RNS Number:4828S
Avocet Mining PLC
26 November 2003
AVOCET MINING PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2003
HIGHLIGHTS
* Pre-tax profit increased by 202% to #3.5 million (US$5.6 million)
* Earnings per share up 140% to 2.98p
* Operating cash flow increased by 254% to #6.4 million
* Gold production up 66% to 90,410 ozs
* North Lanut gold project on track for 2004 production
* Total debt to net worth reduced from 126% to 24%
6 months to 30 6 months to Variance Year to
September 2003 30 September 2002 31 March
2003
#'000 #'000 #'000
Turnover 21,386 12,089 +77% 31,377
Operating cash flow 6,418 1,811 +254% 6,383
Gross profit 4,437 2,163 +105% 4,387
Pre-tax profit 3,460 1,147 +202% 2,357
Earnings per share 2.98p 1.24p +140% 1.96p
Average spot gold price US$355/oz US$313/oz +13% US$291/oz
Gold production (ozs) 90,410 54,380 +66% 107,340
Average total cash cost US$237/oz US$212/oz +12% US$225/oz
__________________________________________________________________________________________________
For further information please contact:
Avocet Mining PLC 4C Communications Ltd
John Catchpole (Chief Executive) Carina Corbett
Jonathan Henry (Finance Director) 020 8949 7171
020 7907 9000 020 7907 4761
www.avocet.co.uk
CHAIRMAN'S STATEMENT
This is the first reporting period for which the financial results of Avocet
Mining reflect its gold business only and which are no longer burdened by an
unprofitable tungsten business. Notable achievements were:
* Strong operating cash flows from the Penjom mine in Malaysia, which
achieved a record level of gold production;
* A full period of additional gold production from last year's
acquisition of the Zeravshan Gold Company in Tajikistan;
* Placing of #10 million, sufficient to fund an accelerated development
of the North Lanut project in Indonesia;
* Divesture of ownership and operating control of tungsten
operations;
* Record earnings and operating cash flow, and substantially improved
liquidity.
Financial Results
For the six months ended 30 September 2003 turnover was #21.4 million (2002:
#12.1 million). Total gold sales were 93,050 ozs (2002: 50,600 ozs), all of
which were achieved at spot prices averaging US$358/oz (2002: US$313/oz).
Gross profit increased to #4.4 million (2002: #2.2 million) giving a gross
margin for the period of 21% (2002: 18%). The 100% improvement in gross profit
was largely as a result of higher gold prices, the elimination of tungsten
losses and additional gold production from ZGC. Penjom's cost of gold sold was
US$254/oz (2002: US$208/oz). This cost included depreciation of US$38/oz (2002:
US$30/oz) and an additional charge of US$14/oz (2002: US$34/oz credit)
representing waste stripping costs that were deferred last year but are now
being amortised over the mine's life. ZGC's cost of gold sold was US$335/oz
inclusive of US$18/oz of depreciation.
Pre-tax profit increased over 200% to #3.5 million (2002: #1.1 million).
Despite the increased scope of the Group's business, administrative costs were
cut by 11% to #0.6 million (2002: #0.7 million). Net interest costs were almost
unchanged at #0.4 million.
The Group made an after-tax profit of #2.5 million, a 218% increase on the #0.8
million earned for the same period in 2002. As a result, basic earnings per
share improved by 140% to 2.98p.
Operating cash flow increased 254% to #6.4 million (2002: #1.8 million). Uses
of operating cash flow included: net interest and tax payments of #0.7 million
(2002: #0.3 million); a reduction in net borrowings of #2.3 million (2002: #0.3
million); and investments in fixed assets and exploration totalling #2.4 million
(2002: #0.8 million). With #9.7 million in net proceeds from the September 2003
equity placing, the Group's net cash inflow increased substantially to #10.6
million. The placing allowed the Group to fast track the North Lanut project
while avoiding the need to raise loan finance to fund the project and the
consequential need to hedge. The Group does maintain a hedging position of
80,000 ozs in order to satisfy a banking covenant. This position would realise a
current gold price of approximately US$300/oz, which escalates in line with the
gold lease rate. Deliveries are deferrable until at least 2006, and amount to
less than 2% of the Group's gold resources, as reported for 31 March 2003.
As a result of a strong financial performance, the Group's liquidity position at
30 September 2003 was greatly improved. Total debt was reduced to #5.4 million
(2002: #9.5 million) versus increases in net current assets to #16.0 million
(2002: #4.2 million) including cash of #14.1 million (2002: #2.5 million).
Penjom, Malaysia
6 months to 6 months to Year to
30 September 2003 30 September 2002 31 March
2003
Production Statistics:
Tonnes Mined 7,653,800 7,986,000 14,397,000
Waste:Ore Ratio 18 26 23
Tonnes Processed 271,600 257,000 523,600
Grade Processed (g/t) 7.99 7.50 7.28
Recovery Rate 89% 88% 89%
Gold Produced (ozs) 62,300 54,380 108,905
Cash Costs (US$/oz):
Mining 113 131 120
Processing 56 51 52
Admin. & Royalties 31 30 32
Total Cash Costs 200 212 204
The Penjom mine increased first half gold production by 15% to a new record of
62,300 ozs as ore grades yet again exceeded predicted levels. Gold production
would have been even higher and cash costs lower if not for a slowdown in mill
throughput in the first quarter due to the delayed installation of both a
secondary ball mill and improved resin process systems. Recent results indicate
that a process production rate of 50,000 tonnes of ore per month is now
feasible. The main factor contributing to the 6% overall decrease in total cash
costs was a reduction in Penjom's waste-to-ore stripping ratio, which is
expected to continue with respect to ore reserves contained within the mine's
current open pit limits.
Zeravshan Gold Company, Tajikistan
6 months to 5 months to
30 September 2003 31 March
2003*
Production Statistics:
Tonnes Mined 3,479,400 2,682,000
Waste:Ore Ratio 5.2 2.7
Tonnes Processed 834,300 720,030
Grade Processed (g/t) 1.16 1.22
Recovery Rate 90% 89%
Gold Produced (ozs) 28,110 25,675
Cash Costs (US$/oz):
Mining 117 106
Processing 108 93
Admin. & Royalties 92 85
Total Cash Costs 317 284
* Avocet took over operating control in November 2002
ZGC's average monthly gold production for the first half of the year was 9%
below that achieved for the prior period, following Avocet's acquisition, and
was well below the operation's historical performance. The principal reasons
were the cumulative effect of a lack of investment by the previous operator in
exploration for mine planning purposes and in mill maintenance. The former has
limited the availability of open pit ore in terms of both tonnage and grade.
The latter resulted in a shut-down of the primary crusher and reduced
availability of the plant's SAG mills such that total plant throughput was 7%
below rated capacity. The primary crusher has now been refurbished and
supplemented with an auxiliary crusher. A comprehensive plant maintenance
programme has also been initiated.
Good progress was made towards further enhancing ZGC's performance. The first
pilot testing of a dump leach operation on low grade ores was successfully
completed. Results on the leaching of 12,600 tonnes of ore grading 0.57 g/t
gave a recovery rate of 75.5% at a total cash cost calculated at less than $200/
oz. A larger test for the treatment of 310,000 tonnes of ore has been
initiated. Underground production at a targeted rate of up to 1,000 tonnes per
day of ore grading approximately 2.5 g/t from the area below the Jilau Main open
pit is ahead of schedule. The availability to the plant of higher grade ore
from underground plus supplementary production from dump leaching should lower
unit costs and increase gold production and the life of the operations.
Negotiations with the Tajikistan Government concerning a swap of shareholder
loans owed to Avocet for certain benefits, including an increase in Avocet's
shareholding to above 49%, are ongoing. Recent meetings with the Prime Minister
and senior government officials were positive and we expect to reach an
agreement in due course.
North Lanut, Indonesia
Following the completion of a positive feasibility study for the Riska deposit
at North Lanut and the completion of the September 2003 private placing, the
project has been fast tracked for development. All required approvals have now
been received from the various state and federal government agencies, and the
project is progressing on schedule and within budget. Production at an average
rate of over 50,000 ozs of gold per year and a total cash cost well below US$200
/oz remains our goal.
Exploration
Avocet has budgeted US$3.8 million for exploration related costs for this fiscal
year. Its objectives are to add to the Group's ore resources, and to convert a
material portion of these resources to ore reserves reportable under acceptable
western standards.
Exploration at Penjom has focused on near surface mineralisation along strike
from the Penjom mine and on evaluating the potential for underground reserves.
Progress has been set back by delays in obtaining foreign worker and equipment
import permits. Nevertheless, the new exploration adit from Penjom's main pit
began with unexpected high grade intercepts, while results from drilling
elsewhere are sufficiently advanced to indicate that at least one of our twelve
open pit targets contains a relatively significant ore resource. These results
are being assessed and will be announced by the Company in due course.
Elsewhere in Malaysia, initial work to test the Sungai Luit gold property has
been sufficiently encouraging for further work to be undertaken. In addition,
we are revisiting the Buffalo Reef prospect, near Penjom, which was largely
written off three years ago, while initiating negotiations on two other
properties located within the historic gold belt of Peninsular Malaysia.
In Tajikistan, the Company has purchased a modern RC drilling rig to accelerate
exploration within the area of ZGC's existing operations, and to supplement
geological mapping and trenching. Several promising areas within one kilometre
of current haul roads have been identified. Proving up these potential
resources has been temporarily prioritised over exploration of ZGC's other gold
deposits within its area of interest. This covers 3,000 sq kms where past
Soviet exploration has identified almost 13 million ounces within Russian C and
P categories. These include two partially developed underground mines, Taror
and Chore, which contain at least 2.8 million ounces of resources, and are under
separate evaluation for future development.
Exploration activities in Indonesia were mostly put on hold as the focus
remained on getting the North Lanut project under construction and into
operation. Nevertheless, an opportunity remains to upgrade North Lanut's reserve
base. New property acquisitions nearby and elsewhere in Indonesia are also the
subject of serious negotiation.
Outlook
Avocet's strong operating and financial results have progressed the Company's
goal of 300,000 ozs of annual gold production by 2006. Given that this
objective was only reliant on the development of properties already acquired, it
is conceivable that Avocet's production objective will be exceeded as new
opportunities are exploited.
Penjom continues to exceed expectations and production for the year should now
exceed 110,000 ozs for the first time. Mining cash costs should continue to
decline as the high grade areas currently being mined look set to continue for
at least the short term. The plant continues to become more efficient and the
mine is moving less waste. As a result the second half of the year should see
lower unit cash costs. Historically, Penjom has more than replaced its
production with ore reserves. We have recognised that this cannot continue
indefinitely without a far more substantial exploration effort. This has
started and preliminary results show the mine's economic life should be
extended.
The short-term challenge with respect to ZGC remains one of increasing gold
production to over 100,000 ozs/year and decreasing costs to below US$250/oz.
Meeting this challenge will require new investment incentives from the
Tajikistan Government and production improvements enhanced by lower cost
underground mining and dump leaching, all of which we believe are achievable.
Ultimately, ZGC and its property position hold the greatest long term potential
for the Company.
We expect that by fiscal year-end North Lanut will be in the latter stages of
development and we will be able to give a more realistic estimate of when we
expect the first gold to be poured. This is scheduled for the second half of
2004.
I know that Avocet's shareholders will wish to join me in thanking all the
employees of the Group for a job very well done in bringing the Company to a
healthy position with a truly exciting future.
Nigel McNair Scott
26 November 2003
Consolidated Profit and Loss Account
6 months to 6 months to Year to
30 September 30 September 31 March
2003 2002 2003
Unaudited Unaudited Audited
Turnover #000 #000 #000
Continuing operations 20,498 10,395 27,341
Discontinued operations 888 1,694 4,036
21,386 12,089 31,377
Cost of sales (16,949) (9,926) (26,990)
Gross profit 4,437 2,163 4,387
Administrative expenses (602) (674) (1,539)
Operating profit
Continuing operations 3,840 1,595 3,552
Discontinued operations (5) (106) (704)
Operating profit 3,835 1,489 2,848
Net interest and similar charges (375) (342) (491)
Profit on ordinary activities before 3,460 1,147 2,357
taxation
Tax on profit on ordinary activities (955) (360) (1,080)
Profit on ordinary activities after 2,505 787 1,277
taxation
Equity minority interest (94) 27 117
Profit for the financial period 2,411 814 1,394
retained
Basic Earnings per share (note 1) 2.98p 1.24p 1.96p
Diluted earnings per share (note 1) 2.85p 1.24p 1.89p
Avocet Mining PLC
Consolidated Balance Sheet
30 September 30 September 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Fixed assets
Intangible - deferred exploration costs 3,106 924 1,618
Tangible assets 12,303 11,376 13,736
Investments 280 - 280
15,689 12,300 15,634
Current assets
Stocks 6,979 5,500 8,880
Debtors due within one year 644 749 1,016
Debtors due after more than one year 3,017 3,728 3,571
Cash at bank and in hand 14,134 2,526 3,822
24,774 12,503 17,289
Creditors: amounts falling due in less than one (8,747) (8,325) (12,958)
year
Net current assets 16,027 4,178 4,331
Total assets less current liabilities 31,716 16,478 19,965
Creditors: amounts falling due after more than one
year (3,823) (6,818) (4,524)
Provision for liabilities and charges (2,183) (2,305) (2,216)
25,710 7,355 13,225
Capital and reserves
Called up share capital 25,899 16,424 19,924
Share premium account 27,301 23,600 23,600
Other reserves 11,330 12,590 11,330
Profit and loss account (41,581) (45,078) (44,296)
Equity shareholders' funds 22,949 7,536 10,558
Equity minority interests 2,761 (181) 2,667
25,710 7,355 13,225
Avocet Mining PLC
Consolidated Cash Flow Statement
6 months to 6 months to Year to
30 September 30 September 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Net cash inflow from operating activities 6,418 1,811 6,383
Returns on investment and servicing of finance
Interest received 11 15 29
Interest paid (232) (270) (539)
Net cash outflow from returns on investment and
servicing of finance (221) (255) (510)
Taxation (466) (9) (579)
Capital expenditure and financial investment
Purchase of fixed assets (863) (694) (1,757)
Deferred exploration costs (1,558) (113) (794)
Purchase of investments - - (280)
Net cash outflow from capital expenditure and
financial investment (2,421) (807) (2,831)
Acquisitions and disposals
Purchase of subsidiary undertakings - - (764)
Net cash from (disposal)/purchase of subsidiary
undertakings (83) - 245
Net cash outflow from acquisitions and disposals (83) - (519)
Financing
Proceeds from issue of ordinary shares 10,217 - -
Costs of issue of ordinary shares (541) - -
Repayment of borrowings (2,150) (170) (99)
Capital repayments on finance leases (109) (120) (238)
Net cash inflow/(outflow) from financing 7,417 (290) (337)
Increase in cash 10,644 450 1,607
Avocet Mining PLC
Other Primary Statements
6 months to 6 months to Year to
30 September 30 September 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Statement of total recognised gains and losses
Profit attributable to shareholders 2,411 814 1,394
Exchange translation adjustments 304 634 836
Total recognised gains and losses 2,715 1,448 2,230
Reconciliation of movements in Group
Shareholders' funds
Total recognised gains and losses 2,715 1,448 2,230
New capital subscribed (net of costs) 9,676 - 3,500
Acquisition reserve - - (1,260)
Net change in shareholders' funds 12,391 1,448 4,470
Opening shareholders' funds 10,558 6,088 6,088
Closing shareholders' funds 22,949 7,536 10,558
Notes:
1. The calculation of earnings per share is based on after-tax profits of
#2,411,000 (2002: #814,000) and on the weighted average number of 81,009,717
shares in issue (2002: 65,696,530).
The fully diluted calculation of earnings per share is based on after-tax
profits of #2,411,000 (2002: #814,000) and on the weighted average number of
shares in issue and exercisable under share options of 84,609,717 (2002:
65,696,530).
2. The interim financial information complies with the relevant financial
reporting standards and the accounting policies are applied on a basis
consistent with those applied in the annual financial statements, except as
stated below.
3. The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.The financial information for the year ended 31 March 2003 is an abridged
version of the full accounts, which received an unqualified auditors' report and
have been filed with the Registrar of Companies.
4. This statement is being sent to Shareholders and will be available from
the Company's Registered Office.
This information is provided by RNS
The company news service from the London Stock Exchange
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