RNS Number:1188Q
Zeehan Zinc Limited
14 March 2008
Zeehan Zinc Limited
("Zeehan Zinc" or the "Company)
Interim Report for the six months ended 31 December 2007
Managing Director's Statement
Introduction
The financial half year that ended on 31 December 2007 has seen the Company make
solid progress towards realising the value inherent in its mining and
exploration tenements in Western Tasmania.
A major step forward was announced in December 2007, when the Company raised
�4,275,000 (A$9.5 million) by way of convertible loan notes (the "Notes")
entered with subsidiaries of Chinese investment group Creat Group Company
Limited ("Creat Group"), and the proceeds of such Notes to be paid in two
tranches. The Company received the first payment in mid February and will
receive the second payment, in accordance with the terms of the convertible
notes, on 15 April 2008. The proceeds will primarily be put towards a financial
feasibility study in relation to the construction of a flotation plant at the
Company's Comstock mine in addition to the Company's general working capital
requirements.
In January 2008, Mr Xiaojian Ren, a founding member and the CEO of Creat Group,
was appointed to the Board as a non-executive director. The Board welcomes Mr
Ren, and looks forward to further developing a close working relationship with
him and with Creat Group in its capacity as strategic partner to Zeehan Zinc as
their financial support and management resources will enable the Company to
embark on a new phase of growth.
Progress Year-to-date
Despite experiencing a number of short term delays during the commissioning of
the gravity plant at its Comstock mine due to the necessary fine-tuning of the
final set up, aimed at ensuring maximum metal recovery, the plant is now
operational.
Limited production at Comstock commenced in the first quarter of 2008 to provide
sample batches to potential customers.
Negotiations continue with various interested parties for an offtake agreement
for the sale of a zinc/lead bulk concentrate, which should enable the Company to
begin to generate revenues in the near term.
The Company has applied for permission to alter conditions of its Mining Permit
to increase production at the Comstock site from 200,000 tonnes per annum to
400,000 tonnes per annum. The Company considers it has met all the necessary
conditions to secure the necessary approval, which it believes is imminent.
Results
During the period under review, the Company was in the exploration and
development phase of its projects and therefore received no operating income.
The Company made a loss in the half-year to 31 December 2007 of A$4.67 million
(GBP 2.1 million). The result reflects a number of one-off expenses associated
with further business establishment and the cost of administering operations.
Prospects
With the recent funding and investment made by Creat Group, alongside
commencement of production at Comstock mine, the prospects for the Company are
positive. It is well positioned to achieve its stated goal of becoming a major
producer of lead and zinc in Tasmania.
Ralph Rossouw
Managing Director and CEO
14 March 2008
REVIEW OF OPERATIONS
RESOURCES SUMMARY
The Company announced a 1.3 Mt increase in its resources in December 2007,
following the discovery of a new deposit at its Comstock mine site. This
discovery followed an extensive drilling programme undertaken by the Company
during 2007.
In December 2007, the company engaged AMC Consultants Pty Ltd, a mining
consultancy, to carry out an independent technical audit/technical due diligence
of the Company's exploration strategy and resource geology evaluation. This
assessment is still in progress.
COMSTOCK SITE
Tenement
On 22 August 2007 the Minister of Resources granted the Company a consolidated
mining lease (5M/2007) for a term expiring on 31 March 2009 over 247 Ha
described as Comstock mine, which neighbours the Zeehan township in Western
Tasmania.
This mining lease consolidates four previous mining leases, owned by the
Company, numbered 123M/1947, 9M/2002, 19M/1995 and 43M/1985.
Progress Report
Over the last six months, the Company concentrated on recruiting and building
the skills required to commence full scale commercial production. Extraction has
commenced from the Main Lode JORC resource (South Comstock pit), 150m from the
gravity separation plant.
Between 5,000 and 10,000 tonnes of ore has now been stockpiled (including
several high-grade pods, some weighing over 10 tonnes at grades of up to 50%
zinc/lead). The stripping of waste material at the Allison's lode is currently
underway (March 2008) using mining contractor Hoare Brothers.
Approvals have been granted to increase the capacity of the current ore
stockpile from 12,000 tonnes to 65,000 tonnes. The Company acknowledges that the
400,000tpa operating permit application process underwent several delays during
2007; however, the Company believes this will be approved before production
rates surpass the current 200,000tpa extraction limit.
Additionally, the construction of a new haulage road to the tailings dam will
better regulate traffic and the site's water management works are nearing
completion.
The gravity plant's crushing circuit and container farm are now operational and
the jig circuit has completed first stage commissioning. Limited operations have
commenced, initially as a single shift to provide sample batches for potential
customers. External technical expertise is currently being engaged to assist in
the preliminary feasibility study of the flotation plant, which has a minimum
design processing capacity of 40tph (upgradeable to 100tph).
Routine environmental monitoring and rehabilitation is also being undertaken at
the Comstock site.
Current Status
The Company has produced several samples of pre-concentrate product through its
gravity plant that have been sent to interested purchasers. The Company has been
contacted by a number of Australian and overseas purchasers and is currently
discussing sales opportunities with them. The Company has not yet executed any
sales or off-take agreements.
When production commenced, the Company ascertained that the gravity plant was
delivering lower than expected recoveries when processing high grade ore. This
is a common "teething problem" with a new plant and the Company is confident of
improving this to limit the metal lost to tailings. As a result the Company has
decided to maintain a low rate of production until the plant is ready to operate
at optimal levels.
OCEANA
A scoping study is currently being undertaken by AMC Consultants to identify the
potential of the Oceana deposit and the work required to gather suitable data
for a pre-feasibility study.
A Development Proposal and Environmental Management Plan is currently being
prepared for submission to Government in March 2008 with an expected response
within six months.
MARIPOSA
A two year retention licence application covering 240Ha over the Mariposa site
was submitted to Mineral Resources Tasmania on 29 January 2008. The application
has been given the reference number RL 1/2008 and replaces mining lease
application 7M/2007.
EXPLORATION LICENCES
The Company currently holds three exploration licences (EL20/2002, EL30/2002 and
EL18/2003) covering 93km2 in the Zeehan region. Two of these exploration
licences (EL30/2002 and EL20/2002) were due to expire on 31 January 2008 (due to
reaching their five year term) and applications for extensions of term for 100%
of these two licence areas were submitted to Government on 15 January 2008. The
company has been advised by MRT that the tenement areas remain in force whilst
the renewal applications are being considered and that there is a recommendation
to the Minister of Resources that they be extended for a further 12 months. The
EL18/2003 licence does not expire until 2010.
Exploration activity during 2007 included a major regional seismic programme,
gravity survey, local magnetic surveys, soil surveys and old working surveys.
Annual Reports for the three exploration licence areas, EL30/2002, EL20/2002 &
EL18/2003, were submitted to MRT in the first quarter of 2008 (15/01/08, 15/01/
08 and 08/02/08 respectively).
Exploration will continue in 2008 as per the company and MRT requirements.
Contacts:
Zeehan Zinc c/o Bankside Consultants
Ralph Rossouw, Managing Director and CEO Tel: 0207 367 8888
Libertas Capital Tel: 0207 569 9650
Jakob Kinde, Aamir Quraishi
Bankside Consultants Tel: 0207 367 8888
Simon Rothschild/Oliver Winters
ZEEHAN ZINC LIMITED AND CONTROLLED ENTITIES
CONSOLIDATED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2007
Half Year Half Year Year Ended
Ended Ended
31 Dec 2007 31 Dec 2006 30 June 2007
A$ A$ A$
Revenue 412,425 80,854 339,050
Exploration and Evaluation (352,212) (283,808) (3,003,039)
Costs Expensed
Depreciation Expense (88,359) (8,882) (37,411)
Other Expenses (4,620,297) (1,139,720) (5,229,508)
Finance Costs (18,447) (32,367) (51,672)
Loss before Income Tax (4,666,890) (1,383,923) (7,982,580)
Income Tax Expense - - -
Net Loss Attributable to (4,666,890) (1,383,923) (7,982,580)
Members of Parent Entity
Earnings per share for the loss attributable
to the ordinary equity holders of the company
Cents Cents Cents
Basic loss per share (3.27) (3.19) (9.29)
Diluted loss per share (3.27) (3.19) (9.29)
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2007
31 Dec 2007 31 Dec 2006 30 June 2007
Assets A$ A$ A$
Current Assets
Cash at Bank 1,211,599 4,131,798 9,260,758
Receivables 149,678 516,913 271,982
Other Current Assets 444,279 2,657,344 970,027
Total Current Assets 1,805,556 7,306,055 10,502,767
Non-Current Assets
Receivables - - -
Property, Plant and 18,788,160 4,162,090 12,077,196
Equipment
Intangible Assets 3,721 3,721 3,721
Other Financial Assets - - -
Total Non-Current 18,791,881 4,165,811 12,080,917
Assets
Total Assets 20,597,437 11,471,866 22,583,684
Liabilities
Current Liabilities
Trade and Other 1,222,404 8,129,073 3,237,273
Payables
Other Liabilities 88,601 - 59,409
Provisions 61,264 34,784 77,088
Total Current 1,372,269 8,163,857 3,373,770
Liabilities
Non-Current Liabilities
Payables - 283,011 -
Deferred Tax 48,000 48,000 48,000
Liabilities
Other Liabilities 209,624 - 177,251
Provisions - 500,000 -
Total Non-Current 257,624 831,011 225,251
Liabilities
Total Liabilities 1,629,893 8,994,868 3,599,021
Net Assets 18,967,544 2,476,998 18,984,663
Equity
Issued Capital 45,650,215 18,010,573 41,024,975
Reserves 228,455 112,000 203,924
Accumulated Losses (26,911,126) (15,645,575) (22,244,236)
Total Equity 18,967,544 2,476,998 18,984,663
CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2007
Half Year Ended Half Year Year Ended
Ended
31 Dec 2007 31 Dec 2006 30 June 2007
A$ A$ A$
Cash Flows from Operating Activities
Receipts from Customers 694,027 80,854 174,440
Interest Received 310,659 - 164,610
Payments to Suppliers and (7,067,835) (4,132,717) (12,631,606)
Employees
Exploration Expenditure - - -
Borrowing Costs (18,447) - (51,672)
Net Cash used in Operating (6,081,596) (4,051,863) (12,344,228)
Activities
Cash Flows from Investing
Activities
Purchase of Property, Plant & (6,756,432) (1,145,106) (9,773,282)
Equipment
Proceeds from Property, Plant & - - -
Equipment
Payment for Controlled Entities - (100) (200)
Net Cash used in Investment (6,756,432) (1,145,206) (9,773,482)
Activities
Cash Flows from Financing Activities
Net Movement from Borrowings 61,564 3,607,726 3,292,026
Proceeds from Issue of Shares 4,727,305 5,722,349 28,087,649
Net Cash Provided by Financing 4,788,869 9,330,075 31,379,675
Activities
Net Increase/(Decrease) in Cash (8,049,159) 4,133,006 9,261,966
Held
Cash at Beginning of the 9,260,758 (1,208) (1,208)
Half-Year
Cash at the End of the 1,211,599 4,131,798 9,260,758
Half-Year
STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2007
Issued Retained Other Total
Capital Earning Reserves
A$ A$ A$ A$
Consolidated
Total Equity at 1 July 2006 11,266,424 (14,261,651) 112,000 (2,883,227)
Total Income/(Expense) for the - (1,383,923) - (1,383,923)
Period
Revaluation of Land and - - - -
Buildings
Issue of Share Capital 6,744,149 - - 6,744,149
Total Equity at 31 December 18,010,573 (15,645,574) 112,000 2,476,999
2006
Total Equity at 1 July 2006 11,266,424 (14,261,656) 112,000 (2,883,232)
Total Income/(Expense) for the - (7,982,580) - (7,982,580)
Period
Share Option Reserve - - 91,924 91,924
Less: Capital Raising Costs (5,140,648) - - (5,140,648)
Issue of Share Capital 34,899,199 - - 34,899,199
Total Equity at 30 June 2007 41,024,975 (22,244,236) 203,924 18,984,663
Total Equity at 1 July 2007 41,024,975 (22,244,236) 203,924 18,984,663
Total Income/(Expense) for the - (4,666,890) - (4,666,890)
Period
Share Option Reserve - - 24,531 24,531
Less: Capital Raising Costs (102,065) - - (102,065)
Issue of Share Capital 4,727,305 - - 4,727,305
Total Equity at 31 December 45,650,215 (26,911,126) 228,455 18,967,544
2007
Note 1: Statement of Significant Accounting Policies
This general purpose financial report for the interim half year reporting period
ended 31 December 2007 has been prepared in accordance with Accounting Standard
AASB 134: Interim Financial Reporting and the Corporations Act 2001.
The interim financial report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 30 June 2007 and the
public announcements made by Zeehan Zinc Limited during the interim reporting
period in accordance with the continuous disclosure requirements of the
Corporations Act 2001.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
Basis of Preparation - Going Concern
In the six months ended 31 December 2007 the Economic Entity continued to
complete development of the Comstock Mine site and progress commissioning of the
gravity plant. This resulted in negative cash outflows from operations. The
continued viability of the Economic Entity and its ability to continue as a
going concern and meet its debts as and when they fall due are dependent upon
the Company successfully implementing its business plan and effecting
commercially profitable sales transactions for its products.
As a result of these matters, uncertainties exist in terms of the Company's
ability to generate cash flows in the future considering that full commercial
production operations have not yet commenced, although are expected to do so in
the very near future, which could cast doubt upon the Economic Entity's ability
to continue as a going concern.
As a result of these matters, there is uncertainty as to whether the Company and
its controlled entities will continue as going concerns, and therefore, whether
assets will be realised and liabilities and commitments settled in the normal
course of business and at the amounts stated in the financial report. However,
the Directors believe that the Economic Entity will be successful in the above
matters and, accordingly, have prepared the financial report on a going concern
basis. The Directors regularly monitor the Company's cash position and on an
on-going basis consider a number of strategic and operational plans and
initiatives to ensure that adequate funding continues to be available for the
Company to meet its business objectives.
At this time, the Directors are of the opinion that no asset is likely to be
realised for an amount less than the amount at which it is recorded in the
financial report at 31 December 2007. Provisions have been made in the financial
report relating to the recoverability of the asset carrying amounts. No other
adjustments have been made to the financial report relating to the
recoverability and classification of the asset carrying amounts or the amounts
and classification of liabilities that might be necessary should the
consolidated entity not continue as a going concern.
Note 2: Contingent Liabilities
A claim on behalf of Atlantic Law Llp was received late December 2007 alleging
that Zeehan Zinc Ltd is liable to offer them options (representing 2% of shares
at time of listing) and 5% commission on funds raised by the Company from
investors (ie Libertas) introduced by Atlantic Law, pursuant to the terms of a
retainer entered into in December 2005. Based on preliminary advice, the Company
believes it has good grounds to defend this claim and is proceeding accordingly.
Note 3: Earnings Per Share
Basic and diluted earnings per share amounts are calculated by dividing loss
attributable to the ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the financial year.
The following reflects the information used in the basic and diluted earnings
per share computations:
Economic Entity
Half Year Ended Half Year Year Ended
Ended
31 Dec 2007 31 Dec 2006 30 June
2007
$ $ $
(a) Basic and Diluted earnings per
share
Loss attributable to the
ordinary
equity holders of the Company (0.03) (0.03) (0.09)
(b) Earnings used in calculating earnings
per share
Loss attributable to the
ordinary
equity holders of the Company (4,666,890) (1,383,923) (7,982,580)
(c) Weighted average number of
shares used as the denominator
Weighted average number of
ordinary shares used as the
denominator in calculating
diluted earnings per share 142,780,841 43,349,307 85,886,946
Note 4: Subsequent Events
Related Party Transaction
An unsecured loan of US$300,000 was provided through Wind City Inc and repaid in
full during February 2008. The loan was provided on normal commercial terms and
condition. Mr Brian Caffyn, a non-executive director of the Company, is the
founder of Wind City Inc.
No other event has occurred subsequent to 31 December 2007 requiring disclosure
in, or amendment to, these financial statements.
Fund Raising
On 13 December 2007, the Company announced it had entered into an agreement with
Creat Group Company Limited ("Creat Group") through subsidiaries of Creat Group,
to raise GBP�4.275 million by way of a convertible loan. The Convertible Loan is
in the form of two convertible loan notes (of GBP�2.1375 million each) which
have a term of five years and carry a coupon of 6% per annum. The first Note has
a maturity date of 15 February 2013 and the second Note has a maturity date of
15 April 2013. Funds from the first Note were received in full in February 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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