Gold recovery
rate (%) 95.18 95.40
Silver recovery
rate (%) 81.69 76.94
Gold in dore (oz.) 36,225 37,798
Silver in
dore (oz.) 54,595 49,232
Gold refined (oz.) 35,366 37,984
Silver refined (oz.) 51,428 49,398
In the first quarter of 2017 production was impacted by the same
factors as in 2016. Only 40.8% of ore delivered to the plant was
new stoping ore, with an average grade of 7.9 g/t, however, in
order to maintain monthly plant throughput of at least 12,500 mt it
was necessary to process earlier run-of-mine ore which contained
lower grades of gold. As a result, 1(st) quarter gold production
(7,644 oz.) was lower than in 1(st) quarter 2016 (9,343 oz.).
Extraction of new stoping ore was hindered during the first
quarter of 2017 by a lack of underground equipment, flooding at
lower levels and the failure of mobile pump equipment which also
led to a slowdown in some of the major mine development activities,
including the installation of stationary high power pumps at the
150 m level and construction of the transportation tunnel from the
150 m level to the 100 m level. However, with new mobile pumps now
in place and the arrival of new underground machines the Company
expects to be able to accelerate all mining activities.
The Company has started preparation for ore cutting in the upper
part of the interval between the 150 m and 100 m levels, which
should facilitate access to higher grade ore, and thus expects to
gradually increase gold production from the 3(rd) quarter
onwards.
The Company expects to achieve 2017 refined gold production in
the range 32,000-36,000 oz. (2016:35,366 oz.).
Employees and safety
At 31 December 2016 TSG's subsidiary ZAO Trevozhnoye Zarevo (TZ)
employed 662 staff, including personnel working in two shifts at
the site. Efforts to improve health and safety at Asacha continued.
There was one reported injury in 2016 (2015: 1).
The Company continues to invest in employee training and
development. 60 (2015: 47) employees attended various training
courses, including environmental safety and dangerous wastes, fire
protection, accident protection and mining works safety and
industrial safety and certification.
Asacha Licence
In 2013, the Federal Agency on Subsoil Use extended the Asacha
licence until 1 September 2018, reflecting the seven year mine life
envisaged by the mine's original design documentation. TZ intends
to apply for a further extension to the licence term, taking
account of the results of the exploration at Asacha in the period
since its resources were previously approved by the Russian State
Geological Commission for Reserves (GKZ) in 2002. As a first step,
the process to obtain GKZ's legal recognition of the increase in
reserves commenced in 2015 and was completed in March 2017.
Following GKZ approval, the required design changes to the project
will be undertaken by an external design institute, after which TZ
will seek the necessary approvals and agreements from various
government bodies and agencies.
Reserves and resources
As at 31 December 2016 the JORC total mineral resource
estimate for Asacha was 1.05 million tonnes with
an average gold grade of 20.5 g/t and silver grade
of 52.1 g/t, for approximately 693,000 oz. of gold
and 1.8 million oz. of silver. The Group's JORC
mineral resources are shown on page 6.
Asacha Mineral Resource - Russian State Geological
Commission for Reserves (GKZ) code
as at 31 December 2016
C1 + C2 Resources
Au Ag Cut-off
g/t
C1 & C2 Grade C1 & C2 Grade
oz. g/t oz. g/t
623,943 19.8 1,476,612 46.8 2
GKZ - Russian State Geological Commission for Reserves
The above table shows the resources approved by GKZ in March
2017, which do not include the results of exploration undertaken in
2016. The P1-P2 resources which were included in the previous 2002
GKZ protocol have been reclassified by GKZ as C2 resources because
of the results of 2012 geologic exploration. Currently no P1- P2
resources have been officially approved because of the lack of
adequate geologic data. The Company intends to conduct geologic
exploration works in 2017 to confirm the existence of such
resources.
Business Review
Details of financial performance are set out in the Financial
Review on pages 7 to 8.
Strategic Report - continued
Principal risks and uncertainties
The management of the Group's business and the execution of its
strategy are subject to a number of risks. Risks are formally
reviewed by the Board and appropriate processes put in place to
monitor and mitigate them. If more than one event occurs, the
overall impact of such events may compound the possible adverse
effects on the Group.
The key financial risks affecting the Group are set out in Note
18 to the financial statements. The key operating risks affecting
the Group, most of which are those typically faced by other
companies in the gold mining sector, are set out below.
The Group's licences
The Group's activities are dependent upon the grant and renewal
of appropriate licences, permits and regulatory consents. The
Group's licences contain a range of obligations, including those
described in Note 6 to the financial statements, failure to comply
with which could result in additional costs, penalties being levied
or the suspension or revocation of the licence.
Mitigation: management closely monitor compliance with the terms
of the Group's licences and discussions are held with the
appropriate authorities in respect of the development and operation
of the Group's projects and amendments to licences where
required.
Reserve and resource estimates
Reserve and resource estimates may require revision based on
actual production experience. The volume and grade of reserves
mined and processed and recovery rates achieved may vary from those
anticipated and a decline in the market price of gold may render
reserves containing relatively lower grades of gold mineralisation
uneconomic.
Mitigation: the Group estimates its ore reserves and mineral
resources based on information compiled by Competent Persons as
defined in accordance with the 2012 edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (the JORC code). The Group also conducts detailed
geological modelling and ensures that all analyses of exploration
samples are undertaken by accredited laboratories.
Environmental and health and safety issues
The Group's operations, which involve the use of various
chemicals and contaminants including cyanide, are subject to
extensive Russian environmental and health and safety laws and
regulations. The legislation comprises numerous federal and
regional regulations which are not fully harmonised and may not be
consistently interpreted. Changes in regulations, or the
interpretation of regulations, may result in additional costs.
Mitigation: the Group monitors compliance with the relevant
legislation and regulations and seeks to ensure that the Russian
environmental authorities are satisfied with the Group's compliance
with applicable environmental laws and regulations at all stages of
development and production. Management systems at the Group's
operations include comprehensive safe working practices and the
Group also organises safety training for employees.
Mining and processing risks
The risks inherent in the exploitation of mineral deposits, some
of which are outside the Group's control, include geological,
geotechnical and seismic factors and production risks (ore
grade/quality, tonnages and recovery/yields), industrial and
mechanical incidents, processing problems, technical failures,
labour disputes and environmental hazards including the discharge
of toxic chemicals, fire, flooding and other acts of God. As with
all mining operations, there is uncertainty associated with the
Group's operating parameters and costs. There is significant
seismic activity in Kamchatka, as evidenced by an offshore
earthquake in March 2013 which caused rock falls in some stoping
areas. Local climatic conditions may also impact on mining
operations and the delivery of supplies, equipment and fuel.
Mitigation: the Group's technical and operational management has
extensive experience from other Russian mining projects and
operational audits are undertaken by external experts. All
buildings and installations at the Asacha mine have been designed
and constructed to withstand seismic activity. Logistic
arrangements allow for weather disruption.
Property and Business interruption insurance
The Group holds insurance cover as required by Russian
legislation and to insure those assets which have been pledged as
security for the loan facilities discussed in Note 16 to the
financial statements but to date has been unable to arrange
comprehensive property and business interruption insurance for its
Asacha mine at acceptable cost. This risk has been discussed with
the Company's major shareholders.
Mitigation: the Group's Asacha mine and plant were designed,
engineered and constructed to a high specification with all
elements of the operation built to withstand seismic activity and
to cope with significant water ingress arising from melting snow.
Mining and processing operations, including blasting, are
undertaken and supervised by experienced staff and the site's
logistic arrangements allow for weather disruption; however there
can be no guarantee that operations at Asacha will not be disrupted
by property damage or other interruption.
Gold price volatility
The market price of gold is affected by numerous factors which
are beyond the Group's control. These factors include world
production levels, global and regional economic and political
events, inflation, currency exchange fluctuations, industrial and
jewellery demand, speculative activity and the political and
economic conditions of major gold-producing countries. The purchase
and sale of gold by central banks or other large holders or
dealers, forward sales by producers and the activities of exchange
traded funds and other participants in the markets for gold futures
may also have an impact on the market price.
Mitigation: while the gold price is generally expected to remain
at or close to its current levels for the next few years, the Group
assesses the economic viability of its projects at gold prices
based on long term trends and forecasts and tests its financial
models for sensitivity to the gold price. The Group does not
currently hold any financial instruments to hedge the commodity
price risk on its expected future production but will keep this
exposure under review. As discussed in Note 16 to the financial
statements, in connection with the restructuring of the Group's
loan facilities in 2013, it was agreed that a gold price hedge
programme would be implemented for the revised term of those
facilities. It was subsequently agreed with the bank to defer the
start of the price protection programme in consideration of a 1.0%
addition to the interest rate until such commencement. That
interest rate premium ceased to apply with effect from 4 April
2016.
The regulatory environment
The Group's activities are subject to extensive Russian federal
and regional laws and regulations governing such matters as
licensing, production, taxes, mine safety, labour standards,
occupational health and safety and environmental protection. In
view of the legal and regulatory regime in Russia, legal
inconsistencies may also arise. Amendments to current laws and
regulations governing the activities of mining companies, or more
stringent implementation or interpretation of these laws and
regulations, could have a material adverse impact on the Group,
cause a reduction in levels of production or delay or prevent the
development or expansion of the Group's properties.
Mitigation: the Group's Russian management has extensive
experience and monitors potential changes in legislation, allowing
the Group to be responsive to legal and fiscal developments.
Taxation
Russian tax legislation has been subject to change and some laws
relating to taxes to which the Group is subject are relatively new.
The government's implementation of such legislation, and the
courts' interpretation thereof, has been sometimes unclear, with
few precedents established. Differing legal interpretations may
exist both among and within government ministries and organisations
and local inspectorates. The introduction of new tax provisions may
affect the Group's overall tax efficiency and may result in
significant additional tax liability.
Mitigation: the Group's experienced Russian financial management
ensures full compliance with the Tax Code and timely implementation
of legislative changes.
Going concern
The Directors have reviewed the Group's cash flow forecast for
the period to 31 December 2018 and they believe that, taking
account of reasonably possible changes in commodity prices, trading
performance and expenditure, the Group's operations will continue
to be cash generative and that the Group has adequate resources to
continue in operational existence for the foreseeable future
without requiring additional funding.
Management
OOO Trans-Siberian Gold Management, TSG's 100%-owned subsidiary
in Moscow, provides managerial, technical, financial and
procurement services to TZ and currently has 14 staff, including 2
technical managers based at Asacha and TZ's Managing Director. The
Company's Finance Director is currently UK based, however, with
effect from 1 July 2017, his responsibilities will be assumed by a
Moscow-based Chief Financial Officer.
Strategic Report - continued
Group mineral resources
The Company's Asacha property contains approximately 693,000 oz.
of gold and about 1.8 million oz. of silver in total mineral
resources calculated to JORC standards. The resource estimate for
the Asacha deposit was updated by AranzGeo Expert Services/QG
Australia Pty Ltd (AGL) to the end of December 2016 to incorporate
new data from mining development, the 2016 exploration programme
and to account for mining depletion during 2016. A copy of AGL's
report is available on TSG's website.
Asacha's Main zone hosts six defined veins. Three veins have
been defined in the separate East zone, with mineralisation
generally of lower tenor and width. Asacha's Resources estimates
were classified according to the guidelines of the JORC Code
(2012). Classification took account of data quality, confidence in
geological interpretation and confidence in block estimations. Some
of these aspects are necessarily subjective. Classifications were
applied by digitisation of polygon boundaries between classes in
long section view. Resources were only classified and reported
within constrained vein volumes.
Based on the presence of the operating mine and mill, existing
mine economics, the potential for incremental development access to
deeper and more distal parts of the orebody, and the potential for
further exploration success, AGL opined that all of the vein
resources defined at Asacha have a reasonable prospect of eventual
economic extraction and that a comparison of reported mill
production to the undiluted resource model indicates that the
achieved tonnage is in line with expectation, after likely mining
dilution is taken into consideration.
Group Mineral Resources (JORC) as at 31 December 2016
ASACHA JORC MINERAL RESOURCE
Category Zone Tonnes Au Grade Ag Grade Contained Contained
(000) g/t g/t Au oz. (000) Ag oz. (000)
Measured Main 110 16 25 57 87
Indicated Main 567 20 61 362 1,110
Indicated East 3 56 30 6 3
Total M
& I 681 19 55 424 1,200
Inferred Main 101 14 32 45 100
Inferred East 269 26 53 224 460
Total Inferred 370 23 47 269 560
Rounding in above table may mean that columns do not sum
exactly.
4 g/t cut-off
The information in this report relating to Asacha's mineral
resources is based on information compiled by Carrie Nicholls.
Carrie Nicholls is a Member of the Australasian Institute of
Mining and Metallurgy. She has no interest in, and is entirely
independent of, TSG. Carrie Nicholls has sufficient experience
which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which she is
undertaking to qualify as a 'Competent Person' as defined in the
2012 edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code).
Ms Nicholls is a Qualified Person under the AIM Rules and
consents to the inclusion in this report of the matters based on
her information in the form and context in which it appears.
Financial Review
Results
The Group's and the Company's results are presented in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union.
Operations
Revenue from the sale of 35,550 oz. of refined gold (2015:
37,801 oz.) and 51,741 oz. of refined silver (2015: 49,720 oz.) was
$44.4 million and $843,000 respectively (2015: $43.3 million and
$737,000). Average realised prices were $1,248 per oz. gold and $16
per oz. silver (2015: $1,146 per oz. gold and $15 per oz. silver).
Cost of sales was $28.0 million (2015: $28.8 million), the 2.8%
reduction principally reflecting the partial recovery of the
Russian rouble, partially offset by the 6.0% reduction in gold oz.
sold. Cost of sales per oz. gold, net of the credit from silver
sales revenue, was $763 (2015: $742).
Cash cost per oz. gold including depletion, net of the silver
credit and excluding royalty, was $499 (2015: $522). Cash cost per
oz. gold excluding depletion, net of the silver credit and
excluding royalty, was $426 (2015: $473). Depletion of mining
properties is normally treated as a non cash cost, however the
Group has reported cash cost per oz. on these two bases because, in
the early years of production, some mining properties costs were
amortised over short periods. In future the Group will only report
cash cost per oz. excluding depletion.
A change in accounting policy in 2016 whereby costs are now
allocated to mined ore on a value (gold content) basis instead of
on an activity (tonnage mined) basis would have increased cost of
sales in 2015 but would also have reduced the amount of impairment
provisions required to reflect the expected net realisable value of
low grade ore stocks if the change in accounting policy had been
implemented in 2015. A prior year adjustment has not been made to
inventories, since the net impact on the pre-tax results and
balance sheet for 2015 is not considered to be material. However,
this reduction of inventory impairment provisions resulted in a
significant increase in tax losses relating to prior years and
these have given rise to a material prior year adjustment,
increasing the deferred tax asset. In addition management have
identified that deferred tax liabilities in respect of mining
properties, plant and equipment have been understated in prior
years and prior year adjustment has also been made to correct this.
These adjustments are discussed in Notes 10 and 35 to the financial
statements.
As discussed in Note 11 to the financial statements an
additional impairment provision of $1.4 million (2015: $722,000)
has been recognised against the ore stockpile, reflecting the
difference between its expected net realisable value at a gold
price of $1,200/oz. and cost, including processing, refining and
royalties. At a gold price of $1,200/oz., the processing and
refining of the ore stockpile will be cash generative, wherefore it
is expected that the entire stockpile will be processed, with some
material likely to be blended with higher grade material.
The Group recorded an operating profit for the year of $10.7
million (2015: $8.8 million), after recognising the $1.4 million
increase in the inventory impairment provision discussed above and
an exchange gain of $445,000 (2015 exchange loss: $316,000),
principally reflecting the impact of a partial recovery (after
significant depreciation in 2014 and 2015) of the Russian rouble on
the Group's rouble denominated monetary assets. The Board will
continue to review the Group's exchange rate risks and the possible
use of derivative financial instruments to mitigate against
them.
Administrative expenses amounted to $5.8 million (2015: $5.6
million). Russian administrative expenses amounted to $4.2 million
(2015: $4.3 million), including $1.1 million in respect of the
Moscow management subsidiary (2015: $1.0 million). UK
administrative expenses, principally salaries (discussed in Note 22
to the financial statements) and adviser costs, were $1.6 million
(2015: $1.3 million). UK administrative expenses also included the
settlement of a contingent liability as discussed in Note 31 to the
financial statements.
Finance income was $157,000 (2015: $301,000). Finance costs were
$2.1 million (2015: $2.5 million).
Statement of Financial Position
Total equity was $78.8 million at 31 December 2016 compared to
$77.9 million at 31 December 2015 (restated), after payment of a
$5.5 million special dividend ($0.05 per ordinary share) on 23
December 2016.
Total non-current assets decreased from $83.9 million (restated)
to $82.4 million. Mining properties of $30.5 million (2015: $27.0
million) reflected $5.7 million additional mining and mine
development, offset by depletion of $2.5 million. Property, plant
and equipment decreased by $4.2 million to $46.1 million, primarily
due to depreciation charges, offset by additions to plant.
Current assets increased from $20.1 million to $21.7 million.
Inventories at Asacha at 31 December 2016 comprised $2.4 million
gold and silver in production (2015: $1.9 million), $4.7 million
ore stocks (2015: $5.4 million), of which $3.7 million (2015: $4.9
million) has been recognised as a non-current asset as discussed in
Note 11 to the financial statements and $4.0 million fuel and other
materials and supplies (2015: $3.4 million), in aggregate $11.2
million (2015: $10.7 million). As discussed above ore stocks are
stated net of impairment provisions totalling $2.2 million (2015
$10.3 million). The change in accounting policy discussed above
whereby costs are now allocated to mined ore on a value, rather
than activity, basis would have resulted in a US$254,000 increase
in the aggregate value of gold in progress and silver in progress
at 31 December 2015 if the change in accounting policy had been
implemented in 2015. The change in accounting policy has had no
effect on the value of ore stocks net of impairment provision but
would have reduced the amount of such provisions in prior years
(2015: $777,000, 2014: $55,000, previously 2015: $10.3 million,
2014: $9.6 million).
Recoverable VAT at 31 December 2016 was $1.0 million (2015:
$746,000). VAT amounting to $2.7 million (2015: $2.1 million) was
recovered in 2016. All recoverable VAT at 31 December 2016 is
expected to be received during 2017.
Cash and cash equivalents increased from $12.6 million to $13.1
million.
Loans and borrowings at 31 December 2016 totalled $16.7 million
(2015: $20.2 million), comprising $16.3 million (2015: $19.8
million) outstanding under two five year facilities, totalling
$43.0 million, provided by Sberbank for the development of the
Asacha project and $402,000 finance lease obligations (2015:
$461,000).
Current liabilities at 31 December 2016 totalled $12.8 million
(2015: $7.0 million), the increase principally reflecting a $5.0
million increase in borrowings repayable within one year of the
reporting date.
Strategic Report - continued
The deferred tax liability of $3.9 million (2015 restated: $1.6
million) represents temporary timing differences between accounting
and tax treatment of various assets and liabilities, partially
offset by tax losses, which may be carried forward to reduce the
Group's future tax liability. The deferred tax lability and
material prior year adjustments are discussed in Note 10 to the
financial statements.
On 5 September 2016 as discussed in Note 14 to the financial
statements, the Company announced a proposed capital reduction,
whereby, subject to the approval of the Company's shareholders and
the High Court of Justice in England and Wales (the Court), the
share premium account would be cancelled in order to create
distributable profits. The cancellation was approved by the
Company's shareholders on 29 September 2016 and by the Court on 26
October 2016.
As discussed in Note 18 to the financial statements, the Group's
gearing ratio at 31 December 2016 was 4.4% (2015 restated:
8.9%).
Asacha mine
At a gold price of $1,200/oz., Life of mine ("LOM") cash costs
over the remaining life of the Asacha mine are forecast at
$702/oz., before taking account of a $31/oz. credit from silver
production (assuming a silver price of $14/oz. over the remaining
mine life). Cash costs including all royalties and taxes (in total
$36.5 million, net of VAT recoveries) are forecast at $793/oz.
Total costs, including $32.2 million future capital expenditure and
debt service, are forecast at $880/oz., giving a $320/oz. margin at
a gold price of $1,200/oz.
The Board has carried out impairment reviews of the mine's
economic model as at 31 December 2015 and 2016, assuming a gold
price of $1,219/oz. (2015: $1,100/oz.), an expected economic life
of seven years (2015: nine years) and a 16.7% discount factor
(2015: 17.0%), to determine whether there had been any impairment
in respect of mining properties and/or Asacha's plant, property and
equipment and was satisfied at each reporting date that no
impairment in respect of those assets had arisen.
Events after the reporting date
As discussed in Note 36 to the financial statements, in June
2017 the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ) agreed
two new loan facilities with the Russian bank VTB: a $15 million
facility with a 5 year term and 18 months grace period at an
interest rate of 6.2%, and a $5 million facility with a 3 year
term, also at an interest rate of 6.2%. Drawdown of the first
facility facilitated the repayment of TZ's existing two loan
facilities, amounting to $14.8 million. The new facilities provide
additional funds for working capital and other corporate
purposes.
Dmitry Khilov
Chief Executive Officer
29 June 2017
Board of Directors
Executive
Dmitry Khilov (Aged 59)
Chief Executive Officer
Dmitry Khilov graduated from the Moscow Institute of Finance in
1980. He has held senior positions at the Russian Ministry of
Finance and at the World Bank, and was a member of the Board of
Tokobank. From 1998 to 2000 he was Deputy Chairman of Russia's
Federal Commission for Securities Markets. From 1995 to 2009 he
held senior positions in the United Financial Group (UFG), latterly
as Managing Director of the Private Equity Division of UFG Asset
Management. He joined Trans-Siberian Gold in July 2009.
Simon Olsen (Aged 64)
Finance Director and Company Secretary
Simon Olsen qualified as a Chartered Accountant with Thomson
McLintock, London, after graduating with a law degree from Oxford
University. After 13 years in various senior financial and
administrative roles with the Maersk shipping and industrial group
in London, Jakarta and Manila, he spent four years with Sierra
Rutile, latterly as Chief Financial Officer and six years as
Company Secretary of Navan Mining plc. He was appointed as the
Company's Finance Director in 2004 and will step down from the
Board at the Annual General Meeting on 29 June 2017.
Non-executive
Charles Ryan (Aged 50)
Chairman
Charles Ryan is a graduate of Harvard University. He was an
Associate and Principal Banker with the European Bank for
Reconstruction and Development in London, before becoming a founder
director of UFG. After UFG sold its investment banking business to
Deutsche Bank in 2006, he spent two years as Chief Country Officer
and Chief Executive Officer of Deutsche Bank in Russia, stepping
down in October 2008 to become Chairman of UFG Asset Management. He
is also a general partner with Almaz Capital and a director of PGI
Group plc, Yandex N.V., Limitless Mobile Limited, Preferred Sands,
Acumatica and serves on the Harvard Global Advisory Council and
Capital International Inc. Advisory Board.
Peter Burnell (Aged 76)
Peter Burnell was educated at Magdalen College, Oxford
University. He spent most of his business career as a senior
executive and director of Anglo American Corporation of South
Africa and Minorco SA. He was Chairman of Black Rock Latin American
Investment Trust plc until March 2017.
Robert Sasson (Aged 52)
Robert Sasson graduated from Exeter University with a degree in
Russian Studies and International Government. He worked for Phibro
Salomon before serving as the head of the St Petersburg office of
the European Bank for Reconstruction and Development from 1993.
Prior to joining UFG Asset Management in 2009, he spent three years
with a leading US hedge fund on private equity transactions in
Russia and Ukraine.
Directors' Report
The directors present their report and the Company's audited
financial statements for the year ended 31 December 2016.
Principal activities and future developments
Trans-Siberian Gold plc (the Company) is a UK-based resources
company, whose Asacha gold mine in the Russian Federation has been
in production since September 2011. Details of the Group's
activities, including Key Performance Indicators and expected
future developments, are included in the Chairman's Statement and
Strategic Report.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom and has subsidiaries based in the
Russian Federation. The Company's registered office is 39 Parkside,
Cambridge, CB1 1PN, United Kingdom. The Company's shares are traded
on the AIM Market of the London Stock Exchange.
Share capital
The Company's authorised and issued share capital as at 31
December 2016 is set out in Note 14 to the financial
statements.
Major shareholdings
At 26 June 2017, the following interests of 3% or more in the
issued share capital of the Company appeared in the register
maintained in accordance with section 808 of the Companies Act
2006:
Number % of share
of shares capital
---------------------- ------------ ------------
UFG Asset Management 87,700,219 79.69
The interest held by UFG Asset Management includes the
shareholdings of UFG Private Equity Fund I LP and Russia Select
Fund. The ultimate control of the Company is discussed in Note 33
to the financial statements.
Details of transactions with the Company's major shareholders
are set out in Note 33 to the financial statements.
Results and dividend
The results for the year are set out on pages 14 to 19. On 30
November 2016, the Company announced a special dividend of $0.05
per ordinary share, equivalent to approximately $5.5 million (2015:
$nil). The Company is committed to making regular, sustainable,
dividend payments in future.
Directors
The current directors of the Company and their brief career
details are shown in the Board of Directors section on page 9.
In accordance with the provisions of the Company's Articles of
Association, Simon Olsen and Charles Ryan retire at the forthcoming
Annual General Meeting. Mr Ryan, being eligible, offers himself for
re-election.
Political and charitable donations
The Group made no political donations (2015: $nil). The Group
made no charitable donations (2015: $nil).
Financial instruments
Details of the Group's financial instruments are described in
Note 18 to the financial statements which forms part of this
Directors' Report. As stated in the Strategic Report on page 4, the
key financial risks affecting the Group are set out in Note 18 to
the financial statements.
Events after the reporting date
These events are discussed in the Strategic Report and in Note
36 to the financial statements.
Auditors
BDO LLP (BDO) have expressed their willingness to be reappointed
as auditors of the Company. Upon the recommendation of the audit
committee, a resolution to reappoint them as the Company's auditors
and to authorise the directors to determine their remuneration will
be proposed at the AGM.
Disclosure of information to auditors
Each of the directors at the time this report was approved
confirms that:
-- so far as he is aware, there is no relevant audit information
(that is, information needed by the Company's auditors in
connection with preparing their report) of which the Company's
auditors are unaware; and
-- he has taken all the steps that he ought to have taken in his
duty as a director in order to make himself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
Board of Directors
The Company's Board currently comprises two executive directors
and three non-executive directors, including the chairman. Two
non-executive directors are appointed by UFG Asset Management, a
major shareholder. The other non-executive director is considered
by the Board to be independent of management and free from any
business or other relationship that could materially interfere with
the exercise of his independent judgement.
The Board ordinarily meets on a bi-monthly basis to determine
strategy and to approve budgets and business plans, major capital
expenditure, acquisitions and disposals. Additional meetings are
held as appropriate to transact other business. Formal agendas,
briefing papers and reports are sent to the Board in advance of its
meetings. The Board delegates certain of its responsibilities to
two Board Committees, which have clearly defined terms of reference
as described below.
The directors have access to the advice and services of the
Company Secretary, who is also a director. Any director may also
take independent professional advice at the Company's expense in
the furtherance of his duties.
In accordance with the Articles of Association, each year one
third of the directors (generally those who have held office for
the longest time since their election) will retire from office at
the AGM. A retiring director may be re-elected if eligible and a
director appointed by the Board may also be elected, although in
the latter case the director's period of prior appointment by the
Board will not be taken into account for the purposes of
rotation.
Directors' indemnities
A qualifying third-party indemnity provision, as defined in
section 234 of the Companies Act 2006, is in force for the benefit
of the directors in respect of liabilities incurred as a result of
their office to the extent permitted by law. The Company also
maintained a directors' and officers' liability insurance policy
throughout the financial year.
Audit Committee
The Audit Committee chaired by Charles Ryan, the other current
members being Robert Sasson and Peter Burnell, meets at least twice
a year and is responsible for ensuring that the appropriate
financial reporting procedures are properly maintained and reported
on and for meeting the auditors and reviewing their reports
relating to the financial statements and internal control systems.
It is also responsible for monitoring the independence of the
auditors. Executive directors may attend meetings of the Audit
Committee by invitation; however, at least once a year the
Committee meets the auditors without executive directors being
present.
Remuneration Committee
The Remuneration Committee, also currently consisting of Charles
Ryan, Robert Sasson and Peter Burnell, is responsible for reviewing
the performance of the executive directors and other senior
executives and for determining appropriate levels of their
remuneration, in consultation with external advisers as
appropriate, with due regard to the interests of shareholders. It
meets as required. The committee also makes recommendations to the
Board in respect of employee incentives, including the granting of
share options.
The Company's remuneration policy is to provide competitive
rewards for its executive directors and other senior managers,
taking into account the performance of the Company and conditions
prevailing in the employment market for executives of equivalent
status, both in terms of the level of responsibility of their
position and their achievement of recognised job qualifications and
skills. Base salaries are reviewed annually. Details of directors'
remuneration are disclosed in Note 23 to the financial
statements.
It is the Company's policy that executive directors' service
contracts have no fixed term and that the notice period in those
service contracts does not exceed one year. Both Dmitry Khilov's
and Simon Olsen's service contracts provide that either party may
terminate their employment by giving six months' written notice and
that the Company may make a payment in lieu of notice.
Internal control
The Board is responsible for ensuring that the Group maintains
an adequate system of internal control and risk management. The
internal controls are designed to safeguard the Group's assets and
to ensure the reliability of financial information both for
internal use by management and for external reporting.
The directors are aware that no system can provide absolute
assurance against material misstatement or loss but are satisfied
that the current controls and processes to manage significant risks
are adequate with regard to the current stage of the Group's
development.
Shareholders
The Board attaches great importance to maintaining good
relationships with all its shareholders and ensures that all price
sensitive information is released to its shareholders
simultaneously in accordance with AIM rules.
The Board believes that the AGM provides an important
opportunity for dialogue with private shareholders. At the AGM, the
Chief Executive Officer presents a review of the Group's activities
and the directors are available to answer questions.
The Company's website, www.trans-siberiangold.com, is regularly
updated and contains a wide range of information about the
Group.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Group and Company financial statements
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the
Group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the AIM
Market.
Directors' Report - continued
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRS
as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the directors.
The directors' responsibility also extends to the on-going
integrity of the financial statements contained therein.
By order of the Board
Simon Olsen
Company Secretary
29 June 2017
Independent Auditor's Report
to the members of Trans-Siberian Gold plc
We have audited the financial statements of Trans-Siberian Gold
Plc for the year ended 31 December 2016 which comprise the
consolidated statement of financial position, the company statement
of financial position, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the
company statement of changes in equity, the consolidated statement
of cash flows, the company statement of cash flows and the related
notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and the parent Company's affairs as at 31
December 2016 and of the Group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
-- the strategic report and directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Stuart Barnsdall (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
29 June 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Financial Statements
Consolidated Statement of Financial Position
31 December 31 December 1 January
2016 2015 (Restated) 2015 (Restated)
$000
Note $000 $000
------------------------------------ ------ ------------------- ----------------------- ------------------
Assets
Non-current assets
Mining properties 6 30,489 27,048 26,969
Property, plant and equipment 7 46,121 50,288 54,527
Deferred exploration and
evaluation costs 8 2,106 1,643 1,643
Inventories 11 3,704 4,874 4,415
Total non-current assets 82,420 83,853 87,554
------------------------------------ ------ ------------------- ----------------------- ------------------
Current assets
Inventories 11 7,485 5,782 5,899
Trade and other receivables 12 1,167 1,661 1,421
Cash and cash equivalents 13 13,097 12,643 7,951
------------------------------------ ------ ------------------- ----------------------- ------------------
Total current assets 21,749 20,086 15,271
------------------------------------ ------ ------------------- ----------------------- ------------------
Total assets 104,169 103,939 102,825
------------------------------------ ------ ------------------- ----------------------- ------------------
Liabilities
Non-current liabilities
Borrowings 16 7,971 16,596 22,875
Deferred tax liabilities 10 3,876 1,636 256
Provisions 17 697 723 609
------------------------------------ ------ ------------------- ----------------------- ------------------
Total non-current liabilities 12,544 18,955 23,740
------------------------------------ ------ ------------------- ----------------------- ------------------
Current liabilities
Trade and other payables 15 4,030 3,405 3,107
Borrowings 16 8,760 3,637 3,262
Total current liabilities 12,790 7,042 6,369
------------------------------------ ------ ------------------- ----------------------- ------------------
Total liabilities 25,334 25,997 30,109
------------------------------------ ------ ------------------- ----------------------- ------------------
Total net assets 78,835 77,942 72,716
------------------------------------ ------ ------------------- ----------------------- ------------------
Capital and reserves attributable
to owners of the Company
Share capital 14 18,988 18,988 18,988
Share premium 14 - 89,520 89,520
Retained earnings (deficit) 59,847 (30,566) (35,792)
------------------------------------ ------ ------------------- ----------------------- ------------------
Total equity 78,835 77,942 72,716
------------------------------------ ------ ------------------- ----------------------- ------------------
The financial statements were approved and authorised for issue
by the Board of Directors on 29 June 2017 and were signed on its
behalf by:
Dmitry Khilov Simon Olsen
Chief Executive Officer Finance Director
Company number: 1067991
Company Statement of Financial Position
31 December 31 December
2016 2015
Note $000 $000
------------------------------------ ------ ------------- -------------
Assets
Non-current assets
Property, plant and equipment 7 - -
Investment in subsidiaries 9 111,928 116,369
------------------------------------ ------ ------------- -------------
Total non-current assets 111,928 116,369
------------------------------------ ------ ------------- -------------
Current assets
Trade and other receivables 12 2,635 3,346
Cash and cash equivalents 13 215 147
------------------------------------ ------ ------------- -------------
Total current assets 2,850 3,493
------------------------------------ ------ ------------- -------------
Total assets 114,778 119,862
------------------------------------ ------ ------------- -------------
Liabilities
Current liabilities
Trade and other payables 15 273 411
Borrowings 16 - -
------------------------------------ ------ ------------- -------------
Total current liabilities 273 411
------------------------------------ ------ ------------- -------------
Total liabilities 273 411
------------------------------------ ------ ------------- -------------
Total net assets 114,505 119,451
------------------------------------ ------ ------------- -------------
Capital and reserves attributable
to owners of the Company
Share capital 14 18,988 18,988
Share premium 14 - 89,520
Retained earnings 95,517 10,943
------------------------------------ ------ ------------- -------------
Total equity 114,505 119,451
------------------------------------ ------ ------------- -------------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent company
Statement of Comprehensive Income. The profit for the parent
company for the year was $556,819 (2015: $1,313,023).
The financial statements were approved and authorised for issue
by the Board of Directors on 29 June 2017 and were
signed on its behalf by:
Dmitry Khilov Simon Olsen
Chief Executive Officer Finance Director
Company number: 1067991
Consolidated Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2016 2015 (Restated)
Note $000 $000
------------------------------------ ------ -------------- ------------------
Revenue 19 45,202 44,059
------------------------------------ ------ -------------- ------------------
Cost of sales 20 (27,972) (28,777)
Ore stock inventory impairment 11 (1,389) (722)
------------------------------------ ------ -------------- ------------------
Gross profit 15,841 14,560
Administrative expenses (5,821) (5,562)
Other income 226 86
Foreign exchange differences
on operating activities 18 445 (316)
------------------------------------ ------ -------------- ------------------
Profit from operations 10,691 8,768
Finance expense 28 (2,132) (2,461)
Finance income 28 157 301
Foreign exchange differences
on financing activities 28 (61) 6
------------------------------------ ------ -------------- ------------------
Profit before tax 8,655 6,614
Income tax charge 29 (2,259) (1,388)
------------------------------------ ------ -------------- ------------------
Profit for the year 6,396 5,226
------------------------------------ ------ -------------- ------------------
Total comprehensive income
for the year 6,396 5,226
------------------------------------ ------ -------------- ------------------
Profit for the year attributable
to:
Owners of the parent company 6,396 5,226
Profit for the year 6,396 5,226
------------------------------------ ------ -------------- ------------------
Total comprehensive income
for the year attributable to:
Owners of the parent company 6,396 5,226
Profit for the year 6,396 5,226
------------------------------------ ------ -------------- ------------------
Profit per share attributable
to the owners
of the parent company (expressed
in cents)
- basic and diluted 30 5.81 4.75
Statements of Changes in Equity
Attributable to owners
of the Company
Group Note Share Share Retained
capital premium deficit Total
$000 $000 $000 $000
----------------------- ------ ---------- ---------- ---------- ---------
At 1 January 2015
(restated) 18,988 89,520 (35,792) 72,716
Total comprehensive
income for the year - - 5,226 5,226
At 31 December 2015
(restated) 18,988 89,520 (30,566) 77,942
----------------------- ------ ---------- ---------- ---------- ---------
At 1 January 2016 18,988 89,520 (30,566) 77,942
Capital reduction 14 - (89,520) 89,520 -
Dividends paid 34 (5,503) (5,503)
Total comprehensive
income for the year - - 6,396 6,396
At 31 December 2016 18,988 - 59,847 78,835
----------------------- ------ ---------- ---------- ---------- ---------
Company Note Share Share Retained
capital premium earnings Total
$000 $000 $000 $000
----------------------- ------ ---------- ---------- ----------- ---------
At 1 January 2015 18,988 89,520 9,630 118,138
Total comprehensive
income for the year - - 1,313 1,313
At 31 December 2015 18,988 89,520 10,943 119,451
----------------------- ------ ---------- ---------- ----------- ---------
At 1 January 2016 18,988 89,520 10,943 119,451
Capital reduction 14 - (89,520) 89,520 -
Dividends paid 34 (5,503) (5,503)
Total comprehensive
income for the year - - 557 557
At 31 December 2016 18,988 - 95,517 114,505
----------------------- ------ ---------- ---------- ----------- ---------
Consolidated Statement of Cash Flows
Year ended Year ended
31 December 31 December
2016 2015 (Restated)
Note $000 $000
----------------------------------------- ------ -------------- ------------------
Cash flows from operating activities
Profit for the year 6,396 5,226
Adjustment for:
Mining properties depletion 21 2,381 1,840
Depreciation of property, plant
and equipment charged to income
statement 21 7,026 5,841
Finance expense - net 28 2,036 2,154
IAS39 adjustment to net present
value of restructured bank borrowings 16 76 57
Impairment of ore stocks 11 1,389 722
Corporation tax charge 29 2,259 1,388
Loss on sale of property, plant
and equipment 21 76 24
----------------------------------------- ------ -------------- ------------------
Cash flows from operating activities
before changes in working capital
and provisions 21,639 17,252
Increase in inventories (1,767) (317)
Decrease (increase) in trade
and other receivables 494 (240)
Increase in trade and other payables 625 390
Cash generated from operations 20,991 17,085
Corporation tax paid (18) (8)
Interest paid on borrowings 28 (2,132) (2,636)
Net cash flows generated from
operating activities 18,841 14,441
----------------------------------------- ------ -------------- ------------------
Investing activities
Mining properties (5,976) (1,523)
Purchase of property, plant and
equipment (PPE) (2,962) (2,324)
Purchase of exploration and evaluation
assets (463) (106)
Interest received 156 301
----------------------------------------- ------ -------------- ------------------
Net cash used in investing activities (9,245) (3,652)
----------------------------------------- ------ -------------- ------------------
Financing activities
Repayment of bank borrowings 16 (3,519) (5,200)
Repayment of short term borrowings 16 - (891)
Repayment of finance leases (59) (12)
Dividends paid 34 (5,503) -
----------------------------------------- ------ -------------- ------------------
Net cash used in financing activities (9,081) (6,103)
----------------------------------------- ------ -------------- ------------------
Net increase in cash and cash
equivalents 515 4,686
Cash and cash equivalents at
beginning of the year 13 12,643 7,951
Exchange (losses) gains on cash
and cash equivalents (61) 6
Cash and cash equivalents at
end of the year 13 13,097 12,643
----------------------------------------- ------ -------------- ------------------
Company Statement of Cash Flows
Year ended Year ended
31 December 31 December
2016 2015
Note $000 $000
------------------------------------------ ------ -------------- --------------
Cash flows from operating activities
Profit for the year 557 1,313
Adjustment for:
Depreciation - -
Finance income - net (2,195) (2,622)
Cash flows from operating activities
before changes in working capital
and provisions (1,638) (1,309)
Decrease in trade and other receivables 727 108
(Decrease) increase in trade
and other payables (138) 34
Cash used in operations (1,049) (1,167)
Interest paid on borrowings - (189)
Net cash used in operating activities (1,049) (1,356)
------------------------------------------ ------ -------------- --------------
Investing activities
Loans to subsidiary companies 12 - -
Repayment of loans by subsidiary
companies 6,681 2,300
Interest received - -
Net cash generated from investing
activities 6,681 2,300
------------------------------------------ ------ -------------- --------------
Financing activities
Repayment of short term borrowings 16 - (891)
Dividends paid 34 (5,503) -
Net cash used in financing activities (5,503) (891)
------------------------------------------ ------ -------------- --------------
Net increase in cash and cash
equivalents 129 53
Cash and cash equivalents at
beginning of the year 13 147 88
Exchange (losses) gains on cash
and cash equivalents (61) 6
Cash and cash equivalents at
end of the year 13 215 147
------------------------------------------ ------ -------------- --------------
Notes to the Financial Statements
1. General information
Trans-Siberian Gold plc (the Company) is a UK-based resources
company, with the objective of acquiring and developing a portfolio
of quality gold-mining assets in Russia. The Company is a public
limited company, incorporated and domiciled in the United Kingdom
and has two subsidiaries based in the Russian Federation, one of
which holds the licence for the Asacha deposit where gold
production commenced in 2011. The Company's registered office is 39
Parkside Cambridge CB1 1PN United Kingdom. The registered number of
the Company is 1067991. The Company's shares are traded on the AIM
Market of the London Stock Exchange.
2. Going concern
The Group's operations are cash generative and management
tightly control the level of committed expenditure to ensure that
the Group has sufficient resources available to meet its
liabilities as they fall due. Regular cash forecasts are reviewed
to assess the potential impact of factors such as changes in
commodity prices, production rates and the timing of capital
expenditure.
The Group has reported an operating profit for the year of $10.7
million, which is stated after significant non-cash depreciation
and impairment charges. The Directors have reviewed the Group's
cash flow forecast for the period to 31 December 2018 and they
believe that, taking account of reasonably possible changes in
commodity prices, trading performance and expenditure and scheduled
repayment of bank loan facilities, the Group has adequate resources
to continue in operational existence for the foreseeable future,
wherefore the Directors are confident that the Group will continue
as a going concern and have prepared the financial statements on
that basis.
3. Basis of preparation
The consolidated financial statements are prepared in US dollars
($), rounded to the nearest thousand.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared on the basis of a
going concern and in line with International Financial Reporting
Standards (IFRS) and IFRIC interpretations issued by the
International Accounting Standards Board (IASB) adopted by the
European Union and with those parts of the Companies Act 2006 that
are applicable to companies reporting under IFRSs. The adoption of
all of the new and revised Standards and Interpretations issued by
the IASB and the International Financial Reporting Interpretations
Committee (IFRIC) of the IASB that are relevant to the operations
and effective for annual reporting periods beginning on 1 January
2016 are reflected in these financial statements.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. The areas involving a higher degree of judgement or
complexity, or where assumptions and estimates are significant to
the consolidated financial statements, are disclosed in Note 4.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
a) Standards, amendments and interpretations effective in
2016
New standards, amendments to standards and interpretations that
are mandatory for the first time for the Group for the financial
year beginning 1 January 2016 did not have a material effect on the
Group.
b) Standards, amendments and interpretations that are not yet
effective and have not been early adopted
At the date of authorisation of these financial statements, the
following standards and relevant interpretations, which have not
been applied in these financial statements, were in issue but not
yet effective (and some of which were pending endorsement by the
EU):
IAS 12 (amended) Recognition of Deferred Tax Asset for
Unrealised Losses
IFRS 16 Leases
IAS 7 Disclosure Initiative
lFRIC 22 Foreign Currency Transactions and Advance
Consideration
lFRS 9 Financial Instruments
lFRS 15 Revenue from Contracts
lFRS 2 (amended) Classification and Measurement of Share-based
Payment Transactions
lFRS 15 Clarification to IFRS 15 Revenue from Contracts with
Customers
Annual improvements to IFRSs: 2014-2016 Cycle
The Group considers that the only standard that may have a
significant impact is IFRS 9, however has not yet quantified the
potential impact. The new standard will replace existing accounting
standards. It is applicable to financial assets and liabilities and
will introduce changes to existing accounting concerning
classification, measurement and impairment (introducing an expected
loss method). The Group considers that whilst IFRS 16 and IFRS 15
may impact on the Group, the effect will not be significant. The
operating leases held by the Group are of low value and its revenue
contracts usually contain a single performance criteria that is
satisfied at a point in time. The Group will adopt the above
standards at the time stipulated by that standard. The Group does
not currently anticipate voluntary early adoption of any of the
standards.
Basis of consolidation
The consolidated financial statements of the Group include the
accounts of Trans-Siberian Gold plc and its subsidiaries. Where the
Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the
following elements are present: power over the investee, exposure
to variable returns from the investee and the ability of the
investor to use its power to affect those variable returns. Control
is reassessed whenever facts and circumstances indicate that there
may be a change in any of these elements of control. Subsidiaries
are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date on
which control ceases. Inter-company transactions, balances and
unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated but considered an
impairment indicator of the asset transferred. The accounting
policies and financial year ends of its subsidiaries are consistent
with those applied by the Company.
Business combinations
The consolidated financial statements incorporate the results of
the business combinations using the acquisition method of
accounting. In the consolidated statement of financial position,
the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included
in the consolidated statement of comprehensive income from the date
on which control is obtained.
Foreign currency translation
a) Functional and presentation currency
Items included in the financial information of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial information is presented in
US dollars ($), which is the functional and presentation currency
of the Company and the functional currency
of its subsidiaries. The exchange rate on 31 December 2016 was
GBP1:$1.2342 (2015: GBP1:$1.4739) and $1:RUB60.6569
(2015: $1:RUB72.8827). The average rates applied to transactions
during the year were GBP1:$1.3548 (2015: GBP1:$1.5284) and
$1:RUB67.0917 (2015: $1:RUB61.2115).
b) Transactions and balances
Foreign currency transactions are translated into the functional
currency at the average exchange rate ruling during the month in
which the transactions occur. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss. Foreign exchange gains and losses resulting from
the translation of cash, cash equivalents and borrowings
denominated in foreign currencies are shown as financing
activities; all other foreign exchange gains and losses
are shown as operating activities.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision makers.
The chief operating decision makers have been identified as the
Chief Executive Officer, Finance Director and the non-executive
board members.
The Group has one operating segment in Russia which has
production, exploration and development activities. Its operating
results are regularly reviewed by the Group's chief operating
decision makers in order to make decisions about the allocation of
resources and to assess its performance. The Group's activities in
the United Kingdom are of an administrative and corporate nature
and do not form part of the operating segment.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost
less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation of property, plant and equipment is calculated using
the
straight-line method to allocate their cost to their residual
values over their estimated useful lives, being:
Buildings: - 3-20 years
Motor vehicles: - 4-7 years
Plant and machinery: - 4-12 years
Office furniture and equipment: - 3-5 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount and are recognised
within administrative expenses in profit or loss. Assets under
construction are not subject to depreciation until the date on
which they become available for use.
Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a
straight-line basis over the period of the lease.
Assets held under finance leases are capitalised as property,
plant and equipment at the estimated present value of the
underlying lease payments. The corresponding finance lease
obligation is included in creditors due within or after more
than one year. The interest element is allocated to accounting
periods during the lease term to reflect a constant rate of
interest on the remaining balance of the obligation for each
accounting period.
Exploration and evaluation assets
When the Group incurs expenditure on mining properties that have
not reached the stage of commercial production, the costs of
acquiring the rights to such mining properties and related
exploration and evaluation costs, including directly attributable
employment costs, are deferred where the expected recovery of costs
is considered probable by the successful exploitation or sale of
the asset. General overheads are expensed immediately. Depreciation
on property, plant and equipment used on exploration and evaluation
projects is charged to deferred costs whilst the projects are in
progress. The Group capitalises borrowing costs directly
attributable to the acquisition, construction or production of a
qualifying asset (one that takes a substantial period of time to
get ready for use or sale) as part of the cost of that asset.
Finance costs incurred in respect of the Group's general borrowings
are expensed in profit or loss as incurred. Exploration and
evaluation costs are not amortised.
Where a feasibility study indicates that the future recovery of
costs is not probable, full provision is made in respect of any
deferred costs. Where mining properties are abandoned, deferred
expenditure is written off in full.
Notes to the Financial Statements - continued
3. Principal accounting policies - continued
Exploration and evaluation assets - continued
Deferred exploration and evaluation costs are assessed at each
reporting date to determine whether there are indicators that the
asset may be impaired. If any such indicator exists, a review for
impairment is conducted. The amounts shown as deferred exploration
and evaluation expenditure represent costs incurred and do not
necessarily reflect present or future values.
A project's deferred exploration and evaluation expenditure is
transferred to non-current mining assets when the decision to
proceed to the development stage of that project is taken.
Mining properties
Once a project reaches the stage of commercial production, the
capitalised exploration and evaluation expenditure, other than that
on buildings, machinery and equipment, related to that project is
transferred to tangible assets as mining properties.
Mining properties are depleted over the estimated life of
Asacha's Main Zone resource on a 'unit of production' basis.
Commercial resources are measured and indicated resources.
Changes in commercial resources affecting unit of production
calculations are dealt with prospectively over the revised
remaining resources.
Impairment
The carrying amount of the Group's non-current assets is
compared to the recoverable amount of the assets whenever events or
changes in circumstances indicate that the net book value may not
be recoverable. The recoverable amount is the higher of value in
use and the fair value less costs to sell.
Value in use is estimated by reference to the net present value
of expected future cash flows of the relevant cash generating unit.
Individual mining properties are considered to be separate income
generating units for this purpose, except where they would be
operated together as a single mining business.
If the recoverable amount is less than the carrying amount of an
asset, an impairment loss is recognised. The revised carrying
amounts are amortised in line with the Group's accounting
policy.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment. The reversal
is recognised in the income statement and is limited to the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised in the prior
reporting periods.
Investments
In its separate financial statements, the Company recognises
investments in subsidiary companies involved in mining operations,
exploration and development at cost less any provision for
impairment.
Financial assets
The Group classifies all of its financial assets as loans and
receivables which comprise trade and other receivables and cash and
cash equivalents.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of contractual monetary asset. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the
consolidated income statement. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short term highly liquid investments with
original maturities of three months or less, and, for the purpose
of the statement of cash flows, bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on the
consolidated statement of financial position.
Financial liabilities
The Group classifies all of its financial liabilities as other
financial liabilities which include trade payables, other
short-term monetary liabilities and bank borrowings.
Bank borrowings are initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
Trade payables and other short-term monetary liabilities are
initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Inventories
Raw materials and consumables, which consist of fuel and
materials used in mining operations, spare parts and tools for
development activities are initially recognised at cost, and
subsequently valued at the lower of cost and net realisable
value.
Stockpiles comprise ore containing gold and are valued at the
lower of weighted average cost (including direct labour costs and
related overheads, allocated on a value (gold content) rather than
activity (tonnage mined) basis with effect from 2016) and net
realisable value (using assay data to estimate the amount of gold
contained in the stockpiles, adjusted for expected gold recovery
rates).
Finished goods (comprising refined gold and silver) and work in
progress (including gold in circuit and gold dore) are stated at
the lower of weighted average cost and net realisable value. Cost
includes direct materials, direct labour costs and production
overheads, including depreciation and depletion of relevant
property, plant and equipment and mining properties.
Net realisable value represents the estimated selling price less
all expected costs to completion and costs to be incurred in
selling and distribution.
Share capital
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The Group's ordinary shares are classified as equity
instruments.
Revenue
The Company's subsidiary ZAO Trevozhnoye Zarevo (TZ) has entered
into contracts for the sale of refined gold and silver, whereby
100% of its refined production is sold to the bank which provided
the loan facilities discussed in Note 16. Revenue arising from
sales under these contracts is recognised when the price is
determinable, the refined gold and silver has been delivered at the
refinery in accordance with the terms of the contract, the
significant risks and rewards have been transferred to the customer
and collection of the sale price is reasonably assured.
Taxation
Current tax is the expected tax payable or recoverable on the
taxable profit or loss for the year, using rates enacted at the
reporting date and any adjustments to the tax payable in respect of
previous years.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted by
the reporting date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Share-based payment transactions
The Company makes equity-settled share-based payments to certain
Group employees under the terms of its employee share option
scheme. The fair value of options granted to employees is
recognised as an employee expense, with a corresponding increase in
equity by way of a credit to retained earnings.
The fair value is measured at grant date and expensed on a
straight-line basis over the expected vesting period. The fair
value of the options granted is measured using a Black-Scholes
valuation model, taking into account the terms and conditions upon
which the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of share options that vest
or are likely to vest except where non-exercise is only due to the
Company's share price not achieving the threshold for vesting.
Non-market based vesting conditions are taken into account in
estimating the number of options likely to vest. The estimate of
the number of options likely to vest is reviewed at each reporting
date up to the vesting date, at which point the estimate is
adjusted to reflect the actual options exercised. No adjustment is
made after the vesting date even if the options are not
exercised.
Defined contribution personal pension plan
Contributions to employees' defined contribution personal
pension plans are recognised as an expense in profit or loss as the
services giving rise to the Group's obligations are rendered by the
employees.
Provisions
Provisions for decommissioning, environmental restoration and
legal claims are recognised when the Group has a present legal or
constructive obligation as a result of past events' it is probable
that an outflow of resources will be required to settle the
obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Group companies are generally required to restore mine and
processing sites at the end of their producing lives to a condition
acceptable to the relevant authorities and consistent with the
Group's environmental policies. The expected cost of any committed
decommissioning or restoration programme, discounted to its net
present value where the effect of discounting is material, is
provided and capitalised at the beginning of each project. The
capitalised cost is amortised over the life of the operation and
the increase in the net present value of the provision for the
expected cost is included with interest and similar charges.
The costs of on-going programmes to prevent and control
pollution and to rehabilitate the environment are charged to profit
or loss as incurred.
Notes to the Financial Statements - continued
3. Principal accounting policies - continued
Determination of ore reserves
The Group estimates its ore reserves and mineral resources based
on information compiled by Competent Persons as defined in
accordance with the 2012 edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves (the JORC code).
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Use of estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition,
seldom equal the related actual results.
The more significant areas requiring the use of management
estimates and assumptions relate to mineral resources that are
the basis of future cash flow estimates and unit-of-production
depreciation, depletion and amortisation calculations;
decommissioning, site restoration, environmental costs and closure
obligations; estimates of recoverable gold and other
materials; and asset impairments.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Critical judgements and estimates in applying the entity's
accounting policies
a) Mining properties
The recoverability of the amounts shown in the Group statement
of financial position in relation to mining properties (and also
the carrying value of the Company's investments in its
subsidiaries) are dependent upon compliance with the terms of the
relevant mineral rights licences, extensions of the terms of those
licences beyond their current expiry dates, the political, economic
and legislative stability of the regions in which the Group
operates, the Group's ability to maintain the necessary financing
to fulfil its obligations as they arise, the successful extraction
of the defined mineral resources and the future profitable
production or proceeds from the disposal of properties. This is
discussed further in Note 6.
b) Property plant and equipment
The recoverability of the amounts shown in the Group statement
of financial position in relation to property, plant and equipment
(and also the carrying value of the Company's investments in its
subsidiaries) are dependent upon compliance with the terms of the
relevant mineral rights licences, extensions of the terms of those
licences beyond their current expiry dates, the political, economic
and legislative stability of the regions in which the Group
operates, the Group's ability to maintain the necessary financing
to fulfil its obligations as they arise, the successful extraction
of the defined mineral resources and the future profitable
production or proceeds from the disposal of properties.
c) Deferred exploration and evaluation costs
The recoverability of the amounts shown in the Group statement
of financial position in relation to deferred exploration and
evaluation expenditure (and also the carrying value of the
Company's investments in its subsidiaries) are dependent upon the
discovery of economically recoverable reserves, continuation of the
Group's interests in the underlying mining claims, the political,
economic and legislative stability of the regions in which the
Group operates, compliance with the terms of the relevant mineral
rights licences, extensions of the terms of those licences beyond
their current expiry dates, the Group's ability to obtain the
necessary financing to fulfil its obligations as they arise and
upon future profitable production or proceeds from the disposal of
properties.
d) Ore stocks
The recoverability of the amounts shown in the Group statement
of financial position in relation to ore stocks is dependent on the
gold price. Impairment provisions are recognised in accordance with
the Group's accounting policies to reflect any anticipated
shortfall between net realisable value and cost, including
processing and refining. Part of the Group's ore stockpile may be
classified as non-current inventories, if it is expected to be
processed later than one year from the reporting date. This is
discussed further in Note 11.
e) Decommissioning, site restoration and environmental costs
The Group's mining and exploration activities are subject to
various laws and regulations governing the protection of the
environment. The Group recognises management's best estimate for
asset retirement obligations in the period in which they
are incurred. Actual costs incurred in future periods could
differ materially from the estimates. Additionally, future changes
to environmental laws and regulations, life of mine estimates and
discount rates could affect the carrying amount of this provision.
Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited
to the life of mine. This is discussed further in Note 17.
f) Deferred tax
The Group has incurred trading losses in previous periods which
give rise to potential deferred tax assets. The recognition of the
deferred tax asset is dependent upon the Group making sufficient
taxable profits in future periods to utilise those losses. This is
discussed further in Note 10.
g) Contingencies
By their nature, contingencies will only be resolved when one or
more future events occur or fail to occur. The assessment of such
contingencies inherently involves the exercise of significant
judgement and estimates of the outcome of future events. This is
discussed further in Note 31.
5. Segment information
The Group's operations are entirely focused on gold production
and exploration and development activities within the Russian
Federation, with its corporate head office in the UK. The operating
segment has been identified on the basis of internal reports about
the components of the Group. The Group has one reportable segment,
being operations in Russia, whose accounting policies are in line
with those set out in Note 3. The operating results of this segment
are regularly reviewed by the Group's chief operating decision
makers in order to make decisions about the allocation of resources
and to assess their performance. With the exception of UK
administrative costs amounting to $1,638,000 (2015: $1,309,000),
the numbers in the primary statements reflect the results of the
sole operating segment. All revenue arises from the production of
gold with silver as a by-product which is sold to one customer in
Russia. All non-current assets are located in Russia.
6. Mining properties
Mining properties assets relate to the Asachinskoye (Asacha)
mining licence held by the Company's subsidiary ZAO Trevozhnoye
Zarevo (TZ).
Asacha
Group $000
---------------------- ----------
Cost
At 1 January 2015 57,317
Additions 1,978
---------------------- ----------
At 31 December 2015 59,295
---------------------- ----------
Depletion
At 1 January 2015 (30,348)
Charge for year (1,899)
---------------------- ----------
At 31 December 2015 (32,247)
---------------------- ----------
Net book value
At 1 January 2015 26,969
---------------------- ----------
At 31 December 2015 27,048
---------------------- ----------
Cost
At 1 January 2016 59,295
Additions 5,976
---------------------- ----------
At 31 December 2016 65,271
---------------------- ----------
Depletion
At 1 January 2016 (32,247)
Charge for year (2,535)
---------------------- ----------
At 31 December 2016 (34,782)
---------------------- ----------
Net book value
At 1 January 2016 27,048
---------------------- ----------
At 31 December 2016 30,489
---------------------- ----------
$154,000 (2015: $150,000) of the depletion charge is included in
inventory
Exploration expenditure incurred in respect of Asacha's Eastern
Zone is discussed in Note 8.
On 8 September 1994, the Kamchatka Department of the Geological
Committee of the Russian Ministry for Natural Resources issued a
licence, after tender, to TZ for the exploration and development of
the Asacha minerals deposit in Kamchatka. The licence includes the
right to extract gold and silver and, pursuant to the decision of
the Federal Agency on Subsoil Use on 12 September 2013, its term
has been extended for four years until 1 September 2018, reflecting
the seven year mine life envisaged by the mine's original design
documentation. TZ intends to apply for a further extension to the
licence term, taking account of the results of exploration at
Asacha since its resources were approved by the Russian State
Geological Commission for Reserves (GKZ) in 2002. As a first step,
the process to obtain GKZ's legal recognition of the increase in
reserves commenced in 2015 and was completed in March 2017.
Following approval by GKZ, the required design changes to the
project will be undertaken by an external design institute, after
which TZ will seek the necessary approvals and agreements from
various government bodies and agencies.
The Board has carried out impairment reviews of the mine's
economic model as at 31 December 2015 and 2016, assuming a gold
price of $1,219/oz. (2015: $1,100/oz.), an expected economic life
of seven years (2015: nine years) and a 16.7% discount factor
(2015: 17.0%), to determine whether there had been any impairment
in respect of mining properties and was satisfied at each reporting
date that no impairment in respect of mining properties had
arisen.
.
Notes to the Financial Statements - continued
7. Property, plant and equipment
Office
Plant Assets
and Motor equipment under
construction
Buildings machinery vehicles and furniture (i) Total
Group $000 $000 $000 $000 $000 $000
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Cost
At 1 January
2015 78,108 17,527 2,293 475 695 99,098
Additions 228 2,055 - 2 420 2,705
Re-classifications - - - - - -
Disposals - (236) (46) (3) - (285)
At 31 December
2015 78,336 19,346 2,247 474 1,115 101,518
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Depreciation
At 1 January
2015 (32,068) (9,703) (2,193) (424) (183) (44,571)
Charge for
year (ii) (5,764) (1,045) (85) (25) - (6,919)
Impairment - - - - - -
provision
Disposals - 211 46 3 - 260
----------- ------------ ----------- ---------------- --------------- ----------
At 31 December
2015 (37,832) (10,537) (2,232) (446) (183) (51,230)
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Net book
value
At 1 January
2015 46,040 7,824 100 51 512 54,527
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
At 31 December
2015 40,504 8,809 15 28 932 50,288
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Cost
At 1 January
2016 78,336 19,346 2,247 474 1,115 101,518
Additions 697 862 929 6 518 3,012
Re-classifications - 494 - - (494) -
Disposals - (595) - (29) - (624)
Transfers (5) - - - 5 -
At 31 December
2016 79,028 20,107 3,176 451 1,144 103,906
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Depreciation
At 1 January
2016 (37,832) (10,537) (2,232) (446) (183) (51,230)
Charge for
year (ii) (5,534) (1,407) (139) (22) - (7,102)
Impairment - - - - - -
provision
Disposals - 520 - 27 - 547
----------- ------------ ----------- ---------------- --------------- ----------
At 31 December
2016 (43,366) (11,424) (2,371) (441) (183) (57,785)
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
Net book
value
At 1 January
2016 40,504 8,809 15 28 932 50,288
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
At 31 December
2016 35,662 8,683 805 10 961 46,121
--------------------- ----------- ------------ ----------- ---------------- --------------- ----------
i. Assets under construction comprise $961,352 (2015: $932,589)
for building construction and infrastructure at Asacha.
ii. $25,068 of the depreciation charge is included in additions
to mining properties (2015: $340,383). $51,234 (2015: $50,114) of
the depreciation charge related to property, plant and equipment
used on exploration and evaluation projects or assets under
construction and was capitalised in exploration and evaluation
costs or property, plant and equipment in accordance with the
Group's accounting policy. $nil (2015 $688,469) of the depreciation
charge is charged to inventories.
iii. The net carrying amount of property, plant and equipment
includes the following amounts in respect of assets held under
finance leases
2016 2015
$000 $000
Plant and machinery 442 703
Motor vehicles - -
Office equipment and furniture - -
--------------------------------- ------- -------
442 703
--------------------------------- ------- -------
The Board has carried out impairment reviews of the mine's
economic model as at 31 December 2015 and 31 December 2016 as
discussed in Note 6 and is satisfied that no impairment has arisen
at either reporting date in respect of property, plant and
equipment.
Office equipment
and furniture
------------------
2016 2015
Company $000 $000
------------------ ---------------- ----------------
Cost
At 1 January 20 20
Additions - -
Disposals - -
------------------ ---------------- ----------------
At 31 December 20 20
------------------ ---------------- ----------------
Depreciation
At 1 January 20 20
Charge for year - -
Disposals - -
------------------ ---------------- ----------------
At 31 December 20 20
------------------ ---------------- ----------------
Net book value
At 1 January - -
------------------ ---------------- ----------------
At 31 December - -
------------------ ---------------- ----------------
8. Deferred exploration and evaluation costs
Movement on the Group's deferred exploration and evaluation
expenditure which relates to the "Asacha East" zone, a separate
orebody within the Asacha mineral rights licence discussed in Note
6, are as follows:
Asacha
$000
---------------------- --------
At 1 January 2015 1,643
Additions (i) -
At 31 December 2015 1,643
---------------------- --------
At 1 January 2016 1,643
Additions (i) 463
At 31 December 2016 2,106
---------------------- --------
i Additions include capitalised PPE depreciation (see Note 7(ii)
).
The carrying values of exploration and evaluation costs are
predicated on the Company's continued pursuit of its strategy in
respect of the Asacha property, which includes mining in the
"Asacha East" zone in due course.
9. Investments in subsidiary undertakings
The Group has interests in the following subsidiaries which are
included in these financial statements by way of consolidation:
Principal
Country of country Description and
incorporation/ Principal of proportion of
Subsidiary undertaking registration activity operation shares held
------------------------ ----------------- ---------------- ------------ -----------------
OOO Trans-Siberian Russia Administration Russia Participating
Gold Management shares - 100%
ZAO Trevozhnoye Russia Mining Russia Common shares
Zarevo - 100%
------------------------ ----------------- ---------------- ------------ -----------------
The registered offices of the subsidiaries are:
OOO Trans-Siberian
Gold Management
- Office 55,
15A Leninskiy
Prospekt, 119071
Moscow, Russian
Federation
ZAO Trevozhnoye
Zarevo - 1a Uralskaya
Str., Elizovo,
Elizovo district,
684007 Kamchatskiy
Kray, Russian
Federation
------------------------
Notes to the Financial Statements - continued
9. Investments in subsidiary undertakings - continued
2016 2015
Company $000 $000
--------------------------------------- --------- ---------
Interests in subsidiary undertakings
At 1 January 73,976 69,319
Additional capital contributions
(i) - 4,657
At 31 December 73,976 73,976
--------------------------------------- --------- ---------
Loans to subsidiary undertakings
At 1 January 42,393 44,538
Additions (interest accrued) 2,240 2,512
Repayments (6,681)
Loans forgiven (i) - (4,657)
At 31 December 37,952 42,393
--------------------------------------- --------- ---------
Total investments
At 1 January 116,369 113,857
Additions - net (4,441) 2,512
At 31 December 111,928 116,369
--------------------------------------- --------- ---------
i The Company made additional capital contributions to its
subsidiaries through the forgiveness of loans of $0 (2015:
$4,567,262) in order to correct negative equity positions in those
subsidiaries' local accounts.
In addition to the impairment reviews discussed in Note 6, since
2014 the Board has also carried out impairment reviews of the
Asacha mine's economic model to determine whether there had been
any impairment in the Company's investment in TZ, which is higher
than both the Company's market capitalisation and the net assets of
the Group. As a result of its 2014 review the Board concluded that
a provision of $34.4 million was required against the Company's
investment in TZ. The Board's further impairment reviews of the
mine's economic model assumed a gold price of $1,200/oz. (2015:
$1,100/oz.), an expected economic life of nine years (2015: nine
years) and a 13.4% pre-tax discount factor (2015: 17.0%) and
concluded that no adjustment to the provision made in 2014 was
required. Although the economic life and discount factor
assumptions vary from those assumed in the impairment reviews
discussed in Note 6, the Board considers these to be
reasonable.
Interest deemed to arise from the deferred payment of the
purchase consideration for the Company's subsidiaries has been
capitalised in the cost of the relevant investment where such
interest qualifies for capitalisation within the Group's deferred
exploration expenditure. The cumulative amount of interest
capitalised is $121,300 (2015: $121,300).
10. Deferred tax
Deferred income tax at 31 December relates to the following:
1 January Charged/(Credited) 31 December
to Income
2016 (Restated) Statement 2016
$000 $000 $000
--------------------------------- -------------------------- ------------------------------- -------------
Tax effect of deductible
temporary differences:
Accounts payable etc. (509) (205) (714)
Recognised taxable losses (3,961) 3,352 (609)
Gross deferred tax asset (4,470) 3,147 (1,323)
--------------------------------- -------------------------- ------------------------------- -------------
Tax effect of taxable
temporary differences:
Mining properties 2,928 89 3,017
Property, plant and
equipment 3,178 (996) 2,182
Gross deferred tax liabilities 6,106 (907) 5,199
--------------------------------- -------------------------- ------------------------------- -------------
Total net deferred tax
liability 1,636 2,240 3,876
--------------------------------- -------------------------- ------------------------------- -------------
1 January Charged/(Credited) 31 December
to Income
2015 (Restated) Statement 2015 (Restated)
$000 $000 $000
--------------------------------- ---------------------------- ------------------------------- ------------------
Tax effect of deductible
temporary differences:
Accounts payable etc. (784) 275 (509)
Recognised taxable losses (5,393) 1,432 (3,961)
Gross deferred tax asset (6,177) 1,707 (4,470)
--------------------------------- ---------------------------- ------------------------------- ------------------
Tax effect of taxable
temporary differences:
Mining properties 2,822 106 2,928
Property, plant and
equipment 3,611 (433) 3,178
Gross deferred tax liabilities 6,433 (327) 6,106
--------------------------------- ---------------------------- ------------------------------- ------------------
Total net deferred tax
liability 256 1,380 1,636
--------------------------------- ---------------------------- ------------------------------- ------------------
Management has reviewed income tax payments planned to 2018 and
believes the deferred tax asset as at 31 December 2016 is fully
recoverable.
These financial statements reflect prior year adjustments in
respect of the deferred tax assets relating to tax losses and short
term timing differences and deferred tax liabilities relating to
mining properties and property plant and equipment. The impact of
the prior year restatements is summarised in Note 35.
As discussed in Note 11, a change in accounting policy whereby
costs are now allocated to mined ore on a value (gold content)
basis instead of on an activity (tonnage mined) basis would have
increased cost of sales in 2015, but would also have reduced the
amount of impairment provisions required to reflect the expected
net realisable value of low grade ore stocks if the change in
accounting policy had been implemented in 2015. A prior year
adjustment has not been made to inventories, since the net impact
on the pre-tax results and balance sheet for 2015 is not considered
to be material. However, this reduction of inventory impairment
provisions resulted in a significant increase in tax losses
relating to prior years and recognition of short term timing
differences relating to inventory impairment provisions and this
has given rise to a material prior year adjustment, increasing the
deferred tax asset.
In addition, following a review of the recognition criteria for
deferred tax relating to the mining properties and property plant
and equipment of TZ, the Russian mining subsidiary, it has been
concluded that additional deferred tax liabilities should have been
recognised in earlier years and a prior year restatement has also
been made to reflect these additional amounts.
11. Inventories
2016 2015 (Restated)
Group $000 $000
------------------------------- --------- -----------------
Non-current:
Ore stocks 5,870 5,651
Less: provision (2,166) (777)
------------------------------- --------- -----------------
3,704 4,874
------------------------------- --------- -----------------
Current:
Gold in progress 2,357 1,848
Silver in progress 88 32
Ore stocks 1,033 542
Fuel 1,070 1,004
Other materials and supplies 2,937 2,356
7,485 5,782
------------------------------- --------- -----------------
11,189 10,656
------------------------------- --------- -----------------
Gold in progress, silver in progress and ore stocks include
mining properties depletion $154,000 (2015: $150,000). Ore stocks,
part of which are classified as non-current inventories, are stated
net of an impairment provision of $2.2 million (2015 restated:
$777,000), which reflects the difference between the ore
stockpile's expected net realisable value at a gold price of
$1,200/oz. and cost, including processing, refining and
royalties.
Management has reviewed the methodology for cost allocation to
ore inventory and has concluded that the nature of mining
activities means that these ore inventory costs are more
appropriately accounted for by allocation to mined ore on a value
(gold content) basis rather than an activity (tonnage mined) basis.
This change in methodology is considered to be a change in
accounting policy. Management has assessed the impact of this
change; it would have resulted in a $254,000 increase in the
aggregate value of gold in progress and silver in progress at 31
December 2015. A prior year adjustment to the carrying value of
inventory has not been made since the amount is not considered to
be material. The change in accounting policy has had no effect on
the value of ore stocks net of impairment provisions (2016: $4.7
million net, 2015: $5.4 million net), but has reduced the amount of
the impairment provisions which would have been required in 2015
and previous years. There would have been a corresponding increase
in production costs, wherefore the net impact on the results for
those years would not have been material. The previously reported
impairment provisions at 31 December 2014 and 31 December 2015 were
$9.6 million and $10.3 million respectively, restated as $55,000
and $777,000 on the new basis.
12. Trade and other receivables
Group Company
---------------------------- ----------------------------
31 December 31 December 31 December 31 December
2016 2015 2016 2015
$000 $000 $000 $000
-------------------------- ---- ------------- ------------- ------------- -------------
Current:
Trade receivables 102 202 - -
Taxes recoverable
- value added tax
(i) 1,024 746 4 8
Prepayments and accrued
income 22 664 22 26
Receivables from
subsidiary companies
(ii) - - 2,606 3,308
Income tax asset 16 26 - -
Other receivables 3 23 3 4
-------------------------------- ------------- ------------- ------------- -------------
1,167 1,661 2,635 3,346
------------------------------- ------------- ------------- ------------- -------------
i Russian VAT to the value of $2,693,772 (2015: $2,012,643) was recovered in 2016.
ii TSG's current receivables from subsidiary companies includes
$1,363,350 (2015: $2,066,239) short term loans, including accrued
interest.
13. Cash and cash equivalents
Group Company
---------------------------- ----------------------------
31 December 31 December 31 December 31 December
2016 2015 2016 2015
$000 $000 $000 $000
--------------- ---- ------------- ------------- ------------- -------------
Cash at bank 13,097 12,643 215 147
13,097 12,643 215 147
-------------------- ------------- ------------- ------------- -------------
There are no restrictions over the access to, and use of, the
Group's bank and cash balances, other than those that customarily
relate to periodic short-term deposits.
Notes to the Financial Statements - continued
14. Share capital and premium
Number
of
Number shares
of allotted Share Share
shares and fully capital premium Total
Group and Company authorised paid $000 $000 $000
------------- ---------- ---------- ----------
At 1 January
2015 150,000,000 110,053,073 18,988 89,520 108,508
At 31 December
2015 150,000,000 110,053,073 18,988 89,520 108,508
-------------------- ------------- ------------- ---------- ---------- ----------
At 1 January
2016 150,000,000 110,053,073 18,988 89,520 108,508
Capital reduction (89,520) (89,520)
-------------------- ------------- ------------- ---------- ---------- ----------
At 31 December
2016 150,000,000 110,053,073 18,988 - 18,988
-------------------- ------------- ------------- ---------- ---------- ----------
All shares are ordinary shares with a par value of 10 pence.
Share capital represents amounts subscribed for share capital at
nominal value. The share premium account represents the amounts
received by the Company on the issue of its shares which were in
excess of the nominal value of the shares. On 5 September 2016, the
Company announced a proposed capital reduction, whereby, subject to
the approval of the Company's shareholders and the High Court of
Justice in England and Wales (the Court), the share premium account
would be cancelled in order to create distributable profits. The
cancellation was approved by the Company's shareholders on 29
September 2016 and by the Court on 26 October 2016.
Retained earnings (deficit) represents the cumulative net gains
and losses recognised in the statement of comprehensive income less
any amounts reflected directly in other reserves.
15. Trade and other payables
Group Company
---------------------------- ----------------------------
31 December 31 December 31 December 31 December
2016 2015 2016 2015
$000 $000 $000 $000
-------------------------------------- ---- ------------- ------------- ------------- -------------
Current:
Trade payables 1,318 1,343 38 44
Amounts due to subsidiary companies - - 43 36
Social security and other taxes 204 182 9 10
Other payables 2,406 1,765 81 205
Accrued expenses 102 115 102 116
-------------------------------------------- ------------- ------------- ------------- -------------
4,030 3,405 273 411
------------------------------------------- ------------- ------------- ------------- -------------
16. Borrowings
Group Company
---------------------------- ----------------------------
31 December 31 December 31 December 31 December
2016 2015 2016 2015
Note $000 $000 $000 $000
---------------------------- ------ ------------- ------------- --- ------------- -------------
Non-current:
Bank borrowings 7,746 16,209 - -
Finance lease obligations 32 225 387 - -
---------------------------- ------ ------------- ------------- ------------- -------------
7,971 16,596 - -
---------------------------- ------ ------------- ------------- ------------- -------------
Current:
Bank borrowings 8,583 3,563 - -
Related party loans 33 - - - -
Finance lease obligations 32 177 74 - -
---------------------------- ------ ------------- ------------- ------------- -------------
8,760 3,637 - -
---------------------------- ------ ------------- ------------- ------------- -------------
16,731 20,233 - -
---------------------------- ------ ------------- ------------- ------------- -------------
Movement in borrowings is analysed as follows:
Group Company
-------------------- ------------------
2016 2015 2016 2015
Note $000 $000 $000 $000
------------------------- ------- --------- --------- ------- ---------
At 1 January 20,233 26,137 - 1,066
Increase in borrowings - - - -
Interest on related
party and other
loans - 14 - 14
Repayment of loan
and accrued interest (3,519) (6,298) - (1,080)
IAS39 adjustment
to net present value
of restructured
bank borrowings 76 57 - -
Finance leases 32 (59) 323 - -
At 31 December 16,731 20,233 - -
------------------------- ------- --------- --------- ------- ---------
In 2009 and 2010 ZAO Trevozhnoye Zarevo (TZ) arranged two five
year loan facilities, each of which initially bore an annual
interest rate of 10.5%, for the Asacha project, in total $43
million, with the Russian bank Sberbank. The loans are secured by
pledges over certain moveable assets and the shares of TZ and OOO
Trans-Siberian Gold Management, TSG's other subsidiary. In
September 2013, the terms of the two loan facilities were extended
to December 2018.
Repayment of the $26.5 million then outstanding under the two
facilities commenced in March 2014. In 2015, in addition to
scheduled repayments, TZ prepaid $1.0 million and $2.2 million,
which had been scheduled to be repaid in, respectively, 2016 and
2018.
In accordance with IAS39, the fees and commissions paid to
Sberbank in respect of the loan restructuring are amortised over
the extended terms of the facilities, resulting in a net present
value adjustment of $221,000 (2015: $297,000). It was agreed that a
gold price hedge programme would be implemented for the revised
term of the facilities. It was subsequently agreed with the bank to
defer the start of the price protection programme in consideration
of an increase to the interest rate to 11.5% until such
commencement. On 4 April 2016, the interest rates on the two loan
facilities were reduced to 9.3% (applied to $9.65 million) and 9.7%
(applied to $10.35 million).
In 2012 UFG Asset Management and AngloGold Ashanti Limited, each
a related party by virtue of their then respective 54.42% and
31.17% holdings in the shares of the Company, agreed to provide
short term loan facilities, in aggregate $781,000 (increased to
$891,000 in January 2013), on commercial terms including interest
at 8%. The terms of the two facilities were extended, ultimately to
31 March 2015. Both facilities were repaid in full on 12 March
2015.
17. Provisions
2016 2015
Environmental/site restoration
provision $000 $000
--------------------------------- ---- ------- -------
At 1 January 723 609
Liability adjustment (24) 205
Finance charge - unwinding of
discount 20 59
Exchange rate difference (22) (150)
--------------------------------------- ------- -------
At 31 December 697 723
--------------------------------------- ------- -------
The provision relates to site restoration at the Asacha mine,
which is expected to commence in 2027. The amount of $696,562
(2015: $723,462) is included in mining properties and is calculated
based on regional data from the Monitoring Ecological Centre of
Kamchatka.
18. Financial instruments
Details of the significant accounting policies in respect of
financial instruments are disclosed in Note 3.
Financial risk management
The Group is exposed through its operations to the following
financial risks: liquidity risk, credit risk, cash flow interest
rate risk, commodity price risk and foreign exchange risk. The
Board seeks to minimise the Group's exposure to those risks by
reviewing and agreeing policies for managing each financial risk
and monitoring them on a regular basis. No formal policies have
been put in place in order to hedge the Group's activities to the
exposure to interest risk, commodity price risk or currency risk,
however these may be considered in future. No derivatives or hedges
were entered into during the period.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its policies and processes for
managing those risks or the methods used to measure them unless
otherwise stated in this note.
Principal financial instruments
The Group's principal financial instruments, from which
financial instrument risk arises, comprise long and short-term
loans, cash and short-term deposits as well as trade and other
receivables and trade payables which arise directly from its
operations.
Liquidity risk
The Group's policy is to ensure that it has sufficient cash to
allow it to meet its liabilities when they become due. Cash
forecasts identifying the Group's funding and liquidity
requirements are reviewed regularly by the Board. At the reporting
date the Group's long term borrowings comprised $16.3 million
outstanding on two bank facilities for the Asacha project
(originally five year facilities but restructured in September
2013) as discussed in Note 16.
The contractual maturities of the Group's financial liabilities
(which are all carried at amortised cost) are shown in the table
below:
Carrying Contractual 6 months 6 to 12 to 36 to
amount cash or less 12 36 months 72 months
Group flows months
2016 $000 $000 $000 $000 $000 $000
------------------------- ---------- ------------- ---------- --------- ------------ ------------
Current financial
liabilities
Trade and other
payables 3,826 3,826 3,826 - - -
Loans and borrowings 8,534 8,534 4,016 4,518 - -
Interest 49 865 599 266 - -
Finance lease
obligations 177 269 134 135 - -
Non-current
financial liabilities
Loans and borrowings 7,746 7,746 - - 7,746 -
Interest - 3,355 1,709 1,094 552 -
Finance lease
obligations 225 268 - - 268 -
------------------------- ---------- ------------- ---------- --------- ------------ ------------
20,557 24,863 10,284 6,013 8,566 -
------------------------- ---------- ------------- ---------- --------- ------------ ------------
Notes to the Financial Statements - continued
18. Financial instruments - continued
Carrying Contractual 6 months 6 to 12 to 36 to
amount cash or less 12 months 36 months 72 months
Company flows
2016 $000 $000 $000 $000 $000 $000
-------------------- ---------- ------------- ---------- ------------ ------------ ------------
Current financial
liabilities
Trade and other
payables 264 264 264 - - -
264 264 264 - - -
-------------------- ---------- ------------- ---------- ------------ ------------ ------------
Carrying Contractual 6 months 6 to 12 to 36 to
amount cash or less 12 months 36 months 72 months
Group flows
2015 $000 $000 $000 $000 $000 $000
------------------------- ---------- ------------- ---------- ------------ ------------ ------------
Current financial
liabilities
Trade and other
payables 3,223 3,223 3,223 - - -
Loans and borrowings 3,494 3,494 499 2,995 - -
Interest 69 204 125 79 - -
Finance lease
obligations 74 190 95 95 - -
Non-current
financial liabilities
Loans and borrowings 16,209 16,209 - - 16,209 -
Interest - 4,115 944 954 2,217 -
Finance lease
obligations 387 518 - - 259 259
------------------------- ---------- ------------- ---------- ------------ ------------ ------------
23,456 27,953 4,886 4,123 18,685 259
------------------------- ---------- ------------- ---------- ------------ ------------ ------------
Carrying Contractual 6 months 6 to 12 to 36 to
amount cash or less 12 months 36 months 72 months
Company flows
2015 $000 $000 $000 $000 $000 $000
-------------------- ---------- ------------- ---------- ------------ ------------ ------------
Current financial
liabilities
Trade and other
payables 401 401 401 - - -
401 401 401 - - -
-------------------- ---------- ------------- ---------- ------------ ------------ ------------
Credit risk
The credit risk on liquid funds is limited because the
counterparties are banks with credit ratings assigned by
international credit rating agencies. The Company has made
investments in and loans to one of its subsidiaries, recovery of
which is dependent on the future income generation of that
subsidiary. This is discussed further in Note 9.
The Group and Company's maximum exposure to credit risk by class
of individual financial instrument is shown in the table below:
2016 2015
------------------ ----------------------- -----------------------
Carrying Maximum Carrying Maximum
value exposure value exposure
Group $000 $000 $000 $000
------------------ ---------- ----------- ---------- -----------
Current financial assets classified
as loans and receivables
Cash and cash
equivalents 13,097 13,097 12,643 12,643
Trade and other
receivables 105 105 225 225
---------- ----------- ---------- -----------
13,202 13,202 12,868 12,868
---------- ----------- ---------- -----------
2016 2015
------------------------ ----------------------- -----------------------
Carrying Maximum Carrying Maximum
value exposure value exposure
Company $000 $000 $000 $000
------------------------ ---------- ----------- ---------- -----------
Current financial assets classified
as loans and receivables
Cash and cash
equivalents 215 215 147 147
Loans to subsidiaries 1,363 1,363 2,066 2,066
Trade and other
receivables 1,246 1,246 1,246 1,246
Non - current
financial assets
Loans to subsidiaries 37,952 37,952 42,393 42,393
---------- ----------- ---------- -----------
40,776 40,776 45,852 45,852
---------- ----------- ---------- -----------
Cash flow interest rate risk
The Group is exposed to cash flow interest rate risk from its
deposits of cash and cash equivalents with banks. The cash balances
maintained by the Group are managed in order to ensure that the
maximum level of interest is received for the available funds but
without affecting working capital flexibility.
As discussed in Note 16, prior to 4 April 2016 the $43 million
facilities provided by Sberbank for the Asacha project in 2009 and
2010 and restructured in September 2013 each bore interest at
11.5%, including a 1.0% premium pending the implementation of a
gold price protection programme. On that date the interest rate on
these facilities was reduced to 9.3% (applied to $9.65 million) and
9.7% (applied to $10.35 million). The Group has no other debt or
fixed rate finance leases, except for finance leases discussed in
Note 32. No subsidiary of the Group is permitted to enter into any
borrowing facility or lease agreement without the Company's prior
consent.
The interest rate profile of the Group and Company's financial
assets at 31 December 2016 was as follows:
31 December 31 December
2016 2015
Group $000 $000
------------- ----------------------- ------------- -------------
Cash
US dollars Fixed rate 34 1
US dollars Floating rate 10,626 11,887
Sterling Non-interest bearing 130 18
Sterling Floating rate 4 4
Russian
roubles Fixed rate 27 96
Russian
roubles Floating rate 2,276 637
------------- ----------------------- ------------- -------------
13,097 12,643
------------------------------------- ------------- -------------
Company
------------- ----------------------- ----- -----
Cash
US dollars Floating rate 80 123
Sterling Non-interest bearing 130 18
Sterling Floating rate 4 4
Russian
roubles Floating rate 1 2
------------- ----------------------- ----- -----
215 147
------------------------------------- ----- -----
The interest rate profile of the Group and Company's financial
liabilities at 31 December 2016 was as follows:
31 December 31 December
2016 2015
Group $000 $000
------------- --------------------------- ------------- -------------
Loans
Fixed rate - 9.3% (2015:
US dollars 11.5%) 7,491 9,512
Fixed rate - 9.7% (2015:
US dollars 11.5%) 8,789 10,191
16,280 19,703
----------------------------------------- ------------- -------------
Company
------------ ----------------- --- ---
Loans
US dollars Fixed rate - 8% - -
- -
------------ ----------------- --- ---
The weighted average interest rate payable during the year was
10.0% (2015: 11.5%) on fixed rate US dollar loans.
The weighted average interest rates earned during the year were
0.0% (2015: 0.0%) on floating rate sterling cash balances, 0.1%
(2015: 0.10%) on floating rate US dollar balances and 5.5% (2015:
5.5%) on floating rate Russian rouble balances. At the year end,
the Group had cash on overnight deposit. Short-term deposits during
the year included overnight, one-week and one-month notice
periods.
Commodity price risk
By the nature of its activities the Group is exposed to
fluctuations in commodity prices and, in particular, the price of
gold as these could affect its ability to raise further finance in
the future, its future revenue levels and the viability of its
projects. The Group does not currently hold any financial
instruments to hedge the commodity price risk on its expected
future production. The Board will keep this exposure under review,
taking account of the extent to which the commodity price risk can
be hedged and other factors including production risks and the
costs of the hedge programme.
Notes to the Financial Statements - continued
18. Financial instruments - continued
Foreign currency risk
The Group reports in US dollars and conducts most of its
business in dollars and Russian roubles. It also conducts business
in sterling.
Prior to 2014, the Group's principal exchange rate risk was an
appreciation of the Russian rouble against the US dollar which
would impact on certain of the Group's operating costs. The
significant depreciation of the Russian rouble against the US
dollar since the second half of 2014 (partially reversed in 2016)
has had a positive impact on those operating costs, however this
has been partially offset by exchange losses on Russian rouble
denominated monetary assets. The Board will continue to review the
Group's exchange rate risks and the possible use of derivative
financial instruments to mitigate against them.
The table below shows the extent to which Group companies have
monetary assets and liabilities in currencies other than their
functional currency. Foreign exchange differences on retranslation
of these assets and liabilities are taken to profit or loss. All
amounts are shown in their US dollar 000 equivalents.
31 December 31 December
2016 2015
RUB GBP RUB GBP
------------------------------ --------- ------- --------- -------
Current:
Trade and other receivables 1,634 29 225 3
Trade and other payables (4,099) (148) (1,299) (170)
Cash 2,303 134 733 22
------------------------------ --------- ------- --------- -------
(162) 15 (341) (145)
------------------------------ --------- ------- --------- -------
Foreign exchange gains totalling $445,000 (2015 foreign exchange
losses: $310,000) have been recognised in the statement of
comprehensive income for the year. The exchange gains principally
reflect the impact of the appreciation of the Russian rouble on the
Group's rouble denominated monetary assets, partially offset by the
adverse impact on its rouble denominated provisions. During 2016
the rouble traded between RUB60.4464:$1 and RUB83.7059:$1. A 10%
appreciation of the Russian rouble and sterling at the reporting
date (to $1:RUB54.5912 and GBP1:$1.3576 respectively) would, all
other variables held constant, have reduced the Group's profit for
the year by $19,000 (2015: $54,000). A 10% depreciation of the
Russian rouble and sterling at the reporting date (to $1:RUB66.7226
and GBP1:$1.1108 respectively) would, all other variables held
constant, have increased the Group's profit for the year by $17,000
(2015: $44,000). The impact of such sterling appreciation on the
Company's GBP net monetary assets would have been to reduce its
profit after tax by $1,000 (2015: $16,000).
Fair values of the Group's and Company's financial liabilities
and assets
The fair value of the Group's long-term borrowing (which is US
dollar fixed rate debt) and provisions are shown at their carrying
values as any differences are not material. The fair value of the
Group's and the Company's short-term borrowing, cash and cash
equivalents equates to their carrying value because of the short
maturity of these instruments. The fair values of the Group's and
the Company's trade and other payables and trade and other
receivables are not significantly different from their carrying
values. The fair values have been calculated by discounting
expected cash flows at prevailing interest rates and by applying
year end exchange rates.
Capital risk management
The Company is not required to comply with any externally
imposed capital requirements. The Company's Russian subsidiaries
are required to maintain net asset values equal to or above their
share capital. As discussed in Note 9 in previous years the Company
has made additional capital contributions to its subsidiaries
through the forgiveness of loans in order to correct negative
equity positions in those subsidiaries' local accounts.
The Group's primary objective when managing capital is to ensure
that there is sufficient capital available to support the Group's
funding requirements, including capital expenditure, in a way that
optimises the cost of capital, maximises shareholders' returns and
ensures the Group's ability to continue as a going concern. There
were no changes to the Group's capital management approach during
the year.
The Group may make adjustments to the capital structure as
opportunities arise, as and when borrowings mature or as and when
funding is required. This may take the form of raising equity, debt
finance, equipment supplier credits or a combination thereof.
The Group monitors capital on the basis of the gearing ratio,
which is defined as net debt divided by total capital. Net debt is
calculated as total borrowings (including current and non-current
borrowings as shown in the consolidated statement of financial
position) less cash and cash equivalents.
Total capital is calculated as equity as shown in the
consolidated statement of financial position plus net debt. While
the Group does not set absolute limits on the ratio, the Group
believes that a ratio of up to 40% was acceptable in the final
stages of the construction and the commissioning phase of the
Asacha mine and that optimally this should reduce to and remain
below 25% thereafter. The Company's policy in respect of capital
risk management is the same as that of the Group.
The gearing ratios at 31 December 2016 and 2015 were as
follows:
31 December 31 December
2016 2015 (Restated)
Group Note $000 $000
---------------------------------- ------ ------------- ------------------
Total borrowings 16 16,731 20,233
Less: cash and cash equivalents 13 (13,097) (12,643)
---------------------------------- ------ ------------- ------------------
Net debt 3,634 7,590
Total equity 78,835 77,942
Total capital 82,469 85,532
---------------------------------- ------ ------------- ------------------
Gearing ratio 4.4% 8.9%
---------------------------------- ------ ------------- ------------------
31 December 31 December
2016 2015
Company Note $000 $000
---------------------------------- ------ ------------- ------------------
Total borrowings 16 - -
Less: cash and cash equivalents 13 (215) (147)
---------------------------------- ------ ------------- ------------------
Net debt (215) (147)
Total equity 114,506 119,451
Total capital 114,291 119,304
---------------------------------- ------ ------------- ------------------
Gearing ratio (0.19%) (0.12%)
---------------------------------- ------ ------------- ------------------
19. Revenue
Year ended Year ended
31 December 31 December
2016 2015
Group $000 $000
--------- ---- -------------- --------------
Gold 44,359 43,322
Silver 843 737
45,202 44,059
-------------- -------------- --------------
20. Cost of sales
Year ended Year ended
31 December 31 December
2016 2015
Group $000 $000
----------------------- ---- -------------- --------------
Wages and salaries 8,676 6,737
Energy and materials 6,611 10,536
Depreciation 6,726 5,702
Depletion 2,381 1,840
Other costs 3,578 3,962
----------------------------- -------------- --------------
27,972 28,777
---------------------------- -------------- --------------
21. Profit from operations
Year ended Year ended
31 December 31 December
2016 2015
Note $000 $000
----------------------------------- ------ -------------- --------------
Profit from operations is stated
after charging:
Employment benefit expense 22 11,641 9,496
Bad debt 143 36
Depletion of mining properties
(i) 6 2,381 1,840
Depreciation of property, plant
and equipment (ii) 7 7,026 5,841
Loss on sale of property, plant
and equipment 76 24
Operating lease rentals 21 197
----------------------------------- ------ -------------- --------------
i. Depletion of mining properties is shown net of depletion charged to inventories.
ii. Depreciation of property plant and equipment is shown net of
depreciation charged to assets under construction, mining
properties, deferred exploration and evaluation expenditure and
inventories.
Notes to the Financial Statements - continued
22. Employment benefit expense
Year
Year ended ended
31 December 31 December
2016 2015
Group $000 $000
--------------------------------------- ---- -------------- --------------
Wages and salaries 10,810 8,894
Social security costs 2,300 2,433
Pension contributions 36 40
Total employee benefit expense 13,146 11,367
Employee benefit expense charged
to inventories (i) (99) (1,045)
Employee benefit expense capitalised
(i) (1,406) (826)
--------------------------------------------- -------------- --------------
Employee benefit expense charged
to the statement of comprehensive
income 11,641 9,496
--------------------------------------------- -------------- --------------
i. Employee benefit costs have been capitalised under mining
properties $1,337,284 (2015: $753,072) and property, plant and
equipment $68,982 (2015: $73,409). Employee benefit costs charged
to inventories amounted to $98,833 (2015: $1,045,323).
Year
Year ended ended
31 December 31 December
2016 2015
Company $000 $000
------------------------------------- ---- -------------- --------------
Wages and salaries 668 679
Social security costs 22 26
Pension contributions 36 40
Employee benefit expense charged
to the statement of comprehensive
income 726 745
------------------------------------------- -------------- --------------
The average number of employees, shown by activity, during the
year (including executive directors) was:
2016 2015
Group Number Number
----------------- --------- ---------
Operations 550 492
Administration 57 58
------------------ --------- ---------
607 550
----------------- --------- ---------
2016 2015
Company Number Number
----------------- --------- ---------
Operations - -
Administration 2 2
------------------ --------- ---------
2 2
----------------- --------- ---------
23. Directors' remuneration and other interests
The aggregate remuneration of the directors of the Company was
as follows:
Year
Year ended ended
31 December 31 December
2016 2015
$000 $000
----------------------------------- ---- -------------- --------------
Basic salary 488 503
Fees 25 28
Bonus 275 276
Pension contributions 36 40
Benefits in kind 5 5
----------------------------------------- -------------- --------------
Directors' remuneration 829 852
Employer's National Insurance
contributions 22 26
Key management compensation 851 878
----------------------------------------- -------------- --------------
Total number of directors during
the year 5 5
----------------------------------------- -------------- --------------
The following table shows the directors who served during the
year or in the previous year together with an analysis of their
remuneration:
Year
Year ended ended
Basic Benefits 31 December 31 December
Pension in
salary Fees Bonus Contributions kind 2016 2015
$000 $000 $000 $000 $000 $000 $000
---------------------- --------- ------- -------- ----------------- ---------- -------------- --------------
Executive directors
D Khilov 330 - 218 - - 549 546
SV Olsen 158 - 57 36 5 255 278
Non-executive
directors
PCD Burnell - 25 - - - 25 28
CE Ryan - - - - - - -
R Sasson - - - - - - -
---------------------- --------- ------- -------- ----------------- ---------- -------------- --------------
488 25 275 36 5 829 852
---------------------- --------- ------- -------- ----------------- ---------- -------------- --------------
The terms of Mr Olsen's employment contract include a salary
sacrifice arrangement, whereby, in consideration of a GBP23,287
(2015: GBP23,113) reduction in his annual salary, the Company makes
contributions to his personal pension plan.
Mr Khilov's employment contract includes an entitlement to two
bonus payments, each in amount equivalent to eight months' salary
then payable, for which the performance criteria agreed by the
Remuneration Committee in 2014 comprise Asacha plant production,
average gold grades in ore delivered to the Asacha plant and full
cash cost targets, full cash cost being the total cost of sales
excluding depletion, depreciation and royalty less revenue from
sales of silver (net of royalty) divided by gold ounces sold. In
each case, all the required performance criteria must be satisfied
over a twelve month period. The performance criteria for the first
contractual bonus payment to Mr Khilov were satisfied in the twelve
months ended 30 June 2015; the bonus was included in Mr Khilov's
2015 remuneration. The performance criteria for Mr Khilov's second
contractual bonus have not yet been satisfied, wherefore that has
not yet been paid. The bonuses paid in 2016 were
non-contractual.
The following tables show the beneficial interests of the
directors who held office at the end of the year in the ordinary
shares of the Company and the dividends received by those directors
by virtue of those shareholdings (except for the beneficial
interests of Messrs Sasson and Ryan by virtue of their connection
with the Company's major shareholder UFG Asset Management):
Shares Shares held
held at at
1 January 31 December
Shares 2016 Additions Disposals 2016
-------------- ------------ ----------- ----------- --------------
PCD Burnell 240,000 - - 240,000
C Ryan 930,514 5,145,792 - 6,076,306
R Sasson 194,700 514,579 - 709,279
-------------- ------------ ----------- ----------- --------------
2015
2016 $000
Dividends $000
------------- ------- -------
PCD Burnell 12 -
C Ryan 304 -
R Sasson 35 -
------------- ------- -------
No directors have any interests in share options. The options
granted to three directors in respect of qualifying services under
an employee share option scheme approved by special resolution of
the Company on 18 August 2008 expired in 2014.
24. Share option schemes
An employee share option scheme was approved by special
resolution of the Company on 18 August 2008 (the Adoption Date).
The rules of the scheme, which include the commencement of gold
production as a condition to exercise, were amended by resolution
of the Company on 30 June 2014 to allow the granting of share
options until the tenth anniversary of the Adoption Date.
The share options granted to directors and employees in July
2009, all of which were issued for nil cash consideration, expired
on or before 24 July 2014. There were no market conditions
associated with the share option grants. No other options have been
granted under the scheme. No options have been granted since the
year end.
The market price of the Company's shares at 31 December 2016 was
40.5p (2015: 15.125p) and, during the year, ranged between 15.125p
and 55.5p (2015: 9.00p and 16.00p).
25. Share-based payments
There were no share-based payments in 2016 (2015; nil).
26. Pension arrangements
The Group does not provide a pension scheme for its directors or
employees. The Company has made contributions to the personal
pension plan of a director under the terms of a salary sacrifice
arrangement as discussed in Note 23.
Notes to the Financial Statements - continued
27. Auditors' remuneration
Year
ended Year ended
31 December 31 December
2016 2015
$000 $000
--------------------------------------- ---- -------------- --------------
Services provided by the Group's
auditor and network firms:
Fees payable to the Company's
auditor for the audit of parent
company and consolidated financial
statements 117 120
Fees payable to the Company's
auditor and its associates for
other services:
Audit of the Company's subsidiaries
pursuant to legislation 67 58
Tax services - compliance 17 10
Tax services - advice 3 10
204 198
-------------------------------------------- -------------- --------------
28. Finance income and expense
Year ended Year ended
31 December 31 December
2016 2015
Note $000 $000
--------------------------------- ------ -------------- --------------
Finance income:
Interest income on short-term
bank deposits 157 301
Finance income 157 301
--------------------------------- ------ -------------- --------------
Finance expense:
Finance charges under finance
lease (140) (12)
Interest payable on short-term
convertible debt - (14)
Interest payable on long term
bank debt (1,972) (2,376)
Accretion of decommissioning
provision 17 (20) (59)
Finance expense (2,132) (2,461)
--------------------------------- ------ -------------- --------------
Net foreign (losses) gains on
financing activities (61) 6
--------------------------------- ------ -------------- --------------
Net finance expense (2,036) (2,154)
--------------------------------- ------ -------------- --------------
29. Income tax
Year ended Year ended
31 December 31 December
2016 2015 (Restated)
Note $000 $000
------------------------------------- ------ -------------- ------------------
Current tax - UK Corporation - -
tax
Current tax - Russian Corporation
tax 19 8
Deferred tax 10 2,240 1,380
Current tax charge 2,259 1,388
------------------------------------- ------ -------------- ------------------
Factors affecting tax charge
for the year:
Group profit before tax 8,655 6,614
8,655 6,614
------------------------------------- ------ -------------- ------------------
Tax charge at the UK corporation
tax rate of 20% (2015: 20.25%) 1,731 1,339
Effects of:
Difference in Russian tax rate
of 20% (2015: 20%) to UK standard
rate - 32
Expenses not deductible for
tax purposes 339 563
Exchange differences on the
tax base 153 (495)
Adjustment to tax charge in
respect of prior years 36 (51)
------------------------------------- ------ -------------- ------------------
Total income tax charge for
the year 2,259 1,388
------------------------------------- ------ -------------- ------------------
The UK Corporation tax rate changed from 21% to 20% with effect
from 1 April 2015.
During the development of the Asacha project, the Group
accumulated tax losses which may be carried forward. As at 31
December 2016, the Company had deferred tax losses carried forward
with an estimated tax value of $3,023,000 (2015: $3,023,000). The
subsidiaries in Russia had tax losses carried forward with a tax
value, at the standard rate of corporation tax in Russia of 20% of
$609,000 (2015 restated: $3,961,000), which is available for use
until 31 December 2024.
Tax losses arising in prior periods will reduce the Group's
future tax liability. Prior to 2011, no deferred tax asset was
recognised in respect of the available tax losses as the directors
believed that it would not be prudent to recognise such tax assets
until the Group began to generate taxable income. Following the
commencement of commercial production at Asacha in 2011, the
directors recognised a deferred tax asset in respect of the
available tax losses of the Russian subsidiaries as it is believed
that profits will be available against which the tax asset can be
utilised.
30. Earnings per ordinary share
The calculation of basic profit per 10p ordinary share is based
on the retained profit for the year ended 31 December 2016 of
$6,395,985 (2015 (restated): $5,226,341) and on 110,053,073 (2015:
110,053,073) ordinary shares, being the weighted average number of
ordinary shares in issue and ranking for dividends during the
year.
The Group had no dilutive potential ordinary shares in either
year that would serve to reduce the profit per ordinary share.
There is therefore no difference between the basic and diluted
profit per share for either year. Nil (2015: nil) potential
ordinary shares have therefore been excluded from the above
calculations.
31. Contingencies
Being an international Group with tax affairs in more than one
geographical location makes the degree of estimation and judgements
more challenging. Any taxation issues that arise are dealt with on
the advice of the Company's tax advisors, however, resolution may
differ from the accounting estimates and therefore impact the
Group's results and future cash flows. Accounting for tax
contingencies requires management to make judgements and estimates
based on management's interpretation of country-specific tax law
and the likelihood of settlement. Management has identified a
potential income tax exposure in respect of the taxation of
intragroup interest. The directors believe that prior year tax
losses should be sufficient to shelter any estimated tax liability.
However, the relevant tax guidance and procedures are subject to
interpretation and agreement by the tax authorities and there is a
possible income tax exposure of up to approximately $1.1
million.
Under the terms of his employment contract a former director of
the Company was entitled to a payment of GBP250,000 (the Asacha
Bonus) within 180 days of the Asacha mine substantially achieving
performance criteria deemed acceptable by the Remuneration
Committee, with two additional share price related amounts of
GBP125,000 each. On 28 April 2015, the Remuneration Committee
resolved that an acceptable performance for the purposes of the
Asacha Bonus would comprise the achievement during one period of
three consecutive complete calendar months of three conditions
comprising Asacha plant throughput of at least 37,500 metric tonnes
of ore, an average gold grade of at least 10.0 grams per tonne in
ore delivered to the Asacha plant and Asacha plant gold recovery of
at least 95.0 per cent. One of these conditions, all of which had
to be met within the same three month period, has not yet been met,
however in November 2016 a full and final settlement of this
contingent liability was agreed at GBP150,000, representing a
significant discount to the contractual amount.
32. Commitments
a) Operating lease commitments
The Group leases various property, plant and machinery under
cancellable operating lease agreements. The lease expenditure
charged to profit or loss during the year is disclosed in Note
21.
The total future minimum lease payments under non-cancellable
operating leases are as follows:
Equipment Land and buildings
--------------------- ----------------------------------------
2016 2015 2016 2015
Group $000 $000 $000 $000
----------------- ---------- --------- ------------------- -------------------
Liabilities:
Due within one
year 97 25 236 145
97 25 236 145
----------------- ---------- --------- ------------------- -------------------
Lease payments are effected by equal monthly instalments. Leased
equipment may only be used at the Asacha mine. Leased land and
buildings includes property in Moscow and Kamchatka.
The company had no operating lease commitments.
b) Finance lease commitments
The Group has entered into various finance lease agreements in
respect of plant and machinery.
Outstanding commitments as at 31 December 2016 were as
follows:
Minimum
Group lease payments Interest Present value
------------------- ------------------- ---------------- -------------------
2016 2015 2016 2015 2016 2015
$000 $000 $000 $000 $000 $000
------------------- --------- -------- ------- ------- --------- --------
Due within one
year 269 190 (92) (116) 177 74
Due within 1 to
5 years 269 518 (44) (131) 225 387
Due in more than - - - - - -
5 years
------------------- --------- -------- ------- ------- --------- --------
538 708 (136) (247) 402 461
------------------- --------- -------- ------- ------- --------- --------
Lease payments are effected by equal monthly instalments over a
three year period. The lessee typically has the right to accelerate
purchase at any time. Leased equipment may only be used at the
Asacha mine. The lease arrangements do not involve any restrictions
in respect of additional leasing or debt or dividend payments.
The company had no finance lease commitments.
c) Capital commitments
Contracted commitments for capital purchases as at 31 December
2016 amounted to $2,387 (2015: $1,986), as detailed below:
2016 2015
Group $000 $000
---------------------------------- ------- -------
Asacha project - due within one
year 2 2
2 2
---------------------------------- ------- -------
Notes to the Financial Statements - continued
33. Ultimate controlling party and related party
transactions
The ultimate control of TSG lies with the individual investors
in UFG Private Equity Fund I LP, Russia Select Fund and UFG Asset
Management (collectively, UFG). No one investor is considered to be
the ultimate controlling party.
Directors' emoluments and dividends paid to them in respect of
their beneficial interests in the ordinary shares of the Company
are detailed in Note 23. UFG received a dividend in respect of its
beneficial interest in the ordinary shares of the Company in amount
$4,381,011 (2015: $nil). Other related party transactions involved
UFG and the Company's other major shareholder AngloGold Ashanti
Limited (AGA), as detailed below:
Purchases Amount Purchases Amount
during owing during owing
the year at the year at
to to
31 December 31 December 31 December 31 December
2016 2016 2015 2015
Related Nature of $000 $000 $000 $000
party transaction
--------- --------------- -------------- -------------- -------------- --------------
AGA Loans (see - - - -
Note 16)
Loan interest - - 5 -
- - 5 -
--------- --------------- -------------- -------------- -------------- --------------
UFG Loans (see - - - -
Note 16)
Loan interest - - 9 -
--------- --------------- -------------- -------------- -------------- --------------
- - 9 -
--------- --------------- -------------- -------------- -------------- --------------
Total - - 14 -
--------- --------------- -------------- -------------- -------------- --------------
In 2012 UFG and AGA provided TSG with short term loan facilities
on commercial terms. These were repaid in full in March 2015.
Transactions between TSG and its subsidiaries and between those
subsidiaries include technical, management and other services and
loans as detailed below:
Purchases Purchases
(Sales) Amount (Sales) Amount
during owing during owing
the year (owed) the year (owed)
to at to at
31 December 31 December 31 December 31 December
2016 2016 2015 2015
Related Nature of $000 $000 $000 $000
party transaction
---------- ----------------- -------------------------------- --------------- -------------- ---------------
Technical
TSG services - (1,242) 21 (1,242)
Other services 7 43 (10) 36
Loans - (6,282) 3,120 (13,682)
Loan interest (2,249) (33,032) (1,092) (30,777)
---------------------------- -------------------------------- --------------- -------------- ---------------
(40,513) 2,039 (45,665)
---------------------------- -------------------------------- --------------- -------------- ---------------
Management
TSGM services (1,053) (291) (981) (159)
Other services (7) (43) 10 (36)
(1,060) (334) (971) (195)
---------------------------- -------------------------------- --------------- -------------- ---------------
Technical
TZ services - 1,242 (21) 1,242
Management
services 1,053 291 981 159
Loans - 6,282 (3,120) 13,682
Loan interest 2,249 33,032 1,092 30,777
---------------------------- -------------------------------- --------------- -------------- ---------------
- 40,847 (1,068) 45,860
---------------------------- -------------------------------- --------------- -------------- ---------------
Total - - - -
----------------------------- -------------------------------- --------------- -------------- ---------------
The movement on loans provided by TSG to TZ and the interest on
those loans includes loans forgiven of $nil (2015: $3,120,000) and
loan interest forgiven of $nil (2015: $1,537,269) as discussed in
Note 9.
The directors of the Company consider that there are no key
management personnel, as defined by IAS 24, Related party
transactions, other than the directors themselves.
34. Dividends
On 30 November 2016, the Company announced a special dividend of
$0.05 per ordinary share, equivalent to approximately $5.5 million
(2015: $nil).
35. Prior year adjustment
The prior year restatements discussed in Note 10 are as
follows:
Deferred tax asset
An additional deferred tax asset of $1.7 million has been
recognised at 1 January 2015.
An additional deferred tax asset of $2.7 million has been
recognised at 31 December 2015.
Deferred tax liability
An additional deferred tax liability of $5.4 million has been
recognised at 1 January 2015.
An additional deferred tax liability of $5.6 million has been
recognised at 31 December 2015.
Group retained losses at 1 January 2015 have increased by $3.7
million.
Group income tax charge for the year ended 31 December 2015 has
reduced by $755,000.
36. Events after the reporting date
On 19 June 2017, the Company's subsidiary ZAO Trevozhnoye Zarevo
(TZ) agreed a new $15 million loan facility with the Russian bank
VTB, with a 5 year term and 18 months grace period at an interest
rate of 6.2%. The new facility facilitated the repayment of TZ's
existing two loan facilities, amounting to $14.8 million. On 21
June 2017 TZ agreed an additional $5m facility with VTB, with a 3
year term, also at an interest rate of 6.2%.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUAAQUPMGBB
(END) Dow Jones Newswires
June 30, 2017 02:01 ET (06:01 GMT)
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