TIDMAVM
RNS Number : 8106D
Avocet Mining PLC
02 May 2013
Avocet Mining PLC unaudited results for the
quarter ended 31 March 2013
-- Q1 production at Inata in line with life of mine plan: 30,481
oz (Q4 2012: 30,909 oz) produced at a total cash cost (including
royalties) of US$1,169 per oz (Q4 2012: US$1,246 per oz).
-- Full year guidance remains 135,000 oz at a total cash cost of $1,100 per oz
-- EBITDA of US$6.7 million (Q4 2012: US$5.3 million) reflecting
sale of 28,751 oz during quarter
-- Cash outflow from operating activities US$15.4 million.
Excluding US$20.2 million buyback of forward contracts, positive
cash generated from operating activities of US$4.8 million (Q4
2012: US$16.4 million)
-- Gold hedge restructured - total forward contracts reduced by
29,020 oz and remainder rescheduled to be cleared 18 months earlier
at 31 December 2016
-- Loan agreement with affiliate of largest shareholder, Elliott
Management, to finance feasibility study at Tri-K and corporate
costs for remainder of 2013
-- Revised Inata Ore Reserves announced in quarter - reduction
to 0.9 million ounces, based on US$1,200/oz pit shells
KEY FINANCIAL METRICS
Quarter ended Quarter ended Quarter ended Year ended
31 March 31 December 31 March 31 December
2013 2012 2012 2012
Period Unaudited Unaudited Unaudited Audited
================================= ============== ============== ============== =============
Gold production (ounces) 30,481 30,909 38,296 135,189
================================= ============== ============== ============== =============
Average realised gold price
(US$/oz) 1,422 1,468 1,543 1,491
================================= ============== ============== ============== =============
Total cash production cost
(US$/oz) 1,169 1,246 850 1,000
================================= ============== ============== ============== =============
Profit/(loss) before tax
and exceptional items (US$000) 181 (4,699) 20,839 18,275
================================= ============== ============== ============== =============
(Loss)/profit before tax
(US$000)(2) (44,792) (139,999) 20,839 (117,025)
================================= ============== ============== ============== =============
(Loss)/earnings per share
(US cents per share) (20.30) (53.23) 6.33 (46.57)
================================= ============== ============== ============== =============
EBITDA(3) (US$000) 6,748 5,282 28,101 48,343
================================= ============== ============== ============== =============
Net cash generated by operating
activities (US$000) (15,374) 16,401 13,852 52,381
================================= ============== ============== ============== =============
[1] Key Financial Metrics are presented for continuing
operations only, and represent results excluding the Group's former
operations in South East Asia.
(2) Q1 2013 includes net US$45.0 million of exceptional items:
US$20.2 million cost of hedge buy-back; US$96.6 million loss on
initial recognition of forward contracts; US$72.2 million gain on
reversal of impairment; and US$0.3 million cost of impairment of
discontinued Mali projects. See note 3 for further details.
3 EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
David Cather, Chief Executive Officer, commented:
"The recent revision to the input assumptions behind our Ore
Reserves at Inata and the resulting revised life of mine plan
provides us with a more conservative platform on which to operate.
Inata's Q1 production was a solid first step in achieving this
year's targets, with mining now moving to include the Minfo pit as
a source of higher grade ore for the rest of the year. Our focus at
Inata will also be on operating improvements in order to achieve
better plant recoveries and throughputs. We are on track to meet
guidance of 135,000 ounces of production for the year, and by year
end we will have a greatly reduced hedge book.
Our Souma Project will add to these achievements by presenting
an opportunity to enhance Inata's cash flows as a satellite
operation and to extend its mine life. In Guinea, by year end we
will also have advanced our Tri-K Project through the milestones of
a feasibility study and maiden reserve estimate. Delivery on these
key areas will serve to rebuild the Company's asset base and enable
us to realise shareholder value.
Recent gold price volatility is a key concern of investors at
present, and whilst we cannot control the gold price, this has
underlined the importance of our ongoing cost improvement
initiatives and conservative approach to mining at Inata -
exemplified by our decision in March to rebase our reserves on a
gold price of US$1,200 per ounce."
Management Conference Call
The Company will host a conference call for investors and
analysts at 9am (UK) on Thursday
2 May 2013.
Dial in details are as follows:
UK: 08444 933800
Norway: 21563013
Alternative number: +44 (0)1452 555 566
Conference ID # 58502724
A recording of the conference call will also be made available
on the Avocet website later on the same day.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining Pelham Bell Pottinger J.P. Morgan Cazenove Arctic Securities SEB Enskilda
PLC Financial PR Corporate Broker Financial Financial Adviser
Consultants Adviser & &
Market Maker Market Maker
============= ===================== ========================= ================= ==================
David Cather, Daniel Thöle Michael Wentworth-Stanley Arne Wenger Fredrik Cappelen
CEO Petter Bakken
Mike Norris,
FD
Rob Simmons,
IR
------------- --------------------- ------------------------- ----------------- ------------------
+44 20 7766 +47 2101
7676 +44 20 7861 3232 +44 20 7742 4000 3100 +47 2100 8500
NOTES TO EDITORS
Avocet Mining is a gold mining and exploration company listed on
the London Stock Exchange (ticker: AVM.L) and the Oslo Børs
(ticker: AVM.OL). The Company's principal activities are gold
mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The
deposit at Inata currently comprises a Mineral Resource of 4.7
million ounces and an Ore Reserve of 0.9 million ounces. The Inata
Gold Mine poured its first gold in December 2009 and produced
135,189 ounces of gold in 2012. Other assets in Burkina Faso
include eight exploration permits surrounding the Inata Gold Mine
in the broader Bélahouro region. The most advanced of these
projects is Souma, some 20 kilometres from the Inata Gold Mine,
where there is a Mineral Resources estimate of 0.8 million
ounces.
In Guinea, Avocet owns exploration licences in the north east of
the country. Mineral Resource development has been ongoing since
2005 and the Tri-K project is the most advanced, which currently
has a Mineral Resource estimate of 3.2 million ounces and where a
feasibility study is underway.
CHIEF EXECUTIVE OFFICER'S REVIEW
During Q1, the Company made significant progress in the
restructuring of its finances, and is now funded for the 2013 work
programme that will focus on optimising the Inata operation and
demonstrating value from Souma and Tri-K. Operations at Inata are
progressing in line with guidance for the year. We are encouraged
by Souma's potential as a satellite deposit, whilst we are
examining the effect it could have on the longer term economics at
Inata.
In March 2013, the process to reassess Inata's reserve concluded
with a decrease from 1.8 million ounces to 0.9 million ounces. This
reduction was partly driven by the conservative approach we have
adopted in managing our assets, exemplified by the use of a lower
gold price of US$1,200 per ounce and the assumption of no
additional major investment to achieve this production
schedule.
In addition to the reduction in the assumed gold price and
depletion during 2012, the key drivers behind this decrease in
reserves were metallurgy and ore hardness, both of which have
proved more challenging than estimated in the previous reserve.
The reserve reduction resulted in lower production forecasts
over the life of mine, and required the Company's hedge book with
Macquarie Bank Limited to be restructured. Consequently Avocet
bought back 29,020 hedged ounces at a cost of US$20 million, and
shortened the period over which the remaining 144,230 ounces are to
be delivered by 18 months to 31 December 2016.
The hedge restructure utilised cash that would otherwise have
been used to advance the Company's growth projects. As a result, a
US$15 million loan was agreed with Manchester Securities Corp, an
affiliate of our largest shareholder, Elliott Management
('Elliott'), to be drawn down in three tranches (the 'Elliott
loan'). Being a transaction with a related party, the second and
third tranches of this loan, which are to be secured over Avocet's
assets in Guinea and will include the provision of 4 million
warrants at 40 pence per share, will require shareholder approval
at a General Meeting ('GM'), which is scheduled for 28 May 2013. To
this end, a circular will be issued to our shareholders today
outlining details of this proposal, and comes with the endorsement
of the Avocet Board.
Assuming shareholder approval is granted, the Elliott loan will
be repayable in full on 31 December 2013, and the Company intends
to put in place further financing by this time. Throughout the
remainder of 2013, we intend to remain focussed on evaluating lower
capital cost options for the development of Souma and Tri-K, and
entrenching operational improvements at Inata. We believe that the
completion of the feasibility study at Tri-K in Guinea, as well as
the advancement of Inata and Souma, should demonstrate the
potential value to be realised from the Group's portfolio of assets
during the rest of 2013, which ought to assist the Group in raising
additional longer-term financing by 31 December 2013..
OPERATIONAL REVIEW
Gold production and cash costs
2012 2013
-------
Q1 Q2 Q3 Q4 FY 2012 Q1
Ore mined (k tonnes) 578 610 559 906 2,653 817
Waste mined (k tonnes) 7,240 6,689 7,565 8,980 30,474 9,127
Total mined (k tonnes) 7,818 7,299 8,124 9,886 33,127 9,944
Ore processed (k tonnes) 608 651 643 654 2,556 616
Average head grade (g/t) 2.36 1.82 1.62 2.03 1.95 1.65
Process recovery rate 87% 86% 91% 83% 87% 82%
------- ------- ------- ------- ========= -------
Gold Produced (oz) 38,296 32,917 33,067 30,909 135,189 30,481
Cash costs (US$/oz) Q1 Q2 Q3 Q4 FY 2012 Q1
Mining 332 402 374 562 412 542
Processing 283 332 279 350 309 360
Administration 122 145 167 219 161 163
Royalties 113 127 117 115 118 104
------- ------- ------- ------- ========= -------
850 1,006 937 1,246 1,000 1,169
Gold production in the first quarter of 2013 of 30,481 ounces
was in line with the life of mine plan announced in March 2013.
Grades were nearly 20% lower than in Q4 2012, and tonnes milled
were also lower, but these were largely offset by favourable
inventory movements, with 1,977 ounces drawn out of gold in circuit
inventory in Q1, whereas in Q4 3,708 ounces had been added to gold
in circuit inventory. Mining of higher grade ore from Minfo has
commenced and quarterly production is scheduled to increase as a
result. Guidance for the full year remains at 135,000 ounces.
Mining volumes exceeded 9.9 million tonnes in the quarter, not
only an improvement on Q4 2012, but also the highest quarterly
tonnage since mining began at Inata in 2008. This improvement is in
part due to the performance initiatives put in place over the
latter half of 2012, and is the aggregate effect of a number of
individual improvements, including training programmes, supervision
monitoring, and revised schedules and timetables. Improved mining
performance has in turn increased availability of ore stockpiles,
and therefore enables greater flexibility in processing ore going
forward.
Plant throughput levels (616,000 tonnes) were 6% lower than Q4
2012 but remain in line with the life of mine plan. Head grades
fell from 2.03 g/t in Q4 to 1.65 g/t in this quarter, as ores fed
to the mill were from slightly lower grade areas (chiefly the
Sayouba pit). Recoveries were also slightly lower than the previous
quarter, at 82%, as ores treated in January and February in
particular were lower grade and included carbonaceous material.
Total cash costs (including royalties) in the quarter were
US$1,169 per ounce, a decrease of six per cent compared with Q4
2012.
Total mining costs were US$16.5 million, lower than the previous
quarter. Mining costs on a unit basis were US$1.66 per tonne, a
reduction of 6% compared to the previous quarter, reflecting cost
improvement initiatives being implemented at site.
The total processing cost for the quarter was US$11.0 million,
which is in line with the previous quarter. On a unit basis, the
processing cost was US$17.81 per tonne, 8% higher than Q4 2012 as a
result of fewer tonnes milled and increased usage of consumables
such as lime and cyanide. Cost improvement initiatives are underway
to optimise reagent usage, particularly with respect to lime
consumption.
Unit costs for both mining and processing are in line with the
full year guidance given in March of US$1,100 per ounce.
Souma exploration project, Burkina Faso
In January and February, a diamond drill rig collected
geotechnical data and metallurgical samples in support of planned
feasibility work on the Souma project and new resources at Inata
(Minfo East and Filio). In March, a reverse circulation rig
conducted scout drilling on geochemical and geophysical anomalies
at Souma with a view to identifying and prioritising resource
candidates for infill drilling in 2014.
During the quarter, an updated Mineral Resource estimate of 0.8
million ounces (16.3 million tonnes grading 1.48 g/t Au) was
announced, representing an increase of 38% on the previous
estimate. Souma's geological setting is distinct from that at
Inata, and preliminary testwork has indicated gold recoveries of
+90% for all nine samples that were submitted.
Testwork results from drilling undertaken in 2012, which were
received during the quarter, emphasise the high grade core at
Souma, which will be the focus of any operation involving the
trucking of ore to the Inata processing plant. Results received
during Q1 include:
- 16m @ 6.3 g/t Au from 35m;
- 11m @ 7.3 g/t Au from 61m;
- 21m @ 2.8 g/t Au from 6m;
- 6m @ 7.8 g/t Au from 72m; and
- 10m @ 3.9 g/t Au from 33m.
Tri-K development project, Guinea
The feasibility study for the phase 1 development of the Tri-K
project is underway, targeting a heap leach project exploiting
oxide ore from two deposits at Tri-K - Koulékoun and Kodiéran.
National, regional and local authorities are supportive of the
project, and discussions with regards to securing a Mining
Convention have commenced. The feasibility study is expected to be
completed in H2 2013, and a mining licence application submitted
shortly thereafter.
Exploration in Guinea has focused on supporting the Tri-K
feasibility study by conducting infill drilling on the upper oxide
portion of the Kodiéran Mineral Resource. Geologists are
undertaking a geochemical survey of termite mound samples in an
effort to generate new exploration targets for 2014 and help
illustrate the upside potential of the Tri-K District.
As part of the feasibility study process, infill drilling is
ongoing in order to establish a maiden reserve estimate for Tri-K.
Results received during the quarter for Kodieran include:
- 22m @ 5.5 g/t Au from 1m;
- 21m @ 5.7 g/t Au from 30m; and
- 14m @ 2.2 g/t Au from 45m.
FINANCIAL REVIEW
Revenue in the quarter was US$40.9 million, reflecting sales of
28,751 ounces of gold at an average realised price of US$1,422 per
ounce, (including 8,250 ounces delivered into forward contracts at
US$950 per ounce), compared with revenue of US$44.5 million in Q4
2012, representing 30,276 ounces at an average realised price of
US$1,468 per ounce.
EBITDA for the quarter totalled US$6.7 million, compared with
US$5.3 million in Q4 2012.
Favourable inventory movements totalled US$4.1 million in the
quarter, with increases in stockpile (due to additional tonnes and
higher average cost) and gold in transit, partly offset by a
reduction in gold in circuit.
A number of exceptional items arose in the quarter as a result
of the restructure of the hedge book with Macquarie Bank Limited.
These include a charge of US$20.2 million representing the cost of
closing out 29,020 ounces of forward gold sales. In addition, a
non-cash expense of US$96.6 million was recognised as a result of
bringing onto the balance sheet the mark-to-market liability of the
remaining 144,230 ounces of forward sales at US$937.50 per ounce.
The recognition of the mark-to-market liability is in accordance
with IAS 39 (see note 13 for more information), and reflects the
fact that the recent buy back demonstrates a practice of
cash-settling forward contracts. Under IAS 39, this means that the
own-use exemption previously applied is no longer appropriate.
The inclusion of the hedge liability resulted in a partial
reversal of the impairment recognised in December 2012. The
original impairment reflected the shortfall between the net present
value of Inata's cash flows, including the effect of hedge sales,
and its net assets, which excluded the hedge liability. Following
the recognition of the mark-to-market liability at 31 March 2013
the net present value of Inata's cash flows is now significantly
greater than Inata's net assets, resulting in an impairment
reversal in Q1 2013 of US$81.7 million.
Profit from operations in the quarter was US$73.6 million, which
included the effect of the impairment reversal, compared with an
operating loss of US$139.7 million in Q4 2012, which included the
original impairment. Excluding the impairment and impairment
reversal, operating profit in Q1 2013 would have been US$1.4
million compared with an operating loss of US$4.4 million in Q4
2012.
The loss before tax for the quarter, including exceptional
items, was US$44.8 million, compared with a loss of US$140.0
million in Q4 2012. Excluding exceptional items, the pre-tax profit
was US$0.2 million compared with a loss of US$4.7 million in Q4
2012. Net cash consumed by operating activities in the period was
US$15.4 million, including the impact of the US$20.2 million hedge
buy-back which is reported as an operating cash flow item.
Excluding this, Net cash flow from operating activities in Q1 2013
was US$4.8 million.
Other cash flow items in the quarter include capex of US$5.4
million (principally US$2.4 million work on the second tailings
facility at Inata and US$2.6 million on mining equipment and engine
rebuilds), US$5.7 million of capitalised exploration expenses
(US$3.1 million in Burkina Faso and US$2.5 million in Guinea), as
well as US$5.0 million drawn down on the Elliott Loan.
Net cash decreased in the quarter by US$22.0 million, with
closing cash standing at US$32.9 million, and US$10.0 million of
external debt (US$5.0 million each with Macquarie Bank Limited and
Elliott).
OUTLOOK
Over the remainder of 2013, Avocet will be focussed on
optimising cash flow at Inata, while meeting its production
guidance of 135,000 ounces at a total cash cost of US$1,100 per
ounce. Subject to shareholder approval, the Company expects to draw
down a further US$10.0 million under the Elliott Loan, to finance
the completion of the feasibility study at Tri-K in Guinea, and to
meet corporate costs. Further low capital cost improvements at
Inata are being investigated in order to demonstrate the upside
potential compared with the March life of mine plan, with work at
Souma geared to add longer term value to Inata.
Further financing is expected before the end of 2013 to provide
funds for repayment of the US$15.0 million Elliott loan and for
working capital for 2014. The Board is confident that undertaking
the value-generative initiatives outlined above should assist the
Group in its discussions regarding future financing.
DAVID CATHER
Chief Executive Officer
CONDENSED CONSOLIDATED INCOME STATEMENT
For the three months ended 31 March
2013
Three months ended
Note 31 March 31 March
2013 2012
Unaudited Unaudited
=============================================== ===== ============= ==============
US$000 US$000
Continuing operations
Revenue 2 40,885 60,256
Cost of sales 2 (36,749) (36,007)
=============================================== ===== ============= ==============
Gross profit/(loss) 4,136 24,249
=============================================== ===== ============= ==============
Administrative expenses (2,135) (2,154)
Share based payments (329) (559)
Partial reversal of impairment of mining
assets 3,7 72,200 -
Impairment of exploration intangible
assets 3 (316) -
Profit from operations 73,556 21,536
=============================================== ===== ============= ==============
Loss on recognition of forward contracts 3 (96,632) -
Restructure of forward contracts 3 (20,225) -
Finance items
Exchange (losses)/gains (114) 145
Finance expense (1,379) (858)
Finance income 2 16
(Loss)/profit before taxation from continuing
operations (44,792) 20,839
=============================================== ===== ============= ==============
Analysed as:
Profit before taxation and exceptional
items 181 20,839
Exceptional items 3 (44,973) -
=============================================== ===== ============= ==============
(Loss)/profit before taxation from continuing
operations (44,792) 20,839
=============================================== ===== ============= ==============
Taxation 37 (6,884)
=============================================== ===== ============= ==============
(Loss)/profit for the period from continuing
operations (44,755) 13,955
=============================================== ===== ============= ==============
Discontinued operations
Loss on disposal on subsidiaries(1) 3 - (105)
=============================================== ===== ============= ==============
(Loss) / profit for the period (44,755) 13,850
=============================================== ===== ============= ==============
Attributable to:
Equity shareholders of the parent company (40,416) 12,492
Non-controlling interest (4,339) 1,358
=============================================== ===== ============= ==============
(44,755) 13,850
=============================================== ===== ============= ==============
Earnings per share
- basic (cents per share) 5 (20.30) 6.28
- diluted (cents per share) 5 (20.30) 6.20
EBITDA (2) 6,748 28,101
=============================================== ===== ============= ==============
(1) During 2011, the Group disposed of all of its trading
subsidiaries which were classified as discontinued
operations. All operations for 2012 are continuing. Refer to note 3 for further information.
(2) EBITDA represents earnings before finance items, taxation,
depreciation and amortisation. EBITDA is not defined by IFRS but is
commonly used as an indication of underlying cash generation.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the three months ended 31 March 2013
Three months ended
31 March 31 March
2013 2012
=========================================== ===== ========== ==========
Note Unaudited Unaudited
=========================================== ===== ========== ==========
US$000 US$000
(Loss)/profit for the period (44,755) 13,850
Revaluation of other financial assets 9 (206) 80
=========================================== ===== ========== ==========
Total comprehensive income for the period (44,961) 13,930
=========================================== ===== ========== ==========
Attributable to:
Equity holders of the parent company (40,622) 12,572
Non-controlling interest (4,339) 1,358
=========================================== ===== ========== ==========
Total comprehensive income for the period (44,961) 13,930
=========================================== ===== ========== ==========
Total comprehensive income for the period
attributable to owners of the parent
arising from:
Continuing operations (40,622) 12,677
Discontinued operations - (105)
=========================================== ===== ========== ==========
(40,622) 12,572
=========================================== ===== ========== ==========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2013
31 March 31 December
2013 2012
Note Unaudited Audited
========================================= ===== =========== ============
US$000 US$000
Non-current assets
Intangible assets 6 55,081 49,442
Property, plant and equipment 8 217,910 145,653
Other financial assets 9 393 599
273,384 195,694
Current assets
Inventories 10 62,904 56,949
Trade and other receivables 11 28,387 25,124
Cash and cash equivalents 12 32,933 54,888
========================================= ===== =========== ============
124,224 136,961
Current liabilities
Trade and other payables 50,408 42,023
Other financial liabilities 13 46,159 6,105
========================================= ===== =========== ============
96,567 48,128
Non-current liabilities
Other financial liabilities 13 63,551 2,434
Deferred tax liabilities - 37
Other liabilities 6,317 6,251
========================================= ===== =========== ============
69,868 8,722
Net assets 231,173 275,805
========================================= ===== =========== ============
Equity
Issued share capital 16,247 16,247
Share premium 146,040 146,040
Other reserves 15,911 16,117
Retained earnings 66,134 106,221
Total equity attributable to the parent 244,332 284,625
Non-controlling interest (13,159) (8,820)
========================================= ===== =========== ============
Total equity 231,173 275,805
========================================= ===== =========== ============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Three months ended 31 March 2012
====================================================================================================
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
=============== ======== ======== ========= ========= ============= ================ ========
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December
2011
(Audited) 16,247 149,915 15,273 208,129 389,564 991 390,555
Profit for the
period - - - 12,492 12,492 1,358 13,850
Revaluation of
other
financial
assets - - 80 - 80 - 80
=============== ======== ======== ========= ========= ============= ================ ========
Total
comprehensive
income for
the
period - - 80 12,492 12,572 1,358 13,930
=============== ======== ======== ========= ========= ============= ================ ========
Share based
payments - - - 510 510 - 510
Release of
treasury
and own
shares - - 230 (39) 191 - 191
At 31 March
2012
(Unaudited) 16,247 149,915 15,583 221,092 402,837 2,349 405,186
=============== ======== ======== ========= ========= ============= ================ ========
Three months ended 31 March 2013
=====================================================================================================
Total
attributable
Share Share Other Retained to the Non-controlling Total
capital premium reserves earnings parent interest equity
=============== ======== ======== ========= ========= ============= ================ =========
US$000 US$000 US$000 US$000 US$000 US$000 US$000
At 31 December
2012
(Audited) 16,247 146,040 16,117 106,221 284,625 (8,820) 275,805
Loss for the
period - - - (40,416) (40,416) (4,339) (44,755)
Revaluation
of other
financial
assets - - (206) - (206) - (206)
Total
comprehensive
income for
the
period - - (206) (40,416) (40,622) (4,339) (44,961)
=============== ======== ======== ========= ========= ============= ================ =========
Share based
payments - - - 329 329 - 329
At 31 March
2013
(Unaudited) 16,247 146,040 15,911 66,134 244,332 (13,159) 231,173
=============== ======== ======== ========= ========= ============= ================ =========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the three months ended 31 March 2013
Three months ended
31 March 2013 31 March
2012
============================================= ===== ============== =========
Note Unaudited
============================================= ===== =========================
US$000 US$000
Cash flows from operating activities
(Loss)/profit for the period (44,755) 13,850
Adjusted for:
Depreciation of non-current assets 2,8 5,076 6,565
Partial reversal of impairment of mining (72,200) -
assets
Impairment of exploration intangible 316 -
assets
Share based payments 329 559
Taxation in the income statement (37) 6,884
Loss on recognition of forward contracts 96,632 -
Non-operating items in the income statement 491 914
Discontinued operations 3 - 105
============================================= ===== ============== =========
(14,148) 28,877
Movements in working capital
Increase in inventory (5,955) (9,870)
Increase in trade and other receivables (3,264) (2,312)
Increase /(decrease) in trade and other
payables 8,058 (2,500)
============================================= ===== ============== =========
Net cash (used in)/generated by operations (15,309) 14,195
Interest received 2 66
Interest paid (67) (409)
Net cash (used in) generated by operating
activities (15,374) 13,852
============================================= ===== ============== =========
Cash flows from investing activities
Payments for property, plant and equipment 8 (5,403) (6,649)
Exploration and evaluation expenses 6 (5,671) (8,056)
Disposal of discontinued operation, net
of cash disposed of 3 - 1,980
Net cash (used in)/generated by investing
activities (11,074) (12,725)
============================================= ===== ============== =========
Cash flows from financing activities
Proceeds from debt 5,000 -
Financing costs (150) -
Payments in respect of finance lease (243) -
Loans repaid 13 - (6,000)
Net cash generated by/(used in) financing
activities 4,607 (6,000)
============================================= ===== ============== =========
Net cash movement (21,841) (4,873)
Exchange (losses)/gains (114) 145
Total decrease in cash and cash equivalents (21,955) (4,728)
============================================= ===== ============== =========
Cash and cash equivalents at start of
the period 54,888 105,236
============================================= ===== ============== =========
Cash and cash equivalents at end of period 32,933 100,508
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The condensed consolidated interim financial statements, which
are unaudited, have been prepared in accordance with the
requirements of International Accounting Standard 34 as adopted for
use in the European Union. This condensed interim report does not
include all the notes of the type normally included in an annual
financial report. Accordingly, this condensed report is to be read
in conjunction with the Annual Report for the year ended 31
December 2012, which has been prepared in accordance with IFRS as
adopted by the European Union, and any public announcements made by
the Group during the interim reporting period.
The financial information set out in this interim report does
not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006. The unaudited condensed financial statements
for the three months ended 31 March 2013 have been drawn up using
accounting policies and presentation expected to be adopted in the
Group's full financial statements for the year ending 31 December
2013. The accounting policies are not different to those set out in
note 1 to the Group's audited financial statements for the year
ended 31 December 2012, with the exception of certain amendments to
accounting standards or new interpretations issued by the
International Accounting Standards Board, which were applicable
from 1 January 2013. These have not had a material impact on the
Group.
The Company's statutory financial statements for the year ended
31 December 2012 are available on the Company's website
www.avocetmining.com. The auditor's report on those financial
statements was unqualified and did not contain a statement under
sections 498(2) or (3) of the Companies Act 2006.
Going Concern
On 25 March 2013, the Company announced it had completed
discussions regarding financing with Macquarie Bank Limited
("Macquarie") and an affiliate of its largest shareholder, Elliott
Management ("Elliott"), which is the beneficial owner of 27% of the
Company's shares. The Company has executed financing agreements
with both parties.
Due to Inata's reduction in Ore Reserves and revised life of
mine plan Macquarie placed restrictions on the use of cash within
Société des Mines de Bélahouro SA ("SMB"), the Company's trading
subsidiary that holds Inata, pending agreement on restructuring
Inata's hedge. Following the hedge restructure announced on 25
March, the minimum cash balance required by Macquarie to be held in
SMB fell from US$37 million to US$12 million.
The hedge restructure agreed with Macquarie, including the
US$20.2 million hedge buy back, meant that funds previously held in
SMB were no longer available to fund the Tri-K project in Guinea
and general corporate activities. The Company therefore entered
into a loan agreement with Manchester Securities Corp. ("the
Elliott Lender"), which, as an affiliate of its largest shareholder
Elliott, made the Elliott Lender a related party under the UK
Listing Rules. The Elliott loan facility will ensure that
sufficient funds are available to complete the feasibility study at
Tri-K as well as for general corporate purposes in 2013.
One of the covenants related to the MBL loan and hedge facility
relates to the ratio between the hedge liability and the future
cash flows at the Inata mine over the term of the hedge. For the
purposes of calculating this ratio, the hedge liability is reduced
by cash in SMB and the prevailing spot price is applied to all
sales, including hedge deliveries, in calculating future cash flow.
The directors have a reasonable expectation that SMB's cash flow
and hedge commitments can be managed so that this and other
covenants will not be breached.
The funding arrangements between the Elliott Lender and the
Company consist of two facilities: an initial facility of US$5
million, drawn down at the end of March 2013; and a second secured
facility of US$15 million, which is subject to shareholder
approval. US$5 million of this second secured facility will be used
to repay the initial unsecured facility.
The Directors have concluded that the shareholder approval of
this facility represents a material uncertainty that may cast
significant doubt upon the Company's ability to continue as a going
concern and that, therefore, the possibility exists that the
Company could be unable to continue to fund its corporate and
exploration activities as currently envisaged. However, the
directors have a reasonable expectation that shareholders will
approve the Elliott funding.
Assuming shareholder approval is obtained, the Elliott loan
facility of US$15m will be due for repayment 31 December 2013.
Further finance will be required in order to repay the Elliott
Lender at that date and provide working capital for 2014. The
directors have concluded that obtaining the required finance
represents a material uncertainty that may cast significant doubt
upon the Company's ability to continue as a going concern and that,
therefore, the possibility exists that the Company could be unable
to repay amounts owed to the Elliott Lender and to fund its
corporate activities in 2014. Nevertheless, the directors have a
reasonable expectation that the Company will obtain sufficient
funding prior to 31 December 2013 and for these reasons, they
continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
Estimates
Certain amounts included in the condensed consolidated interim
financial statements involve the use of judgement and/or
estimation. These are based on management's best knowledge of the
relevant facts and circumstances, having regard to prior
experience. However, judgements and estimations regarding the
future are a key source of uncertainty and actual results may
differ from the amounts included in the financial statements.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the consolidated financial
statements for the year ended 31 December 2012, with the exception
of those highlighted in the exceptional items in notes of these
statements.
2. Segmental reporting
IFRS 8 requires the disclosure of certain information in respect
of reportable operating segments. One of the criteria for
determining reportable operating segments is the level at which
information is regularly reviewed by the Chief Operating Decision
Maker (CODM) for the purposes of making economic decisions. In this
report, operating segments for continuing operations are determined
as the UK, West Africa mining operations (which includes
exploration activity within the Inata mine licence area), and West
Africa exploration (which includes exploration projects in Burkina
Faso, Guinea and Mali). Discontinued operations for 2012 represent
the disposal of one of the remaining assets in South East Asia that
was subject to the agreement with J&Partners L.P. (note 3).
2. Segmental Reporting
West Africa
For the three months ended mining West Africa
31 March 2013 UK operations exploration Total
============================================= ======== ============ ============= =========
US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 40,885 - 40,885
============================================= ======== ============ ============= =========
Cost of Sales 733 (36,262) (1,220) (36,749)
============================================= ======== ============ ============= =========
Cash production costs:
- mining - (16,495) - (16,495)
- processing - (10,970) - (10,970)
- overheads - (4,983) - (4,983)
- royalties - (3,171) - (3,171)
============================================= ======== ============ ============= =========
- (35,619) - (35,619)
Changes in inventory - 4,074 - 4,074
Expensed exploration and other
cost of sales (a) 746 346 (1,220) (128)
Depreciation and amortisation (b) (13) (5,063) - (5,076)
====================================== ===== ======== ============ ============= =========
Gross profit/(loss) 733 4,623 (1,220) 4,136
Administrative expenses and share
based payments (2,464) - - (2,464)
Partial reversal of impairment
of mining assets - 72,200 - 72,200
Impairment of exploration intangible - - (316) (316)
============================================= ======== ============ ============= =========
(Loss)/profit from operations (1,731) 76,823 (1,536) 73,556
Loss on recognition of forward
contracts - (96,632) - (96,632)
Restructure of forward contracts - (20,225) - (20,225)
Net finance items (729) (744) (18) (1,491)
============================================= ======== ============ ============= =========
Loss before taxation (2,460) (40,778) (1,554) (44,792)
Taxation - 37 - 37
============================================= ======== ============ ============= =========
Loss for the period (2,460) (40,741) (1,554) (44,755)
============================================= ======== ============ ============= =========
Attributable to:
Equity shareholders of parent
company (2,460) (36,402) (1,554) (40,416)
============================================= ======== ============ ============= =========
Non-controlling interest - (4,339) - (4,339)
(Loss)/profit for the period (2,460) (40,741) (1,554) (44,755)
============================================= ======== ============ ============= =========
EBITDA (c) (1,718) 9,686 (1,220) 6,748
====================================== ===== ======== ============ ============= =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provision at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
West Africa
mining West Africa
At 31 March 2013 UK operations exploration Total
================================== ===== ======== ============ ============= ==========
US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL POSITION
Non-current assets 931 213,818 58,635 273,384
Inventories - 62,386 518 62,904
Trade and other receivables 347 24,079 3,961 28,387
Cash and cash equivalents 6,183 25,888 862 32,933
Total assets 7,461 326,171 63,976 397,608
========================================= ======== ============ ============= ==========
Current liabilities (9,129) (82,664) (4,774) (96,567)
Non-current liabilities (430) (69,438) - (69,868)
========================================= ======== ============ ============= ==========
Total liabilities (9,559) (152,102) (4,774) (166,435)
========================================= ======== ============ ============= ==========
Net assets (2,098) 174,069 59,202 231,173
========================================= ======== ============ ============= ==========
West Africa
For the three months ended 31 mining West Africa
March 2013 UK operations exploration Total
================================== ===== ======== ============ ============= ==========
US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
Loss for the period (2,460) (40,741) (1,554) (44,755)
Adjustments for non-cash and
non-operating items (d) 1,071 28,982 554 30,607
Movements in working capital (127) (2,155) 1,121 (1,161)
========================================= ======== ============ ============= ==========
Net cash (used in)/ generated
by operations (1,516) (13,914) 121 (15,309)
Net interest paid 2 (67) - (65)
Purchase of property, plant
and equipment (1) (5,303) (99) (5,403)
Deferred exploration expenditure - - (5,671) (5,671)
Proceeds from debt 5,000 - - 5,000
Financing costs (150) - - (150)
Other cash movements (e) (4,545) (1,754) 5,942 (357)
================================== ===== ======== ============ ============= ==========
Total (decrease)/ increase in
cash and cash equivalents (1,210) (21,038) 293 (21,955)
========================================= ======== ============ ============= ==========
(d) Includes depreciation and amortisation, share based
payments, taxation in the income statement, and other non-operating
items in the income statement;
(e) Other cash movements include cash flows from financing
activities, intragroup transfers, and exchange gains or losses.
2. Segmental Reporting (continued)
West Africa Continuing
For the three months ended mining West Africa operations Discontinued
31 March 2012 UK operations exploration total operations Total
====================================== ======== ============ ============= ============ ============= =========
US$000 US$000 US$000 US$000 US$000 US$000
INCOME STATEMENT
Revenue - 60,256 - 60,256 - 60,256
====================================== ======== ============ ============= ============ ============= =========
Cost of Sales 827 (35,637) (1,197) (36,007) - (36,007)
====================================== ======== ============ ============= ============ ============= =========
Cash production costs:
- mining - (12,707) - (12,707) - (12,707)
- processing - (10,827) - (10,827) - (10,827)
- overheads - (4,685) - (4,685) - (4,685)
- royalties - (4,339) - (4,339) - (4,339)
====================================== ======== ============ ============= ============ ============= =========
- (32,558) - (32,558) - (32,558)
Changes in inventory - 5,163 - 5,163 - 5,163
Expensed exploration
and other cost of sales (a) 860 (1,710) (1,197) (2,047) - (2,047)
Depreciation and amortisation (b) (33) (6,532) - (6,565) - (6,565)
=============================== ===== ======== ============ ============= ============ ============= =========
Gross profit/(loss) 827 24,619 (1,197) 24,249 - 24,249
Administrative expenses
and share based payments (2,713) - - (2,713) - (2,713)
====================================== ======== ============ ============= ============ ============= =========
(Loss)/profit from
operations (1,886) 24,619 (1,197) 21,536 - 21,536
(Loss)/profit on disposal
of subsidiaries and
investments - - - - (105) (105)
-------------------------------------- -------- ------------ ------------- ------------ ------------- ---------
Net finance items 3 (724) 24 (697) - (697)
====================================== ======== ============ ============= ============ ============= =========
(Loss)/profit before
taxation (1,883) 23,895 (1,173) 20,839 (105) 20,734
====================================== ======== ============ ============= ============ ============= =========
Analysed as:
------------------------------- ----- -------- ------------ ------------- ------------ ------------- ---------
(Loss)/profit before
tax & exceptional items (1,883) 23,895 (1,173) 20,839 - 20,839
-------------------------------------- -------- ------------ ------------- ------------ ------------- ---------
Exceptional items - - - - (105) (105)
====================================== ======== ============ ============= ============ ============= =========
(Loss)/profit before
taxation (1,883) 23,895 (1,173) 20,839 (105) 20,734
====================================== ======== ============ ============= ============ ============= =========
Taxation - (6,884) - (6,884) - (6,884)
====================================== ======== ============ ============= ============ ============= =========
(Loss)/profit for the
period (1,883) 17,011 (1,173) 13,955 (105) 13,850
====================================== ======== ============ ============= ============ ============= =========
Attributable to:
Equity shareholders
of parent company (1,883) 15,653 (1,173) 12,597 (105) 12,492
-------------------------------------- -------- ------------ ------------- ------------ ------------- ---------
Non-controlling interest - 1,358 - 1,358 - 1,358
(Loss)/profit for the
period (1,883) 17,011 (1,173) 13,955 (105) 13,850
====================================== ======== ============ ============= ============ ============= =========
EBITDA (c) (1,853) 31,151 (1,197) 28,101 - 28,101
=============================== ===== ======== ============ ============= ============ ============= =========
(a) Other cost of sales represents costs not directly
attributable to production, including exploration expenditure
expensed;
(b) Includes amounts in respect of the amortisation of mine
closure provision at Inata;
(c) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
2. Segmental Reporting (continued)
West Africa Continuing
mining West Africa operations Discontinued
At 31 March 2012 UK operations exploration total operations Total
============================== ===== ========= ============ ============= ============ ============= =========
US$000 US$000 US$000 US$000 US$000 US$000
STATEMENT OF FINANCIAL
POSITION
Non-current assets 2,486 264,232 33,674 300,392 - 300,392
Inventories - 49,936 449 50,385 - 50,385
Trade and other receivables 412 26,075 4,662 31,149 - 31,149
Cash and cash equivalents 64,786 34,400 1,322 100,508 - 100,508
Total assets 67,684 374,643 40,107 482,434 - 482,434
===================================== ========= ============ ============= ============ ============= =========
Current liabilities (3,384) (39,066) (4,904) (47,354) - (47,354)
Non-current liabilities (430) (29,464) - (29,894) - (29,894)
===================================== ========= ============ ============= ============ ============= =========
Total liabilities (3,814) (68,530) (4,904) (77,248) - (77,248)
===================================== ========= ============ ============= ============ ============= =========
Net assets 63,870 306,113 35,203 405,186 - 405,186
===================================== ========= ============ ============= ============ ============= =========
West Africa Continuing
For the three months mining West Africa operations Discontinued
ended 31 March 2012 UK operations exploration total operations Total
============================== ===== ========= ============ ============= ============ ============= =========
US$000 US$000 US$000 US$000 US$000 US$000
CASH FLOW STATEMENT
(Loss)/profit for
the period (1,883) 17,011 (1,173) 13,955 (105) 13,850
Adjustments for non-cash
and non-operating
items (d) 589 14,609 (276) 14,922 105 15,027
Movements in working
capital (4,579) (11,153) 1,050 (14,682) - (14,682)
===================================== ========= ============ ============= ============ ============= =========
Net cash (used in)/
generated by operations (5,873) 20,467 (399) 14,195 - 14,195
Net interest (paid)/received 66 (409) - (343) - (343)
Purchase of property,
plant and equipment (117) (4,881) (1,651) (6,649) - (6,649)
Loans repaid - (6,000) - (6,000) - (6,000)
Deferred exploration
expenditure - (263) (7,793) (8,056) - (8,056)
Net proceeds from
disposal of discontinued
operations 1,980 - - 1,980 - 1,980
------------------------------------- --------- ------------ ------------- ------------ ------------- ---------
Other cash movements (e) (7,024) (3,229) 10,398 145 - 145
------------------------------ ----- --------- ------------ ------------- ------------ ------------- ---------
Total (decrease)/increase
in cash and cash
equivalents (10,968) 5,685 555 (4,728) - (4,728)
===================================== ========= ============ ============= ============ ============= =========
(d) Includes depreciation and amortisation, share based
payments, movement in provisions, taxation in the income statement,
and other non-operating items in the income statement;
(e) Other cash movements include cash flows in respect of the
sale of subsidiaries, deferred consideration paid, cash flows from
financing activities, and exchange gains or losses;
3. Exceptional items
31 March 2013 (three months) Unaudited 31 March 2012
(three months)
Unaudited
================================================= ======================================= ================
US$000 US$000
Restructure of forward contracts (20,225) -
Loss on recognition of forward contracts (96,632) -
Partial reversal of impairment of mining assets 72,200 -
Impairment of Mali exploration asset (316) -
Loss on disposal of subsidiaries - (105)
Exceptional loss (44,973) (105)
================================================= ======================================= ================
Restructure and recognition of forward contracts
On 25 March 2013, Avocet announced the restructure of the
Macquarie forward contracts for delivery of gold bullion. The
restructure consisted of eliminating 29,020 ounces under the
forward contracts at a cost of US$20.2 million and shortening the
delivery profile of the remaining ounces by 18 months so that all
ounces are delivered by December 2016.
The recognition of the liability is in accordance with IAS 39
(see note 13 for more information), and reflects that the recent
buy back demonstrates a practice of cash-settling forward
contracts. Under IAS 39, this means that the own-use exemption
previously applied is no longer appropriate. The fair value of the
forward contracts has been recognised at $96.6m. Further details
are provided in note 13.
Partial reversal of impairment on mining assets
In March 2013 Avocet recognised a partial reversal of impairment
of non-current mining assets in respect of the Inata Gold Mine.
Further details are provided in note 7.
Impairment of Mali exploration asset
During Q1 the company decided to discontinue operations at the
N'tjila permit located in the Republic of Mali. As a result the
$0.3m capitalised in relation to the permit has been impaired and
recognised as an exceptional item.
Loss on disposal of subsidiaries
Completion of one of the last two exploration assets occurred on
16 February 2012 for proceeds of US$2.0 million, resulting in a
loss of US$0.1 million. There are no remaining assets or
liabilities recognised in the Group statement of financial position
in respect of the last remaining South East Asian exploration
company, which the Company no longer expects to sell.
4. EBITDA
Earnings before interest, tax, depreciation and amortisation
(EBITDA) represents profit before depreciation/amortisation,
interest and taxes, as well as excluding any exceptional items and
profit or loss from discontinued operations.
31 March 31 March
2013 2012
(three months) (three months)
Unaudited Unaudited
US$000 US$000)
(Loss)/profit before taxation (44,792) 20,734
Exceptional Items 44,973 105
Depreciation 5,076 6,565
Exchange (gain)/losses 114 (145)
Net finance income (2) (16)
Net finance expense 1,379 858
EBITDA 6,748 28,101
==================================== ================ ================
5. Earnings per Share
Earnings per share are analysed in the table below, presenting
earnings per share for continuing and discontinued operations.
31 March 31 March
2013 2012
(three months) (three
months)
Unaudited Unaudited
================================================= ================= ============
Shares Shares
Weighted average number of shares in issue
for the period
- number of shares with voting rights 199,104,701 198,905,882
- effect of share options in issue(1) 1,018,785 2,647,551
================================================= ================= ============
- total used in calculation of diluted earnings
per share 200,123,486 201,553,433
================================================= ================= ============
US$000 US$000
Earnings per share from continuing operations
(Loss)/profit for the period from continuing
operations (44,755) 13,955
Less non-controlling interest 4,339 (1,358)
================================================= ================= ============
(Loss)/profit for the period attributable to
equity shareholders of the parent (40,416) 12,597
================================================= ================= ============
(Loss)/earnings per share
- basic (cents per share) (20.30) 6.33
- diluted (cents per share) (1) (20.30) 6.25
================================================= ================= ============
Earnings per share from discontinued operations
Profit/(loss) for the period - (105)
Less non-controlling interest - -
================================================= === =======
Profit/(loss) for the period attributable to
equity shareholders of the parent - (105)
================================================= === =======
Earnings/(loss) per share
- basic (cents per share) - (0.05)
- diluted (cents per share) - (0.05)
================================================= === =======
Total (loss)/earnings per share
- basic (cents per share) (20.30) 6.28
- diluted (cents per share) (1) (20.30) 6.20
================================= ======== =====
(1) As a result of the loss for the period, in calculating the
diluted earnings per share the effect of share options in issue has
been ignored for the 3 months ending 31 March 2013.
6. Intangible assets
Intangible assets represent deferred exploration expenditure.
The movement in the period is analysed below:
31 March
2013
================================ =========
US$000
At 1 January (audited) 49,442
Additions 5,671
Capitalised depreciation(1) 284
Impairment of Mali exploration
assets (316)
================================ =========
At 31 March (unaudited) 55,081
================================ =========
31 March 31 December
2013 2012
(Unaudited) (Audited)
============== === ============== =============
US$000 US$000
Burkina Faso 29,897 26,577
Guinea 25,184 22,574
Mali - 291
=================== ============== =============
Total 55,081 49,442
=================== ============== =============
(1) Capitalised depreciation represents the depreciation of
items of property, plant, and equipment which are used exclusively
in the Group's exploration activities. The consumption of these
assets is capitalised as an intangible asset, in accordance with
accounting standards and industry practice.
7. Partial reversal of impairment on mining assets
At 31 December 2012, the Group recognised an impairment of
$135.3m in respect of mining assets at Inata. In accordance with
IAS 36 Impairment of Assets, an entity is required to assess at the
end of each reporting period whether there is any indication that a
previous impairment loss may no longer exist or may have decreased.
If such an indication exists, the entity should estimate the
recoverable amount of that asset.
The forward contract liability at fair value in March 2013 has
been excluded from both the carrying amount of the cash generating
unit ('CGU') and the cash flows of the value in use ('VIU')
calculation. This avoids double counting of the liability's cash
flow and provides a more stable basis to assess the CGU's fair
value. The Company has concluded that the requirements of an
indication of a reversal of impairment were identified in relation
to the Inata mining assets. An assessment was therefore carried out
of the fair value of Inata's assets, using the discounted cash
flows of Inata's latest estimated life of mine plan to calculate
the VIU. As a result of the review, a pre-tax partial reversal of
impairment losses of $72.2m has been recorded in Q1 2013 and
allocated to mine development costs.
When calculating the VIU, certain assumptions and estimates were
made. Changes in these assumptions can have a significant effect on
the recoverable amount and therefore the value of the impairment
recognised. The key assumptions are outlined below:
Assumption Judgements Sensitivity(2)
------------- -------------------------------------- -----------------------------------
Timing of Cash flows are forecast over the An extension or shortening
cash flows expected life of the mine. The of the mine life would result
current life of mine plan forecasts in a corresponding increase
mining activities to continue until or decrease in reversal
2017, with a further 3 years during of impairment, the extent
which stockpiles will be processed of which it is not possible
and rehabilitation costs will be to quantify.
incurred.
------------- -------------------------------------- -----------------------------------
Production Production costs are forecast based A change in production costs
costs on detailed assumptions, including of 10% would increase or
staff costs, consumption of fuel decrease the pre-tax reversal
and reagents, maintenance, and of impairment attributable
administration and support costs. by US$37.4 million(1) .
------------- -------------------------------------- -----------------------------------
Gold price Analyst consensus prices were used A change of 10% in the gold
for the forecast of revenue from price assumption would increase
gold sales, based on an average or decrease the pre-tax
consensus at March 2013 for the reversal of impairment recognised
period 2013-2020. Prices range in the year by US$79.1 million(1)
from US$1,775 per ounce in 2013 .
to US$1,293 per ounce from 2017.
------------- -------------------------------------- -----------------------------------
Discount A discount rate of 10% (pre-tax) A change in the discount
rate has been used in the VIU estimation. rate of one percentage point
would increase or decrease
the pre-tax reversal of
impairment recognised in
the year by US$6.0 million(1)
.
------------- -------------------------------------- -----------------------------------
Ore Reserves The life of mine plan is based A 10% increase or decrease
and gold on Ore Reserves of 0.92 million in ounces produced, compared
production for the Inata Mine as at 31 December with the current Ore Reserve,
2012, less the Q1 2013 production. would increase or decrease
The Ore Reserve is estimated in the pre-tax reversal of
accordance with the principles impairment recognised in
the JORC Code and was reviewed the year by US$79.1 million(1)
and approved by Clayton Reeves .
(refer to page 22 of the 31 December
2012 Annual Report).
------------- -------------------------------------- -----------------------------------
(1) Sensitivities provided are on a 100% basis, pre-tax. 10% of the
post-tax impairment would be attributed to the non-controlling interest.
(2) The impairment reversal on the Inata mining assets would be limited
to US$130.1 million, being the previous impaired value less the impact
on depreciation as a result of the impairment.
------------------------------------------------------------------------------------------
8. Property, plant and equipment
Mining property and plant
===============================================
Mine Vehicles, Exploration
development Plant and fixtures, and property Office
costs Machinery equipment and plant equipment
============== =============== ============== =============== ===============
Three months
ended
31 March 2013 Note West Africa West Africa West Africa West Africa UK Total
================== ===== ============== =============== ============== =============== =============== ========
US$000 US$000 US$000 US$000 US$000 US$000
Cost
At 1 January 2013
(audited) 96,789 87,589 55,568 5,242 1,121 246,309
Additions 2,917 2,243 157 99 1 5,417
Partial reversal
of impairment on
mining assets 7 72,200 - - - - 72,200
At 31 March 2013 171,906 89,832 55,725 5,341 1,122 323,926
(unaudited)
================== ===== ============== =============== ============== =============== =============== ========
Depreciation
At 1 January 2013
(audited) 56,958 23,624 18,677 822 575 100,656
Charge for the
period 2,670 1,537 860 - 9 5,076
Charge for the
period -
capitalised(1) - - - 284 - 284
================== ===== ============== =============== ============== =============== =============== ========
At 31 March 2013 59,628 25,161 19,537 1,106 584 106,016
(unaudited)
================== ===== ============== =============== ============== =============== =============== ========
Net Book Value
At 31 March 2013 112,278 64,671 36,188 4,235 538 217,910
(unaudited)
================== ===== ============== =============== ============== =============== =============== ========
At 1 January 2013
(audited) 39,831 63,965 36,891 4,420 546 145,653
================== ===== ============== =============== ============== =============== =============== ========
(1) Capitalised depreciation represents the depreciation of
items of property, plant, and equipment which are used exclusively
in the Group's exploration activities. The consumption of these
assets is capitalised as an intangible asset, in accordance with
accounting standards and industry practice.
9. Other financial assets
31 March 31 December
2013 2012
Unaudited Audited
======================= =========== ============
US$000 US$000
At 1 January 599 1,828
Fair value adjustment (206) (1,229)
======================= =========== ============
At 31 March/December 393 599
======================= =========== ============
Other financial assets represent available for sale financial
assets which are measured at fair value. The fair value adjustment
is the periodic re-measurement to fair value, with gains or losses
on re-measurement recognised in equity.
Other financial assets relate to shares in Golden Peaks
Resources Limited. The shares were acquired as consideration for
the disposal of two of the Group's assets in South East Asia in
2011. In January 2012 Golden Peaks announced that it had changed
its name to Reliance Resources. Reliance Resources is listed on the
Toronto Stock Exchange.
10. Inventories
31 March 31 December
2013 2012
Unaudited Audited
US$000 US$000
Consumables 35,727 33,844
Work in progress 21,502 20,001
Finished goods 5,675 3,104
62,904 56,949
================== =========== ============
Work in progress includes ore in stockpiles and gold in circuit.
Finished goods represents gold in transit or undergoing refinement,
prior to sale.
11. Trade and other receivables
31 March 31 December
2013 2012
Unaudited Audited
US$000 US$000
Payments in advance to suppliers 7,887 9,524
VAT 18,667 14,766
Prepayments 1,833 834
28,387 25,124
================================== =========== ============
12. Cash and cash equivalents
Included in US$32.9 million cash and cash equivalents at 31
March 2013 is US$13.4 million of restricted cash (31 December 2012:
US$38.4 million), representing a minimum account balance held in
Macquarie Bank Limited of US$12.0 million, a condition of the Inata
project finance facility, and US$1.4 million (31 December 2012:
US$1.4 million) relating to amounts held on restricted deposit in
Burkina Faso for the purposes of environmental rehabilitation work,
as required by the terms of the Inata mining licence.
In relation to the minimum account balance held in Macquarie
Bank Limited of US$12.0 million, there are no restrictions on the
use of funds above the minimum amount by SMB. Restrictions apply to
the other companies in the Group regarding access to the surplus
funds above the $12.0m, as set out per the press release on 25
March 2013.
13. Other financial liabilities
31 March 31 December
2013 2012
Unaudited Audited
US$000 US$000
Current liabilities
Interest bearing debt 10,000 5,000
Finance lease liabilities 882 1,105
Forward contracts - held for 35,277 -
trading
Total current other financial
liabilities 46,159 6,105
=============================== =========== ============
31 March 31 December
2013 2012
Unaudited Audited
US$000 US$000
Non-current liabilities
Finance lease liabilities 2,196 2,434
Forward contracts - held for 61,355 -
trading
Total non-current other financial
liabilities 63,551 2,434
=================================== =========== ============
Interest bearing debt
Interest bearing debt includes the remaining balance under the
Macquarie Bank Limited Inata project finance facility of US$5.0
million (31 December 2012: US$5.0 million) and the Elliott Lender
loan of US$5.0 million (31 December 2012: US$nil).
As announced on in the press release on 25 March 2013, the
remaining balance of US$5.0 million under the Macquarie Bank
Limited Inata project finance facility, previously due on 31 March
2013, was re-negotiated as part of the hedge restructure and is now
due by 30 September 2013.
The initial facility of US$5.0 million, under the loan agreement
with the Elliott Lender was drawn down on 25 March 2013 and is
payable on 24 September 2013. Subject to shareholder approval, the
Company intends to repay this loan facility earlier then the due
date using the second Elliott Lender facility.
Forward contracts
On 25 March 2013, Avocet announced a restructure of the
Macquarie forward contracts for delivery of gold bullion. The
partial settlement of the contract means that the remaining forward
contracts no longer qualifying for the 'own use exemption' and are
therefore now within the scope of IAS 39 financial instruments.
Under IAS 39 the forward contracts are classified as a financial
liability designated at fair value through profit or loss (FVTPL)
as they meet the requirements to be classified as
held-for-trading.
The fair value of the forward contracts were assessed to be
US$96.6 million based on a closing spot rate of US$1,598.25/oz,
analysed between current (US$35.2 million) and non-current (US$61.4
million) in accordance with the schedule delivery of forward sold
ounces.
Finance lease liabilities
Also included within other financial liabilities are liabilities
in respect of assets held under finance lease, US$0.9 million of
which is included within current financial liabilities, and US$2.2
million is included within non-current financial liabilities.
14. Related party transactions
The table below sets out charges in the three month period and
balances at 31 March 2013 between the Company (Avocet Mining PLC)
and Group companies that were not wholly owned, in respect of
management fees and interest on loans. There were no other related
party transactions in the period requiring disclosure.
Avocet Mining PLC Wega Mining AS
============================= =========================== ===========================
Charged in Balance at Charged in Balance at
three months 31 March three months 31 March
to 31 March 2013 to 31 March 2013
2013 2013
============================= ============== =========== ============== ===========
US$000 US$000 US$000 US$000
Société des Mines
de Bélahouro SA (90%) 703 139,488 1,257 109,993
============================= ============== =========== ============== ===========
Compensation paid to key management of the Group during the
quarter was US$0.8 million, including pension contributions of
US$0.04 million. A share based payment expense of US$0.3 million
was recognised in the quarter in respect of awards made under the
Performance Share Plan, the details of which were reported in the
announcement made on 13 March 2012. No dividends were received by
Directors during the period in respect of shares held in the
Company.
During the quarter the Company entered into a US$15.0 million
loan agreement with Manchester Securities Corp. ("the Elliott
Lender"), an affiliate of Avocet's largest shareholder, Elliott
Management. Under the UK listing rules, the Elliott Lender and
Elliott Management are related parties to the Company. US$5.0m was
drawn down in March 2013 under the initial facility in accordance
with the loan agreement. The terms of the initial facility, which
is unsecured are considered to be normal commercial terms. The
availability of the second facility under the agreement, which is
secured, is subject to shareholder approval at a GM to be held on
28 May 2013.
15. Contingent liabilities
There were no contingent liabilities at 31 March 2013 or 31
December 2012.
Note 32 to the financial statements for the year ended 31
December 2012 contains a description of the Indonesian civil cases
being brought by PT Lebong Tandai against Avocet and other parties,
and the reader is therefore referred to the Company's Annual Report
for 2012 for further details. The Company is not aware of any
change in circumstances and as any financial settlement is
considered to be remote, this matter does not constitute a
contingent liability.
16. Unaudited quarterly income statement for continuing
operations
Quarter
Quarter ended ended
Quarter Quarter Quarter ended
31 March ended ended 30 June 31 March
31 December 30 September
2013 2012 2012 2012 2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
=============================== ============== ============= ============== ============= ==============
US$000 US$000 US$000 US$000 US$000
Revenue 40,885 44,453 50,146 49,255 60,256
Cost of sales (36,749) (44,264) (45,689) (42,734) (36,007)
Cash production costs:
- mining (16,495) (17,372) (12,355) (13,225) (12,707)
- processing (10,970) (10,812) (9,219) (10,914) (10,827)
- overheads (4,983) (6,767) (5,521) (4,789) (4,685)
- royalties (3,171) (3,547) (3,877) (4,182) (4,339)
=============================== ============== ============= ============== ============= ==============
(35,619) (38,498) (30,972) (33,110) (32,558)
Changes in inventory 4,074 10,798 (5,662) (97) 5,163
Expensed exploration
and other cost of sales (128) (6,899) (3,084) (3,732) (2,047)
Depreciation and amortisation (5,076) (9,665) (5,971) (5,795) (6,565)
Gross profit 4,136 189 4,457 6,521 24,249
=============================== ============== ============= ============== ============= ==============
Administrative expenses (2,135) (4,052) (3,630) (3,166) (2,154)
Share based payments (329) (520) (517) (471) (559)
Impairment of mining - (135,300) - - -
assets
Reversal of impairment
of mining assets 72,200 - - - -
Impairment of exploration
intangible assets (316) - - - -
Profit/(loss) from operations 73,556 (139,683) 310 2,884 21,536
=============================== ============== ============= ============== ============= ==============
Loss on recognition of (96,632)
forward contracts - - - -
Restructure of forward (20,225)
contracts - - - -
Net finance costs (1,491) (316) (633) (426) (697)
(Loss)/profit before
taxation (44,792) (139,999) (323) 2,458 20,839
=============================== ============== ============= ============== ============= ==============
Analysed as:
Profit/(loss) before
taxation and exceptional
items 181 (4,699) (323) 2,458 20,839
Exceptional items (44,973) (135,300) - - -
=============================== ============== ============= ============== ============= ==============
(Loss)/profit before
taxation (44,792) (139,999) (323) 2,458 20,839
Taxation 37 22,488 (486) (589) (6,884)
Profit/(loss) for the
period (44,755) (117,511) (809) 1,869 13,955
=============================== ============== ============= ============== ============= ==============
Attributable to:
Equity shareholders of
the parent company (40,416) (105,975) (918) 1,611 12,597
Non-controlling interest (4,339) (11,536) 109 258 1,358
=============================== ============== ============= ============== ============= ==============
(44,755) (117,511) (809) 1,869 13,955
=============================== ============== ============= ============== ============= ==============
EBITDA (1) 6,748 5,282 6,281 8,679 28,101
=============================== ============== ============= ============== ============= ==============
(1) EBITDA represents earnings before exceptional items, finance
items, tax, depreciation and amortisation. EBITDA is not defined by
IFRS but is commonly used as an indication of underlying cash
generation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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